“Lumpy” Sales and Shipments

2. “Lumpy” Sales and Shipments • According to the International Sleep Products Association (ISPA) (and based on a new analytical method), 2018 US sales of mattresses and foundations, including both domestic and imported products, increased modestly. • Shipments during 2018 from US manufacturers tell a different story, as 2.4% fewer units were shipped, with a total value of $8.3 billion. Results for both mattresses and foundations are less than those for 2016. • Industry reports for Q1 and Q2 2019 indicated further market shrinkage, with total Q1 units sold decreasing 3.4%, and Q2 performing even worse, with a 10.8% decrease in units sold, and 6.7% in dollars.

3. Tariffs and Other Nightmares • As with many consumer products, the bedding & mattress industry must address the tariffs issue. Total mattress imports declined 22% during July 2019. Some in the industry view this as a boost to domestic production, but it may be short-lived. • According to the Piper Jaffray August 2019 Mattress Survey, 28% of retailers expect substantial sales during the remainder of year; however, the ISPA estimates just a 1.5% increase in total 2019 shipments and another modest 2% increase for 2020. • Another recent Piper Jaffray survey revealed only 22% of retailers offer DTC brands, such as Casper, and another 11% said they will by mid-2020. The other 67% of retailers are at a great disadvantage as DTC brands’ market share is approximately 20%.

4. Americans Are Tossing and Turning More • Fulfilling a need is the primary driver of revenue for businesses/retailers and, according to The Better Sleep Council’s latest (April 2019) State of America’s Sleep study, many Americans need a better mattress, as 56% of respondents said they were poor sleepers. • The worst sleepers in America were women, or 57% of all poor sleepers, and, unsurprisingly, 71% of women with children at home younger than 18 were poor sleepers. Most men with children at home were also poor sleepers, at 56%. • The fewest poor sleepers were retired adults, at 16%, with just 3% of Silent Generation members and 22% of Boomers in that category. Men (58%) and empty nesters (78%) were some of the excellent sleepers.

5. Retailers Remain Upbeat • A 2019 Furniture Today retailers survey found a larger percentage (57%) expect their bedding accessories sales to increase during 2019, compared to 40% who said their 2018 accessories sales increased. • Another bright spot, according to the same Piper Jaffrey August 2019 Mattress Survey cited on page 1 of the Profiler, is selling a mattress with an adjustable base. The median rate has been improving: from 17% for 2017 to 19% for 2018 to 22% for 2019. • Although the bedding store sector has contracted by hundreds of stores, with the Chapter 11 bankruptcies of Mattress Firm, Sleep Outfitters and Mattress1One, furniture stores are not leaping into any perceived gap and some are even eliminating bedding.

6. Online Mattress Brands Stacked to the Ceiling • Although a 41% YOY sales increase is likely to moderate, eventually, according to Furniture Today data, the top 15 bedding e-tailers experienced exactly that during 2018, increasing total sales from $2.18 billion to $3.07 billion. • The total online mattress industry is valued at $16.5 billion. ISPA reported 45% of mattresses purchased during 2018 were from e-tailers, compared to 35% for 2017. • A quick purchasing process and front-door delivery are certainly what attracts many consumers, but there are an estimated 175 online mattress companies, and many with very little product differences and one or more companies manufacture multiple brands.

7. Customer Satisfaction Slides with Sales • The average score in the J.D. Power 2018 Mattress Satisfaction ReportSM declined slightly to 840 from 2017’s 842 (on a 1,000-point scale). The report cites a lack of support, durability and comfort were consumers’ primary reasons for their dissatisfaction. • Sleep Number replaced Tempur-Pedic in the top position with a score of 867, which was its score in the 2017 rankings. Tempur-Pedic’s score decreased 39 points from 887 to 848. Sleep Number outperformed Tempur-Pedic in 6 of 7 measured factors. • After Sleep Number and Tempur-Pedic, the remaining brands were Serta, 842; Sealy, 837; Simmons/Beautyrest, 833; IKEA, 829; and Stearns & Foster (insufficient score for 2018).

8. Advertising Strategies • With a modest sales increase forecast for 2020, bedding & mattress retailers should now (with your input) plan an aggressive advertising program for next year to ensure they will at least maintain current revenue levels and be in a better position to increase market share. • Use the information at the bottom of page 1 of the Profiler to explain why a bedding & mattress retailer is at a disadvantage continuing to resist adding DTC brands, such as Casper, to their inventory. When they do, suggest a promotion to help the launch. • Data in the Profiler indicates selling a mattress with an adjustable base can increase sales. Bedding& mattress retailers can test the attraction of this combination among local consumers with a blitz ad campaign and a special offer for a combination purchase.

9. New Media Strategies • To show retailers are focused on making sure customers are well informed, bedding & mattress retailers would be wise to post the most recent news stories about the tariffs and their effect on prices on their Websites and social media platforms. • Bedding & mattress retailers can also gain exposure and generate goodwill by using their social media platforms to post information about sleep problems and who is more likely to experience them and why, as per the information from The Better Sleep Council. • With more women than men planning to purchase a mattress, bedding & mattress retailers may want to test Pinterest to attract more of this consumer group, pairing bedding & mattress products with bedroom furniture/accessories that will appeal to women.