Active sleep solution companies such as Wakefit, Wink & Nod, SleepyCat, Sunday and Flo have adopted a direct-to-consumer model
The mattress market seems to have been woken up from a long slumber, with a few Indian start-ups attempting to disrupt the business model by bringing the concept of ‘mattress in a box’ to India and selling them online.
The unique selling proposition though is the availability of a branded product at a lower price. Active sleep solution companies such as Wakefit, Wink & Nod, SleepyCat, Sunday and Flo have adopted a direct-to-consumer model, thus cutting out the middlemen and commissions. This allows them to sell products at a far lower cost than established mattress manufacturers in India.
Should legacy mattress brands, the likes of Sleepwell, Kurl On and Duroflex — which command almost 50% of the market share — lose sleep over this?
The cost of sleep
Wakefit’s website explains how the company is able to sell products such as memory foam mattresses at a low price: “Usually, mattresses are priced higher due to brand spends being passed on, retail commissions, sales commissions and wholesalers’ profits. Our mattresses are cheaper compared to others in the market because we cut out the middlemen to sell good quality mattresses directly to our customers at fair and honest prices”.
Since consumers cannot touch and feel the products they buy online, these new-age brands have a 100-day no-questions-asked return policy.
Sandeep Prasad, CEO and founder of Wink & Nod, says that in the traditional distributor model, as much as 40% of the price of the product goes into commissions.
The newer players, which only operate online, have tasted success with their offerings. Wakefit, for instance, has grown from earning Rs 7 crore in revenue three years ago, to making Rs 81 crore in 2019. The company aims to net Rs 250 crore in 2020, says its CEO and founder, Ankit Garg.
Legacy mattress brands, which traditionally use the distributor/ retailer set-up, are now warming up to this business model. Duroflex has launched a direct-to-consumer mattress brand called Sleepyhead. Interestingly, the website of this new brand is critical of the business model followed by its parent brand. “Did you know that a mattress that you buy at a retail store costs up to 60% more than the actual cost of the mattress? And don’t forget the delivery cost!” is how its FAQs section reads.
Sleep and tell
Mathew Chandy, MD, Duroflex, says the direct-to-consumer model is best suited for players entering the mid-level price segment. “For products that are more expensive and premium in nature, the retail experience remains an important part of the purchase journey,” he adds.
In the absence of distributors and retail experience, these new-age brands could begin to plateau very quickly. This is precisely why furniture e-commerce brands like Urban Ladder and Pepperfry had to set up experience centres.
Sleep solutions brands have started investing in experience centres to boost volume growth. “Getting consumers to buy high-value products, like mattresses, purely online could be risky as people may have low trust in the brand/ product. Therefore, consumer behaviour will change at a slow pace for this market,” says Devangshu Dutta, chief executive, Third Eyesight.
Even in the evolved markets where online retail has become a way of life, physical stores continue to exist. Especially in the case of upholstered furniture and mattresses, retailers encourage consumers to try out the product.
The challenge for young brands, hence, is to avoid the distributor model and find more affordable ways for consumers to experience their products. Wink & Nod has tie-ups with real estate companies to display its products. For its entry into the tier II and III markets, where selling mattresses exclusively online could be tough, Wakefit plans to build experience centres.
“The challenge here will be to generate footfall without the support of the traditional models, and therefore a brand will have to go for locations with more visibility,” says Dutta. But this means location cost will go up, so even if a company saves up on the distributor model cost, it could end up spending on managing, supporting and supplying the retail experience.