Any thoughts on why markup stays so high if the industry is actually cutthroat? Competition should be driving margin way down.
So for mattresses you really can't afford low margins if you want to stay in business. I can't imagine mattress stores sell more than several mattresses a month. As for why Casper and Purple mattresses are so much when you are supposedly removing the middle-man (the physical stores), I'm not sure. Because they can? I don't really understand why someone would buy one of their mattresses that you can't test out at a store, when you can pay the same price at a store and test out all your options.
This could apply to cars (and it does a bit) but the higher price and social factor makes people understand them more. Mattresses are just cheap enough (with just enough "bargains") that it's easier to just get it over with.
For your last point I'm from Australia so our brands are different but we have plenty of the online foam mattresses. I got one because mattress stores felt a lot like a car sales lot last time - clingy, pressure tactics from someone with a massive information advantage. The online companies all had full refund policies so there's limited risk apart from time.
But there are people who do buy them often enough - hotels! I like to find a Marriott/Hilton/Hyatt/IHG standard mattress and it should be good enough. Ask a hotel manager to hook you up, should only be $250 to $500 at most for a King.
As someone who bought a mattress online:
1. You don't have to go to a store, which makes it much more convenient to buy. 2. If you don't like it, you can return it for a full refund, so there's no possibility of wasting money on a mattress you don't like.
As for a startup, generally people don't buy mattresses that often, but I know I would if they were 100$. Even cheap ones end up around 5-700$, which is nowhere near an impulse buy. As a result, I only replace a mattress if it's completely worn out, which takes a solid 10-15 years.
Funny how popular it is to replace the 800$ phone every 1-3 years but 1-3k$ has to wait until the mattress is unbearable. Everyone I know has this attitude for mattresses.
1) There are already lots of cheap memory foam mattresses that are relatively well reviewed on Amazon for example this one for $200 https://www.amazon.com/dp/B00474X5DO/ref=cm_sw_r_tw_dp_U_x_z... (not a recommendation, just looked it up).
2) The average markup isn't 2000%. You can look at Casper's COGS in their S-1. Also, the return rate is built into the cost, so that adds to it.
3) In general, a cheap mattress is going to be perceived as low quality. It's like how nobody wanted Warby Parker glasses when they were priced around $20. Then they changed the price to $99+ and they actually improved sales.
I’d have to look at my data to see CPC costs but i tried a lot of angles and channels to generate sales cheaply and struggled to find anything sustainable.
CPCs, ad dollars, imagery, affiliate commissions hell, It’s only a matter of time before some affiliate comes in this thread pumping their garbage mattress review site. Half of them you can even get listed on without them asking for a special deal or rate.
I think I paid around 30€ to buy a foam mattress in Germany
https://www.lidl.de/de/matratzen/c11480
Edit: Here's the german discounter store archive, it lists past sales of the three largest chains Lidl, Aldi north/south. Just search for "Matratze" and you can check past sales up to 15yrs ago:
The market is super saturated CPCs, affiliate commissions and the rest of the advertising eats into the real margin.
The rest of it I always saw that people associated more expensive with better when in reality there isn’t that much difference in quality. ie they will all suffer from sagging at some point. Brands play into this too.
If all those retailers are themselves buying from a small number of suppliers, they could be paying a lot of that markup, while their own margin is razor thin due to cutting each others' throats.