Source: Tuft & Needle
Maverick mattress e-tailer Tuft & Needle sells out to Serta Simmons
Serta Simmons Bedding (SSB), the very definition of a staid legacy mattress company, announced it has reached a definitive agreement to acquire Tuft & Needle (T&N), one of a group of online sellers that has disrupted the mattress category in recent years.
With brands including Serta, Simmons and Beautyrest, SSB is the largest manufacturer of mattresses in the world. The deal for T&N, which sells mattresses priced between $350 to $750 directly to consumers, will give SSB access to the fast-growing bed-in-a-box category. T&N’s products will now be available for purchase through SSB’s retail partner store network.
“Tuft & Needle is the original disruptor in the direct-to-consumer mattress industry and is a rare example of an economically healthy, fast growing start-up,” said Michael Traub, SSB chief executive officer, in a statement. “Combining SSB’s nearly 150-year legacy and leadership in product innovation with Tuft & Needle’s expertise in delivering a best-in-class consumer experience, this merger will greatly accelerate our growth and innovation in the direct-to-consumer segment, and significantly enhance our e-commerce capabilities across brands. Together we have a clear path to transform the consumer experience at scale as well as the future of the industry.”
T&N co-founders JT Marino and Daehee Park will continue to lead the company while also helping to push SSB’s omnichannel efforts.
News of the T&N deal comes a week after reports circulated that SSB was considering an acquisition of Mattress Firm, the largest chain of mattress stores in the U.S. The retailer is reported to be considering bankruptcy and closing stores. An unnamed source told the New York Post that a Mattress Firm bankruptcy could leave SSB with “$100 million in receivables.” It’s unclear if SSB will pursue a deal for Mattress Firm in light of its T&N acquisition.
Discussion Questions
DISCUSSION QUESTIONS: What does Serta Simmons Bedding’s acquisition of Tuft & Needle mean for the burgeoning mattress-in-a-box as well as the legacy mattress businesses?
Poll
BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Bob Amster
Principal, Retail Technology Group
It means more consolidation. Even with this purchase, it doesn’t preclude Serta from buying Mattress Firm. And it won’t matter much to consumers. They already see the mattress retailers as a blend of the same. Especially when there are several locations of them on the same street. The acquisition of Tuft & Needle just demonstrates consolidating is the next step, even if it doesn’t create brand preference.
It’s hard to say how successful this acquisition will be for Serta Simmons Bedding. Today we focus less on growing the business we have and more on just buying competitors. That’s not always smart because along with purchasing the company, you’re also inheriting all the company problems. How Tuft & Needle fit into the overall mix of SSB is yet to be seen and how the public will respond is unknown.
The mattress business has become extremely competitive with more mattress e-tailers opening stores like Casper, yet the population remains the same. As for SSB purchasing Mattress Firm, I do not see that as a wise move. The company has been a poorly-run business for a very long time, and it’s doubtful SSB will have what it takes to turn the company around. I think they’re best off focusing on their existing company strengths and doing everything they can to market and promote the business they have, finding additional retail partnerships both in-store and online. Less is more, and if they take on too much, too quickly, it’s doubtful they can succeed.
“…and the beat goes on…” said Sonny & Cher in 1967. The consolidation in the business and the associated failures are fast and furious. There are fewer independent players left to play. This latest deal looks more like a defensive move to maintain market share than a growth opportunity. When the music stops, who will be left standing?
Let’s face it, the traditional mattress segment is old-fashioned and boring! There is also massive oversupply in retail with an extensive number of old-school stores where service and ambiance are OK, but nothing special.
Given this, it’s not surprising that much of the growth has come from new and innovative startups like Casper. SSB clearly wants a slice of this so its acquisition of Tuft & Needle is sensible – not least because it gives it a solid direct-to-consumer operation.
Given Casper’s push into stores, it would not surprise me if SSB did something similar. However, a full takeover of the mess that is Mattress Firm would be a step too far in my view. A selective acquisition of some stores as part of bankruptcy proceedings might be OK, but taking on the whole thing would be a mistake.
