Sleep Retailer eNews | December 14, 2017

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Mattress Firm Faces Uncertainty In The Wake Of Steinhoff’s Fraud Accusations

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The future of Mattress Firm is once again looking precarious, as its parent-company, Steinhoff International, has found itself mired in allegations of accounting fraud. It was revealed last week that the retail group, which acquired Mattress Firm in 2016, is facing investigation into whether or not it has overstated or manipulated its financial performance reports. Following the discovery of “accounting irregularities” and the departure of CEO Markus Jooste, Steinhoff’s market share-price plummeted nearly 84% in the three days. While an independent investigation into the allegations is already underway, many of the details surrounding the scandal still remain uncertain. With the potential of selling off billions of dollars worth of assets on the table, speculation has already begun to swirl as to how this may affect Mattress Firm moving forward.

In a statement, Steinhoff said it is “currently focused on safeguarding operational liquidity to continue funding existing operations throughout its various subsidiaries.” In addition to working with PricewaterhouseCoopers on an independent investigation, the company has appointed additional advisors to lead discussions with its lenders and advise on operations and liquidity. In assessing the “validity and recoverability” of more than $7 billion in assets, the company says it has identified measures that would recoup roughly $2.4 billion of additional liquidity - with the possibility of selling off “non-core” assets. In the meantime, Steinhoff has postponed the release of its 2017 until the investigation is complete, with billionaire Christo Wiese - Steinhoff’s largest shareholder and chairman - stepping into to the executive capacity in Jooste’s absence.

But it appears these efforts are doing little to quell the anxieties of its investors. “It’s a red flag,” Peter Brooke, portfolio manager at Old Mutual Investment Group and a top 20 shareholder in Steinhoff, told Reuters. “This is something very serious.”

It’s important to note that Steinhoff did not make it abundantly clear which accounting irregularities it was referring to in its statement last week. The company has been under investigation in Germany since 2015 to determine whether its revenues were booked properly and taxable profit declared correctly. While misstated revenue is a clear and serious offense, the question of taxes is also pertinent to the company’s future. Over the past five years, Steinhoff’s tax rate has averaged around 12 percent, which is half the headline corporate tax rate in its main markets and less than half posted by its competitors—which has had some experts raising red flags over whether or not it is engaging in unlawful practices. An increased tax rate for the company could further compromise its cash-flow.

The retail conglomerate has led a rapid and aggressive expansion worldwide in recent years — a strategy that included the acquisition of Mattress Firm in 2016. Steinhoff acquired Mattress Firm for $2.4 billion, its most expensive acquisition to date. At the time, many analysts believed this price to be inflated, as new online players had already begun to gobble up market share away from the retail giant. Despite recent strides to invest in future growth, Mattress Firm has still seen same-store sales decline for months. This potentially puts the retailer in a precarious position as Steinhoff looks to boost liquidity by selling off assets, especially considering the retail group also owns a number of higher-performing retail chains in both South Africa and Europe.

Right now, these predictions are little more than speculation - as many analysts have noted that there is not enough information currently available to make more clear determinations. As for Mattress Firm, the retailer has remained pretty mum on the situation, with CEO Ken Murphy stating simply, “We remain steadfast and committed to what we do best.”

Unfortunately, Steinhoff’s accounting troubles are not the only legal issues Mattress Firm is facing right now. This week, Tuft & Needle announced it will be fighting back against the false advertising and defamation lawsuit the retailer filed against them last month. On December 11, the company filed a motion in the US District Court for the Southern District of Texas asking for that suit be dropped - calling it a “thinly-veiled, strategic attempt by Mattress Firm to weaken its competition.” A press release issued by the company maintained that the retailer’s claims do not meet the legal definitions of false advertising, defamation or business disparagement. According to Tuft & Needle’s attorney Charles Babcock, the company is prepared to file a countersuit against Mattress Firm and Steinhoff—with Babcock also alluding to a further investigation into the retailer’s actual market share to determine whether or not it could be considered a monopoly.

