Bed-in-a-Box Startups Challenge Traditional Mattress Makers

March 7, 2016 3:04 p.m. ET

When Will Haley decided to buy a king-size mattress, he did what he does when he needs a new computer or baby diapers: he bought it online.

Never mind that the mattress cost $950, and he wasn’t going to be able to try it out. “I just didn’t want to go to a showroom,” says the 36-year old software developer and father of three from Rocky Mount, N.C.

Mattresses were long considered immune to the e-commerce boom. For decades, they have been sold in showrooms full of dozens of styles with dizzying discounts and high-pressure salespeople.

But a new breed of upstarts with slick websites has cracked into the $14 billion U.S. mattress industry. The online sellers offer just a few varieties at fixed prices—and ship free to customers’ doors a foam mattress that is compressed into a box the size of a large suitcase.

Industry incumbents aren’t taking the new challenge lying down. Tempur Sealy International Inc., the world’s largest mattress manufacturer, this week will start selling its own bed in a box, called Cocoon by Sealy. It will be sold at fixed prices -- $549 to $999 depending on size -- through a dedicated website. It comes in two models: soft or firm.

Mr. Haley bought his bed from Casper Sleep Inc., which sells one type of mattress. The size determines the price, from $500 for twin to $950 for king. Casper’s approach is one of simplicity and convenience, not coil counts and pillow tops. The company generated $100 million in sales last year, its first full year of operation.

Casper and other newer companies, such as Leesa Sleep and Yogabed, have designed sites tailored for smartphones that require a few clicks to order. In place of the chance to try out a $5,000 Tempur-Pedic with adjustable base or lie down on a $2,500 Serta iComfort with gel memory foam, they promise free shipping, 100-day guarantees and free returns.

It is a process aimed at the often wealthier, younger and busy shoppers who care less about kicking the tires and more about convenience. Mr. Haley says he felt comfortable buying the mattress sight unseen because online reviews are enough quality control.

Two-year-old Casper and its rivals represent 2% to 3% of the U.S. market but they are proliferating. “I’ve counted thirteen [startups], most of which have popped up in the last two years,” says Peter Keith, a retail analyst at Piper Jaffray who studies the bedding industry.

Compressed mattresses promise high margins because they are cheaper to ship than inner spring mattresses that can’t be compressed, says Joe Van De Hey, chief executive of C3 Corp., a maker of mattress-compression machinery. Because of how carriers like FedEx and UPS charge, delivering a 90-pound compressed mattress is less expensive than home delivery with a regular truck, he says.

Returns, however, are a challenge. Most bed-in-a-box upstarts offer a free-return policy, but work hard to keep returns low since that requires sending someone to haul away what has expanded into a very large mattress.

In the past Casper sent out a topper, or top cushion, to customers who called to complain about the feel of their mattresses but found it didn’t reduce returns, says Neil Parikh, the company’s chief operating officer. Instead it has worked to improve the product to reduce returns, Mr. Parikh says. He declined to disclose Casper’s return rate.