The mattress-in-a-box trend is not going away anytime soon. The traditional mattress business is flat, with long product replacement cycles. The immediate growth is in direct-to-consumer, which requires a different product, marketing and logistics. If you can’t beat them, acquire them. In today’s fast-paced world, there is a need for speed. What better way to enter this new growth sector than to acquire the original disruptor, who is also showing a profit? Looks like a very smart acquisition which could in turn be disruptive in the industry.
We’re thrilled with our Tuft & Needle mattress. That said, there are too many bedding stores and agility, rather than ubiquity, seems to be the order of the day. I hope SSB will keep Tuft & Needle’s people; they can show the way to the future.
Congratulations to T&N. While I’m happy for T&N and its founders (and shareholders), I’m always disappointed when big established brands buy small, innovative disruptive entrepreneurial companies. All too often the very attributes that made them disruptive and successful get extinguished in the bowels of big corporations instead of propelling and encouraging those attributes. Let’s hope SSB doesn’t allow that to happen.
In times of chaos, there is always opportunity. Case in point, the mattress industry, where the sector is facing challenging times with softening sales, and the customer preferences are slowly shifting over to a more seamless, trusting and transparent shopping experience.
Serta Simmons Bedding’s acquisition of Tuft & Needle is taking a page out of the Walmart digital native spending spree playbook. Why re-invent the wheel when you could acquire Tuft and Needle’s customer experience capabilities, as well as their digital talent team?
These are disruptive and transformative times in the mattress and furniture segment. Let’s hope that SSB retains as much as it can of Tuft & Needle’s talent.
With many new mattress-in-a-box start-ups and consumers’ acceptance for buying mattresses online growing, the mattress industry has changed dramatically in the past five years. In addition the glut of furniture and mattress stores has made competition fierce. Serta Simmons Bedding’s acquisition of Tuft & Needle is a strong signal that they have intentions of expanding from wholesale into retail. Their recent exploration of acquiring Mattress Firm corroborates this strategy.
The acquisition of Tuft & Needle expands Serta’s product category and target audiences and acquiring a company with a lot of existing stores would give them an instant national retail presence. Mattress Firm may not be the best fit from a brand reputation perspective, but they could change the name and improve the operations.
I think mattresses-in-a-box are beyond a burgeoning industry and this deal is the perfect example of that. Serta Simmons is smart to get in the game and will undoubtedly benefit from not just the product, but the culture that T&N brings with it.
It shows that the mattress industry is no different than others. D2C disruptors come into the space, start taking market share and then either have to raise money to really compete or look for acquisition. This is no different than Dollar Shave Club being picked up by Unilever or Jet getting acquired by Walmart. Literally thousands of examples. For the “bed in the box” segment it is one of the first signs of a successful exit and some level of valuation. Some will now look too greedy.
Ah yes, bankruptcy: the original and still biggest “disruptor.”
But back to T&N: with about $100M and growing in sales, I would say it was not an imminent threat to SSB, which has, well, let’s just say a lot more, but was an attractive target. As always in these whale-swallows-guppy stories, the swallowee often loses its identity — the very thing that made them a success in the first place — so we’ll have to see what happens. I wish them well.
If you can’t beat ’em, buy ’em! The mattress sector has been in a state of total disruption for many years now as they are one of the last segments of old-fashioned retail where customers aren’t #1 and consumers have had enough of that.
T&N is the original mattress disruptor and much like Dollar Shave Club, it’s inevitable that they either find new funding levels to grow big fast, or they get bought out by an established brand that realizes they can’t build this model themselves. It’s a smart move for SSB, and certainly a smarter move than buying a failing mattress retailer.
D2C has gained significant momentum in this sector and SSB needs to get in the game if they are to find any source of growth. If nothing else, this is a sure sign that the mattress-in-a-box concept is well beyond being a concept is fully mainstream!