While it’s too soon to know what the future will hold for the retail chain, it’s safe to say that Mattress Firm has a challenging road ahead of it—the ramifications of which may have an effect on mattress retailing nationwide.

Read more here, here, here and here

The Bedding Industry Responds To: Online Reviews

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It’s easier than ever before for consumers to shop online—but with thousands of products available at the touch of a button, e-retail has become just as overwhelming as walking into a big box brick-and-mortar store. As the online marketplace continues to grow, product review websites have become a more prominent part of the buying process. Unlike consumer-generated reviews, these websites are often supported by affiliate marketing partnerships—with brands and retailers offering commission on the sales they’ve influenced. We offered our take on the affiliate marketing phenomenon last month, but for this edition, we wanted to dig a little deeper into the subject. So we turned to two industry veterans—Stuart Carlitz of Eclipse International and Mark Hobson of Colonial LLC—to share their thoughts on how online reviews are affecting the mattress retail market.

“While the mission of product reviewers is noble, the evolution of professional reviewers has significantly deteriorated the authenticity of the process. The days of the benevolent consumer advocate are long gone, and affiliate marketing partnerships have made the review community somewhat murky by creating a less-than-transparent way for consumers to feel reassured in their mattress purchases. I think the practice is falling out of favor and losing credibility among savvy consumers who understand that an affiliate reviewer is compensated for their product assessment and that act takes away the review’s integrity.”
-Stuart Carlitz, president and CEO of Eclipse International

“There is no doubt that the rapid growth of the online bedding brands has had a negative impact on both traffic and revenues at traditional retailers. Since most consumers start their mattress shopping by researching online and the leading review websites appear often in such searches, the answer is clearly YES.....they are influencing the bedding retail industry.

Unfortunately, the typical consumer does not realize that these sites are NOT the impartial, third party source of information that they were looking for.

With significant incentives, kickbacks and other financial relationships, the stage is set for the online brands to "game the system" and steer consumers in directions that benefit themselves and the reviewer, to the detriment of the consumer. We hear that some sites receive as much as 15% on an affiliated sale, well in excess of the typical incentive paid out at traditional retailers.

Ironically, such underhanded behavior is exactly what many of the very same online only brands warn consumers about, in a large part of their marketing.

While I am a firm believer in free and open competition, I also feel that competition should be fair and transparent and as such, I do support a higher degree of regulation for these review sites.

The goal would be to detail the specifics and scale of these back end financial relationships, communicate the potential for bias and as a result, help the consumer decide if such sites still fit their research needs. If not, they will seek out alternatives that do.

Colonial does not make beds ourselves but we do help our clients figure out how to sell more of their own beds at retail. We have always believed that trust is the cornerstone of any healthy business relationship.

Unfortunately, many of these online, “affiliate marketing partnerships” are currently used in ways that are less than trustworthy. Hence, until that changes, it is hard for me to think of any situation where support of such sites, is in the best interest of the bedding industry or our clients and as a result, Colonial.”
-Mark Hobson, President of Colonial LLC

Read more here.

How To Design A Website For Ecommerce Success

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As more and more retailers work to expand their online presence, many are faced with the challenge of designing a successful website. How can you make sure your online store is as engaging as your brick and mortar location? What sorts of websites inspire spending? Retailer Web Service’s Executive Director Jennie Gilbert focused on these questions and more in a recent article. Titled "8 Essentials of Web Design for Ecommerce Success in 2018," the article offers a variety of useful tips that their customers and designers have found lead to the best consumer conversion rates.

