SAVE THE DATE: Sleep Summit Oct 8-11, 2024

Ep. 12: Mike It Up Interview Purple CEO Joe Megibow

In this week’s Mike It Up podcast, Jeff and Mike sit down with Purple CEO Joe Megibow as he shares deep insights about the confluence of data and action, building and maintaining consumer trust, and Purple’s plans for the future.

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In this week’s Mike It Up podcast, Jeff and Mike sit down with Purple CEO Joe Megibow.

In this freewheeling discussion, Megibow shares deep insights about the confluence of data and action, about building and maintaining consumer trust, and about Purple’s plans for the future. Along the way, Megibow talks about product innovation, adapting your marketing mix in an ever-changing landscape, and why he’s the “black sheep” of his family.

Join Mike It Up for this highly entertaining episode! And be sure to subscribe to Mike It Up through your preferred podcast platform so you don’t miss an episode.

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Full Transcription:

[Joe Megibow]

Hi, I’m Joe Megibow and apparently I’m here to ‘Mike It Up’, which I guess has something to do with our host Mike, but we’ll see.

[Mike Magnuson] 

I hope I was clear that this is the nerdist podcast on the internet. I mean it’s a strategy podcast about the mattress industry essentially, so you can’t get much nerdier than that. 

[Joe Megibow] 

I was an electrical engineer, I’ll geek out with you as deep as you want to go.

[Mike Magnuson]

That’s what I was looking forward to, and by the way we’ve got a lot of things in common. You spent some time in Chicago, that’s my hometown. I think you spent some time in San Francisco which is where I live now, right?

[Joe Megibow] 

My wife and kids live in the bay area.

[Mike Magnuson]

Okay, there you go! And yeah, you said you’re an engineer as am I, as is Jeff, and then you’re also a musician, is that right?

[Joe Megibow] 

I come from a family of professional musicians so- 

[Mike Magnuson]

Does that mean that you are also a musician or not?

[Joe Megibow] 

I am also a musician though-

[Mike Magnuson]

Though clearly you feel reluctant to say that, relative to your family members, do you feel unworthy?

[Joe Megibow] 

In most families, if you become a musician you’re the black sheep. In my family, I abandoned my roots and went into the silly business world. I’m a bit of a pariah in my family- 

[Jeff Cassidy]

‘Yeah, we don’t talk about him, he’s just a CEO, you know?’

[Joe Megibow] 

Exactly, that’s exactly how it goes!

[Mike Magnuson]

What musical instruments do the people in your family play? and what do you play?

[Joe Megibow] 

My mom, who is a music major and music ed, her primary instrument is the flute. She’s a flautist, though she plays nearly everything. And my brother is a classically trained drummer, but has become a nationally ranked beatboxer. 

[Jeff Cassidy]

WOW! we need to have him on the podcast to redo our intro music.

[Joe Megibow] 

He’s in a great group out of Denver and Boulder called “Face”, you should check him out. 

[Mike Magnuson]

Is it kind of an acapella group? 

[Joe Megibow] 

They call themselves a vocal rock band but yes!

[Mike Magnuson]

Got it, we won’t tell him that you said yes to that. I’m sure he’s going to be listening to the Mike it Up podcast though-

[Joe Megibow] 

Yeah, because who doesn’t? The nerdist show on the-

[Mike Magnuson]

We have huge followers among the colorado vocal rock audience!

What about yourself, what is your instrument of choice? 

[Joe Megibow] 

I did a lot of piano early on and switched over to brass, mostly trumpet, which I played through college and even into some grad school. Now I’m just keyboards mostly but I’m a hack-

[Mike Magnuson]

Nice! But you still get on there and play a little bit?

[Joe Megibow] 

I do. Actually I just bought a new house in Utah and one of the attractions is the prior owner was a musician who built a full recording studio into the basement, and I’m really excited about it.

[Mike Magnuson]

Oh my god, that is awesome.

[Jeff Cassidy]

You’re speaking Mike’s language, Mike is also a garage musician. Later, when you listen to Mike it up, the music that you hear is Mike’s music. I have to pimp Mike out, he made some incredible songs and corresponding music videos with his family during the pandemic. You’ll have to check those out later, they’re incredible. You guys could form a mattress industry band.

[Mike Magnuson]

In case you’re not impressed enough by how nerdy this podcast is, wait until you see those music videos. 

[Jeff Cassidy]

They’re funny, they’re amazing. 

[Mike Magnuson]

Anyways yeah… I played piano while growing up as well,  that’s kind of my heritage. I enjoy music too, it’s fun to talk to other people who like to make music. 

