Bedding Outlook: Tier Two producers see solid unit, dollar gains
David Perry -- Furniture Today, December 17, 2012
HIGH POINT - Tier Two bedding producers believe the mattress industry will enjoy solid unit and dollar sales gains next year, with some saying a wave of pent-up mattress demand could be unleashed.
The producers are slightly more optimistic about bedding's prospects in 2013 than their larger counterparts, although that group also expects growth next year.
The Tier Two producers are generally encouraged by an improving economy and an improving housing market, two traditional engines for mattress growth. They also believe that consumer optimism is recovering from the setbacks it encountered in the fall elections, and say that interest in higher priced specialty sleep sets should be strong.
But there are some negatives, including a sharply divided nation and the bedding industry's emphasis on low price promotions, the producers say.
Here's how the Tier Two producers responded to the question, What is your overall outlook for bedding business next year?
Walt Bader, president, OMI: "The recent presidential election proved we are a nation still divided, which creates an uncertainty that will impede consumer spending on durable goods until there is economic stability and positive job growth.
"I believe we will see something of an uptick as a result of minor changes in the housing sector and consumer confidence, but I think that retailers are also going to see more pressure to reduce prices. This was recently reinforced when I received an ad from Amazon quoting a queen memory foam mattress for $229.
"Unless retailers begin to focus more on satisfying the specific needs of all consumer segments, they are not going to do well trying to compete with generic products and low-end pricing strategies, which will continue to put pressure on any dollar volume increases year-over-year in our industry."
Denny Boyd, president, Boyd Specialty Sleep: "In 2013 we'll see continued increases as housing begins a modest recovery."
Stuart Carlitz, president, Bedding Industries of America: "With the pent-up demand experienced by the majority of our rank and file customers during the months leading up to the election, in addition to the huge amount of our region's population experiencing horrific damage as a result of Superstorm Sandy, we anticipate a significantly stronger than average December with momentum building into 2013 and the foreseeable future."
Jamie Diamonstein, president, Paramount Sleep: "I believe that we will see a slow, steady increase in purchases in the second half of the year as consumers continue to exhibit cautious optimism. Given the direct correlation between the housing market and bedding purchases, any movement up or down could have a significant impact on sales.
"It will take at least six months to see what impact the newly elected officials and the president will have on lowering unemployment and raising consumer confidence before a clear direction for the country's fiscal challenges can be set."
Neal Grigg, president, Carolina Mattress Guild: "Bedding will continue to gain momentum as the economy crawls back. The recent gain in home sales and improved home valuation should provide some good growth opportunities for the industry."
Bill Hammer, president, Shifman: "I think there is a tremendous opportunity to build our business in 2013. The overall economy seems to be slowly improving, unemployment figures keep dropping, the stock market is up, and the housing market is recovering."
Chris Henning, president of North American operations, Dormeo Octaspring: "Pent-up demand will release a new round of consumer spending in the mattress sector next year. Consumers deeply impacted by the recession, financial turmoil and international instability have started coming back into the market. As they do, we believe a significant number will look at specialty product because of the enhanced comfort, health and new technologies the category provides.
"Our view is that the consumer will continue to spend more for mattresses that address their overall sleeping comfort and mitigate their health related issues as the U.S. consumer continues to age."
Kurt Ling, president, Pure LatexBliss: "We are optimistic because the economy is picking up some steam. In particular, we forecast that specialty sleep products will continue to grow slots on retailers' floors and grow in share of retailers' business as it is desired by consumers. Latex will continue to grow in the specialty sleep category as an alternative to memory foam. Consumers are willing to pay more for the innovation companies like ours bring to the industry. This willingness to pay higher tickets for more innovative and luxurious goods is not only beneficial for us, but for our retailers as well. Two other important points are that consumers continue to buy more accessories as they shop for a mattress. In early adopter circles we are already hearing retailers say ‘Latex is what's next.'"
Rick MacLean, chief operating officer, Jamison: "We are modestly optimistic for bedding sales to increase next year in both units and dollars as the housing market sustains some positive momentum into 2013. We also expect stronger growth in specialty sleep and continued movement away from promotional slots that just don't bring the GMROI that better bedding can provide."
Marco Magni, president, Magniflex USA: "Our industry will see overall unit gains because the marketplace is very competitive right now. Manufacturers with some money are paying for floor position and they are putting low margin units on the floor to meet retailer demand for low-end product. The problem is the retail sales associate just wants to make a sale, even if it means low cost product. They are not challenging the customer enough to get them to see the merits of higher quality, even if it costs a little more because they are afraid to lose the sale.
"For that reason I also do not see any real dollar gains for the industry. Remember, you need to sell 2.5 mattresses at $399 for every $1,000 mattress you used to sell. Higher unit volume, yes, but fewer dollars."
Bob Naboicheck, president, Gold Bond: "I am much more bullish about 2013 than I have been over the last three years. I think that with the election behind us there will be more consumer optimism. The real estate market has picked up as well. The only caveat I would place here is the fiscal cliff discussions in Washington. If that isn't handled properly by our government leaders, it will be a problem.
"Also, the devastating hurricane in the Middle Atlantic states and parts of New England will create demand for sleep products well into 2013. Beyond all the homes that were completely destroyed, many more suffered water damage, mold infestation, etc. While we never like to take advantage of someone else's loss, it will nonetheless be one of the economic factors that give the industry a boost this year."
Jim Nation, president, Five Star: "2013 will be another growth year for the bedding industry. Specialty bedding will continue to lead the way but not at the current pace for the industry. Some players will make bigger moves. Innerspring mattresses will show a small increase. Gradual improvement in the housing market will be a plus in some markets."
Martin Rawls-Meehan, president, Reverie: "Our outlook is very positive. We believe the economy is rebounding, particularly in the housing sector. This will help bolster the mattress industry in general. Specifically for Reverie, we see the adjustable bed business growing at a stronger clip than mattresses. There is a disproportionate pickup in activity for higher-end goods, which encompass adjustable bases. Also, adjustable bed sales are increasing briskly today because retailers are flooring more of our product due to consumer interest and its contribution to the overall ticket. We have some retailers, for example, who used to have three or four adjustable bases on their floors and they are now making commitments to put adjustables under ever compatible mattress on their floor - in some cases that is 30 or more per store. They are making more money and higher average unit selling prices as a result."
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