  1. Be a minimalist: The old adage is true: less often is more. But many retailers and manufacturers provide a wealth of product designs, have many selling points to share and harbor a tremendous passion for what they offer. When building your website, it can be hard to hold back. However, if consumers feel a site is too cluttered, they are less likely to shop and more likely to navigate away. Keep your sales pitching to a minimum and let the products speak for themselves. Place an emphasis on clean product description copy, clarity and superb images to capture the eye and tell compelling stories.
  2. Create micro interactions: Details like hover effects, parallax scrolling and transitions give websites depth and in a sense, simulate the responsiveness of an RSA guiding a consumer through a store. Navigation aids make your site more intuitive, ease usability and create a fuller, interactive experience in a subtle way. Implementing micro interactions is essential to building a dynamic and user-friendly site.
  3. Employ animations and video: In an industry as tactile as the bedding and mattress industry, videos and imagery help communicate the look and feel of products typically experienced in store. Not only are consumers more likely to watch a video to gain information than read a block of text, but they are also the perfect opportunity to show off the benefits of your products. You can use videos and graphics to demonstrate how soft or firm a mattress might be, educate viewers your products' material make-up or even the process by which the products you carry are made.

Read more here.


For more multi-purpose bed and futon solutions, visit Cabinetbed Inc. and Kodiak Furniture in showroom B-220 at the 2018 winter Las Vegas Market.

The Risks of Binge-Watching


Here in North America, most of us are experiencing the cold darkness of the winter months, a period of time when huddling under a blanket and engaging in endless hours of screen time seem more than a little inviting. And streaming apps that allow you to binge-watch whole seasons in one sitting make indulging in an multi-hour screen-fest all too easy. Of course, it’s no surprise that this type of activity isn’t great for you. But a recent study published in the Journal of Clinical Sleep Medicine indicates that binge-watching has a direct correlation to decreased – and significantly poorer quality – sleep.

Defined as "watching multiple consecutive episodes of the same television show in one sitting on a screen, be it a television, laptop, computer or tablet," binge-watching is popular across age groups, but is particularly prevalent among young adults. Co-authors Liese Exelmans and Jan Van den Bulck gathered online survey responses from 423 people aged 18 to 25 years old. The survey assessed regular television viewing, binge-watching, sleep quality, fatigue, insomnia and pre-sleep arousal – a feeling of being wide awake and alert. A vast majority of respondents reported binge-watching at some point during the month, ranging from just once during the month (40%) all the way to those who binged almost nightly (7%). Given that this demographic contains a large percentage of college students, this might not be unexpected. However, this particular population is also typically known to be above average sleepers, so the fact that there’s been a shift is of particular interest to scientists. Those who reported binge-watching incurred a whopping 98% higher likelihood of poor sleep quality than those who did not identify as binge-watchers.

The TV shows in high demand these days tend to be action-packed with high engagement levels and cliffhanger endings that can easily lead people to watch another episode “just to see what happens.” According to Newsweek, “the stress of uncertainty, of not knowing what is going to happen next, produces corticotropin-releasing hormone. CRH heightens awareness and makes it harder to go to sleep. The way to relieve this stress is to, you guessed it, keep watching.” This cycle can continue to repeat itself without people consciously recognizing just how much TV they’re consuming. In fact, most respondents didn’t intend to binge-watch; about 71% of binge-viewing happened by accident.

What happens when you become more and more amped after watching hours of screened entertainment? It takes a lot longer to wind down. This delayed onset of sleep then carries on into over sleeping or, if that’s not an option, increased fatigue, which has a whole host of negative side effects, like a decrease in alertness (especially dangerous when behind the wheel) and poorer cognitive performance. Not to mention that the copious amounts of blue light emitted from our screens can mess with our circadian rhythm, making for a double whammy of sleep-related health issues.

For an entertaining explanation of some of the other dangers of binge-watching, check out this short TED video:

Given that we live in a world that embraces constant entertainment, how do we “binge responsibly?” The very phrase may sound silly, but the American Academy of SleepMedicine does offer a few commonsense tips for decreasing your risk of unintentional binging. Start by setting an episode limit before you even begin watching, being sure to take a break between each episode to get out of the auto-play loop. And of course, shutting it all down at least an hour before bed, being sure to employ some relaxation or meditation techniques to calm down your brain.

So tonight, whether you’re digging into Stranger Things 2 or settling down to re-watch all ten seasons of Friends, make a promise to yourself to binge responsibly. And if you find yourself thinking that maybe you’ll watch “just one more episode,” just…don’t.

Read more here, here, here and here.

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