Awesome, while we’re on the subject of your background, you came out of college… you’re you’re an MBA, that’s another strike against you, that we all three have in common. And that’s when you got disowned by the family, I have to imagine? I mean no fine arts-

[Joe Megibow] 

I was pretty much on my own after that-

[Mike Magnuson]

And then you went into the consulting world, for maybe a decade or more, bouncing around EDS and Ernst & Young, right? 

[Joe Megibow] 

Well, on paper it always looks different from reality. Yeah, out of undergrad with an engineering degree… EDS at that time was owned by General Motors, so for all intents and purposes, I worked at GM in their engineering department, an advanced technology group exclusively focused on GM. They bought EDS as their technology arm, which meant I spent, believe it or not, – 

[Mike Magnuson]

Which, at the time, wasn’t too long after Ross Perot was a national name?

[Joe Megibow] 

That was before he ran for president. but I joined a year after he acquired EDS from Ross so this was very fresh of the EDS days. I spent most of that time in Detroit… well, some in Detroit, a lot of the Flint and Grand Rapids, where the manufacturing plants were. I was on the manufacturing floor, with manufacturing, building engineering systems for them. Which gave me my first taste of true manufacturing, which I loved. Clearly that’s the world I’m in now, we’re fundamentally a manufacturer here at Purple. But yeah.. right out of college, I sort of fell in love with that side.

[Mike Magnuson]

Awesome! And then you made this transition, at some point, into digital media and largely a lot of the travel space, how did that come about? because that was the first big transition, it seemed like, before you then made a big leap to mattresses?

[Joe Megibow] 

The irony is when I went to business school and came out of GM, I really wanted to get out of technology because this was pre-web and technologists were undervalued. I mean we were not that different from those on the manufacturing floor. I mean my salary was not going anywhere, I wasn’t making money, I was watching all these MBAs and marketing types making big money, and I said tech that’s not the place to be. How wrong was I? So I went back to business school to pivot, I was like… maybe I should look at this business thing. Of course, I graduated at 96 which is just as the web started in the old days and I still actually tried to stay, I did get into management consulting for a handful of years, product development, supply chain and a number of areas that weren’t tech. But I couldn’t escape my roots, and the web was crazy, so in the late 90s…  In business school, I fell in love with the intersection of marketing and data, It was still pre-web-

[Mike Magnuson]

You said this is 96, that’s very early for that concept-

[Joe Megibow] 

Yeah 94 95.. I had a professor named Peter Rossi who was early early scholar and in data-driven market analytics, and what you had then was loyalty programs, credit card data and all these true data sets and natural studies out there where you could start to truly equate, especially on things like promotion and price theory, true human behavioral response to marketing efforts, and I love that.  Growing up in an artistic family, storytelling, narrative and that I always loved and I liked the data side as an engineer. I was like, wait, you can have marketing and games too together? light bulbs went off! Then the web happened, well now you’ve got a cornucopia of marketing data. In the late 90s, I was part of the founding team of a behavioral data analytics company that was really looking at early visibility into human behavior on websites, on transactional websites, and spent the better part of a decade helping to build that company out. We ultimately sold the IBM, and it was just a crash course on human factors, human behavior, websites, responding to offers, promotions, content and I loved that. And I ended up flipping… one of our big customers was hotels.com at Expedia, realized no one was taking the full power of all this data, and got wooed into stop soapboxing and start doing, which is a scary proposition by the way-

[Mike Magnuson]

Of course, Jeff and I both have been consultants. We know how that goes! 

[Joe Megibow] 

Exactly, and I realized half of what I said was true, the other half turned out to not be, but at least I was half right.  I flipped over to the other side and I’ve stayed on the industry side ever since. But spent six years at Expedia doing just that, applying data and consumer insights into action and rode a pretty good ride there. Ultimately, promoted up to running the US Expedia business, I was running Expedia.com and then flipped into apparel.  I found a leader at American Eagle Outfitters. His pitch to me was “stop thinking of us as having a thousand stores, think of us as having a thousand distribution centers where we could get products from people online”. I was like holy moly, this guy gets it! That’s not how anyone thinks about this.

[Mike Magnuson]

This was 2014?

