Serta Simmons Bedding will merge with direct-to-consumer mattress company Tuft & Needle, according some executives.
The merger is one of the first to join a legacy mattress company with the upstart online brands that have penetrated the industry over the past few years. Serta Simmons will attempt to use to their advantage the combination of Tuft & Needle’s e-commerce capabilities and infrastructure and Serta Simmons’ retail reach.
Selling in stores aids in reducing the cost of customer acquisition, which has expanded for digital brands over the past few years as competition for online eyeballs has grown. It also opens up an easier way for customers to test a product. Tuft & Needle, Casper, and other online competitors provide 100-night trials for free.
Meanwhile, the terms of the deal were not disclosed.
“The merger will change the industry in a significant way,” stated Serta Simmons CEO Michael Traub. “We will be able to serve consumers unmatched both online and in-store.”
Atlanta-based Serta Simmons has roughly $3 billion in revenue and claims to be the largest manufacturer, marketer, and supplier of mattresses in North America. Its brands include Serta and beautyrest.
It also distributes its products across over 10,000 retail storefronts. It was acquired by private equity firm Advent International in 2012 for a whopping $3 billion, based on media reports during the time. Serta Simmons did not comment on the reported valuation.
On the other hand, Tuft & Needle was founded in 2012 by JT Marino and Daehee Park. The business is to sell mattresses, bedding, and bed furniture. Its mattresses, sold under brand names T&N and Mint, sell for as low as $350 for a twin bed and $750 for a California King size bed.
The company does not sport any outside investors. It generated $170 million in sales last year, selling on Amazon and with retail partners that include Crate & Barrel.
It is among the upstart mattress firms that emerged in the last few years, growing traction by selling beds at a significant discount to traditional brands, while also emphasizing the marketing of its products online. Other companies in this industry include Casper and Purple, among others.
“We have realized that over the past few years, the direct-to-consumer [business] has grown drastically,” said Traub, who added that he was expecting the market shares of such brands to be around 20 percent in 2018.
Serta and Tuft & Needle are tagging the deal a “merger” to reflect the transformational impact that they expect their agreement to have on the companies. Tuft & Needle will retain its headquarters in Phoenix, where it will run the e-commerce platform for all the combined company. Marino and Park will be joining the new company’s leadership team.
“Consumers are shifting to finding retail stores on their phones,” said Marino. “That’s something we’ve mastered – how to drive traffic into those retail stores. It’s probably the most important thing to our retail partners that they haven’t figured out.”