Single-vendor sleep shops stir debate
By David Perry -- Furniture Today, November 4, 2002
High Point — Single-vendor relationships may be fine for a variety of home furnishings retailers, but the concept doesn't always work in the sleep shop channel.
That's one of the lessons bedding executives cite in reflecting on the problems encountered by Sealy's retail affiliates, The Mattress Firm and Mattress Discounters.
The Mattress Firm, a Sealy-only retailer, was sold last month to an affiliate of Sun Capital Partners, a Florida-based investment group. Mattress Discounters, a Sealy and private-label retailer, filed Chapter 11 and said it would close or sell more than 150 stores.
Those retailers were affiliates of Bain Capital, Sealy's principal owner, and two of Sealy's largest customers.
Sealy President and Chief Executive Officer Dave McIlquham said it is too simplistic to say these developments prove the single-vendor model doesn't work.
"Single-vendor sleep-shop retailers create different market dynamics than multi-vendor retailers, but they can sustain themselves and flourish," he said. "There are several such retailers who have been very successful."
While the situations at Firm and Discounters were different, McIlquham said, "both faced challenges rapidly building a strong image in new markets where they faced well-established bedding retailers."
Other bedding executives offered more pointed assessments of the challenges the Bain affiliates faced. Some said the retail model Bain pursued was flawed, while others took a broader view and said that single-vendor bedding stores are prone to failure.
"Just the fact that they were in a situation where they needed to spin off The Mattress Firm proves that single-vendor specialty stores don't work," said Kingsdown CEO Eric Hinshaw. Selection and service are keys for specialty retailers, he said, and the selection in a single-vendor store is obviously limited.
Simmons Chairman Charlie Eitel said, "It seems to be public knowledge that the one-brand model under Sealy at The Mattress Firm and Mattress Discounters hasn't worked. Both retailers are recognizing they need more than one brand."
He said both of those retailers suffered by not carrying single-sided beds, a construction he believes is gaining momentum. "There is a clear movement to one-sided beds," Eitel asserted, adding that Sealy does not offer the "breadth and scope" of products to successfully service major single-vendor bedding retailers.
A Sun Capital executive hinted that Mattress Firm might add one or more vendors to its lineup, and Eitel said Simmons is likely to join the mix there. He also said it's likely Simmons will be a new vendor at Mattress Discounters as that vendor restructures.
The one-brand bedding retail model can work in smaller markets, Eitel said, "but in any sort of metropolitan area, it's important that consumers believe they have options."
Simmons owns about 36 Mattress Gallery stores in California, acquired "through a credit issue that emerged in 2000," Eitel said. Those stores, which carry more than just Simmons bedding, will be sold at some point, he said, adding, "Simmons does not intend to be in the retail mattress business."
Spring Air President Jim Nation said Bain's sleep shops suffered from a number of problems.
"Single-vendor presentations are very viable in any retail format," Nation said. "But what happens when that vendor turns cold? The Sealy and Stearns & Foster lines have lost momentum in the marketplace."
Single-vendor relationships can work, he said, if retailers "have a vendor that will approach the business as if it is a truly competitive business, and not approach it as if they have the business locked up."
Competition among suppliers usually means retailers get better prices, Nation said, but sleep shops often lose effectiveness when they lose their entrepreneurial roots.
"Sleep shops have been very successful under entrepreneurial ownership," he said. "They have not been as successful under corporate, leveraged-buyout entities."
King Koil President Larry McKay said single-vendor bedding relationships can be losing propositions for retailers and consumers.
"They only work if the manufacturer has the same long-term goals as the retailer," he said. "Often the manufacturer in a leveraged company has short-term goals. The 'S' brands will offer a retailer an attractive up-front financial incentive to go single brand. The manufacturer benefits from being able to merchandise their program free from competitive factors that adversely affect their profitability.
"But the retailer gives up a major sleep shop benefit of having a large assortment of national brands," McKay said. "The consumer loses the broad selection of brands and the strong product value that is driven by fierce competition between these brands."
Restonic President Ed Scott said there are some successful examples of single-source retailers in the mattress industry, primarily in secondary markets. But he believes the concept is "fundamentally flawed" for three reasons.
"First, consumers prefer wider choices such as those available from retailers carrying multiple brands," Scott said. "Second, it removes the dynamic tension between retailers and suppliers. This tension is what drives creativity and creates value. Third, multiple brands create competition for floor space, ad space and floor salesperson loyalty, all of which creates values for the retailer and consumer."