[Joe Megibow] 

That was 2012, yeah around 2012. And omnichannel was a new word people barely even understood what it meant, I mean to most people omnichannel was just synonymous with e-commerce, which is sort of the opposite of what it means. In his mind, travel was a decade ahead of apparel and retail so let’s take what travel figured out and start to apply to retail. And I’m like, that sounds awesome! I jumped in and went from being basically a retailer of other people’s products, I mean Expedia is a giant search engine marketplace, to actually making products. We sold what we made and it was all bespoke product and first party, and loved that even more. It’s ours, we own it, we live or die by what we make and we can use data to make better products and we did. I really fell in love with retail and vertically integrated retail through that. After American Eagle, I bounced around a bit, a little startup retailer that we ended up selling, did some consulting, ended up spending a year and a half of Private Equity helping to advise their portfolio companies, which was fascinating and fun. Some great companies I got to work with, spent a bit of time up with Lululemon up in Vancouver which is a remarkable culture, remarkable product company. Ultimately, found Purple which was this amazing intersection of manufacturing, product, innovation, design, engineering, digitally native and marketing. It was all these things I have done throughout my career, came together. It was the perfect job.

[Mike Magnuson]

It does sound like it. When you lay it out like that, it does sound like a path that almost had to end with something like purple, or at least not end, but lead to something like Purple.

[Joe Megibow]

Yeah it did. When I was young I said someday I will be a mattress salesman.

 [Laughter] 

[Mike Magnuson]

Well again, that was always the goal. Everyone starts with that goal but not everyone gets to achieve it Joe. You’re living the dream. All right good, why don’t we do a quick lightning round here. We’re going to start with…  these are just quick fun questions! 

You’re a musician, or you come from a family of musicians, what is the best music decade of the past 100 years?

[Joe Megibow]

The last 100 years? Oh, the 80s full stop.

[Mike Magnuson]

Okay nice, good answer. What’s something you’re terrible at? 

[Joe Megibow]

Something I’m terrible at? Basketball.

[Mike Magnuson]

This is the summer of the olympics we’re coming into, in what non-sport activity would you be most likely to win an olympic medal?

[Joe Megibow]

Is foosball non-sport? 

[Mike Magnuson]

I count that as a non sport yeah! It’s not an Olympic sport.

[Jeff Cassidy]

It’s both, in college, it’s definitely a legit sport. At least in our college.

[Mike Magnuson]

Scale of one to ten, how good a sleeper are you?

[Joe Megibow]

I sleep on a Purple mattress.

[Laughter] 

[Mike Magnuson]

Is that an 11?

[Joe Megibow]

Yeah, that’s 11. yeah this goes to 11. 

[Mike Magnuson]

Nice, favorite pizza toppings? 

[Joe Megibow]

oh! this is a big debate in Purple by the way, it divided the company, it started with pineapple yes or no? In high school, I worked at Pizza Hut, it was one of my first jobs for years  and I was a growing starving teenager so I ate like a pizza a day for two years. And when you eat a pizza a day for two years, you learn to love all pizza. 

[Jeff Cassidy]

That’s also how you get bad at basketball, by eating a pizza-

[Laughter] 

[Joe Megibow]

Exactly. I’ve got a 17 year old right now, and at that age you can eat anything. It doesn’t matter, it just goes in. Actually there is no pizza, as crazy as they make pizza, that I don’t enjoy. But I’d say my favorite pizza is Chicago deep dish stuffed spinach and mushroom pizza.

[Mike Magnuson]

You had me at Chicago deep dish Joe. You just passed the character test right there. 

[Jeff Cassidy]

Wait, follow up question. Not to put you on the spot with all of Purple, but pineapples yes or no?

[Joe Megibow]

I can eat pineapple and ham pizza. But again all pizzas, there’s no bad pizza. It’s the perfect food.

[Mike Magnuson]

What’s some advice you’d give to your younger self?

[Joe Megibow]

Ummm You have time.

[Mike Magnuson]

Nice! All right, last question, what is something that made you smile recently? 

[Joe Megibow]

That’s a good question too! oh goodness my…

[Mike Magnuson]

Beside the Mike It Up podcast obviously.

[Joe Megibow]

Yeah exactly, I smile a lot, life’s too short to be angry. My kids are just an endless source of joy. I know that’s like a total cop-out answer, but my kids give me so much joy.

[Mike Magnuson]

All right, perfect, well that was fun! Okay let’s start a little bit.. Let’s talk about products. I think Purple is really interesting as a company in the mattress category because it’s really one of those rare mattress companies that is built upon a product component or attribute that truly is unique and innovative and proprietary. There’s a lot of talk about those types of things in the mattress category, but this is one where it actually, walks the walk, I would say. Talk to us about what’s coming for Purple? What’s in store for the future of Purple products?

