Why Casper Is Destined to Fail
Diversification preserves wealth, concentration generates it
I’ve had a Casper mattress for 3 years and I love it. I felt like I got a steal when I bought it compared to going to a big box mattress store. Instead of spending thousands, I had a mattress delivered to my doorstep for a fraction of the cost. It was even “memory foam”, which always had seemed like it was a luxury bedding product. After having a Casper though, it didn’t feel like I had bought a luxury item.
This is the bed that I bought. I had bought a good bed for a solid value. Casper’s entire brand is about cutting out the middleman so the consumer can have a solid bedding product at a great price. Casper’s brand is about value. The issue is the new direction of Casper and why I think they’re destined to fail unless they changed their ways.
The New Casper
In the past few years, Casper has been slowly changing its product line from one bed to multiple luxury beds, a line of linens, pillows and many more sleep knick knacks. They’re calling themselves a company for the “Sleep Economy”. This is obviously an artifact of the saturation of the mattress in a box market and the fact that they lose $160 for every $1,000 mattress that they sell. They’re following the strategy of cross selling and going very broad in their product category — a diversification of their product set.
This strategy of diversification would make sense if their core business of selling mattresses was actually profitable. Everything else would be a value add but instead Casper is just fighting to even break even by adding more expensive add-ons.
“We may not achieve profitability when expected, or at all. “ — Casper S1 Filing, Risks Section
These expensive add-ons such as bed sheets and pillows don’t function well as part of Casper’s brand or business either. Expensive sheets and pillows are part of a luxury brand model but Casper is still a value brand. It’s a total mismatch for consumers. On top of that the rest of their future products are simply going to end up being high priced knick knacks.
What To Do Instead
Casper should double down on process and the original concept of Casper that brought so many fans to begin with. Build a great mattress for a solid value. Spend time making it the mattress in the box and then lower cost dramatically by focusing on the manufacturing end of the spectrum. Casper has said, “We currently rely exclusively on third-party contract manufacturers whose efforts we are unable to fully control.” They have a fixed cost product that they spend enormous sums to market but need to get costs down to operate competitively by controlling the manufacturing process.
It’s obvious that mattress stores are already hurting and buying a mattress this way is becoming the de facto. Casper must concentrate on the core mattress business so a product diversification can be natural. Then going further, Casper needs to realize that it isn’t a luxury brand and if they want to begin selling products at luxury price points a new brand may be required.
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