Brick-and-Mortar Meltdown No Problem: Online Retail Startups Shift into Brick-and-Mortar

From Wolf Street, by Wolf Richter

With a tinge of bitter irony and perhaps desperation.

Mattress startup Casper Sleep Inc. is going to disrupt, again. Brick-and-mortar retailers are melting down. Today, clothing store rue21 filed for bankruptcy, shuttering 400+ of its nearly 1,200 stores. A slew of brick-and-mortar retailers announced a similar fate this year. To survive, they’re trying to carve out their niche online. But online retail is tough. And online-only retail startups too are finding out that it’s tough, and now they seek salvation in, well, brick-and-mortar retail.

“You have to start with digital,” Philip Krim, CEO and co-founder of Casper, told the Wall Street Journal. But once the brands is better known, “offline distribution – that’s where you’re really able to get a lot of scale,” he said, apparently oblivious of the meltdown.

Casper’s primary product is a foam mattress, sold online, and shipped in condensed form directly to a bedroom near you. Its revenue reached about $200 million in 2016, up from $100 million in 2015, Krim told the Journal, which added: “Casper raised prices on its mattresses in January to $950 from $850 for a queen, saying it made improvements that justify the higher cost.”

But a snag has cropped up. “Casper is finding it can no longer shun the storefront.” So it made a deal with Target.

Target expects in June to put Casper’s products [pillows, sheets, and other accessories] at the end of rows, a high-profile area, and 35 stores are scheduled to have a larger display with a Casper mattress to try out.

Target, which said the deal came together after about a year of talks, doesn’t yet sell mattresses in stores…. But Casper said it would become the exclusive mattress of Target.com and is discussing the possibility of bringing the bed into stores.

For three years, Casper has “lured customers through Facebook ads and podcast sponsorships,” as the WSJ put it. “It plastered New York subways with posters featuring cute cartoons, sponsored podcasts and flooded Facebook and Instagram with ads.”

Casper came to my attention in November 2014, inside a black envelope addressed to “Resident,” and titled “San Francisco Offers.” The envelope contained six glossy sheets, each for a different online retail startup. One sheet showed this:

No text, just a girl with a mysterious smile waiting for me. In tiny print, the brand, which I circled.

You had to look at the other side to find out what this was. The whole package got my attention – in that respect it worked. It was old-style advertising, delivered by the Postal Service. It relied on hormones. Car ads used to be that way before they were pooh-poohed.

Read more at Wolf Street



Categories: Economy

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