[Joe Megibow]

It starts fundamentally, to me, with backing up and understanding what makes good sleep you know? and in the simplest sense it’s how you fall asleep faster? How do you sleep better? How do you do everything you can to not disrupt sleep? I mean anything you know, whether it’s comfort, temperature, noise, light, motion or anything that disrupts sleep is bad for health. The science is becoming really clear that sleep makes everything better, I mean there’s almost no medical condition, there’s almost no mental, emotional or physical condition that isn’t made better, if you’re getting better sleep. And then the final thing is, you fall asleep easier, stay asleep longer and wake up more effectively. How do you attack those things? The reality is I think the category has stopped. If you survey people, human beings, and ask them about their satisfaction with sleep it’s remarkably low. The reason why people buy new mattresses, outside of life events, moving… It’s more often than not, related to pain. it’s “I hurt”.  And even more remarkable about that, it’s surprisingly not tied to age demographics. Whether you’re asking someone 25 to 35 or asking someone 55 to 65, you get remarkably similar answers. Older you get little more things like pain come up. Most people are not happy with their sleep, most people are not happy.. whether it’s the mattress, the environment, the bedroom, the ambience or whatever. Most people are looking for better sleep, and frankly there is a lot of snake oil out there, there’s a lot of misinformation, I mean this with the work you do, that had enormously profound promise but the reality is very little delivery. And part of that is there just hasn’t been a lot of innovation in decades. It really hasn’t been. What’s most exciting to me, isn’t even the mattress, it’s all these little startups all over that are starting to attack little pieces of sleep health in the sleep environment, none of whom have achieved scale. All of whom are just solving a piece of the total, but you look at it and the amount of money that’s flowing in, in venture capital and investment, it’s remarkable. You can just see this category is ripe for explosive disruption. When you’ve got an unmet consumer need, and it’s tied to human health and the human condition, and the category has failed to deliver, there’s opportunity. But now all of that ends, we’re looking through.. I mean I’ll just start there. It’s not about selling more mattresses, it’s how to attack that problem? And I can talk about what we’ve done so far, but I’ll just start with that premise. Ask your questions! 

[Mike Magnuson]

Before you go on let me ask, because I agree with that premise that you laid out, as it relates to how this goes from what you called snake oil to something real, I think there’s a gap to bridge there that probably has to involve some kind of measurability.. some proof points, that you can really plant the flag on and that’s one area where I just don’t know is the science even there? Because there’s so many externalities, we have sleep trackers, but there’s so many externalities that can’t be captured passively. And when they require active capture, the data is not going to be there. There’s just so much idiosyncrasy that goes beyond, like outside, of what the trackers can capture that it’s not clear. There’s actionable results and meaningful results to be gleaned from any of the current tracking technology, and without that, how do you establish the measurability that takes this from being slate snake oil to something real? 

[Joe Megibow]

Well, there’s some leaps you’re making that I’d challenge us not to make. First of all, we’re not talking about eking out a minuscule amount of performance improvement of an Olympic athlete. we’re talking about ordinary human beings, the majority of whom, or maybe half of whom have sleep disorders or are not satisfied with their sleep. When you have massive gaps and low-hanging fruit, I mean it’s like barn work. You don’t have to have accuracy and these minutiae of detail, to make meaningful changes. 

[Mike Magnuson]

You are talking about the bigger picture of things. 

[Joe Megibow]

Go from any crappy mattress to any reasonably good mattress and you’re going to see a significant improvement in sleep. Again there are big leaps you can make before you even get into things like sleep disorders, and things that take even more effort to solve. The other leap is that data collection and improving sleep quality are directly connected. Because right now, data collection is basically a one-sided action, it’s observation without action. Ultimately, you can do things like biohacking, which is if I truly find some insights and I can correlate that to actions, maybe I can be so self-motivated to change things in my life. But the reality is and this has been played out many times, Fitbit comes out, everyone buys one, everyone tracks their steps. The theory is that if I’m more self-aware of my daily steps, it’ll promote me to walk more. And the reality is most people find that it doesn’t change behaviors, it becomes an interesting fascinating brief piece of data and they end up in a drawer somewhere.

[Mike Magnuson]

Right, right! Exactly.

[Joe Megibow]

How do you close the gap between data collection and action? It’s a massive gap that has a huge unlock and I believe that is one area that there’s going to be significant advancement in innovation in the market.

[Mike Magnuson]

That’s the area where that I was referring to as it relates to the….  In order to make some of that data actionable, you oftentimes need context around what caused this sleep to be bad last night? I mean you can measure that, but without knowing that the person drank five beers before they went to bed, or that they ran a marathon that day or whatever, it’s hard to necessarily take that and make that actionable.

[Joe Megibow]

No, that’s for sure but now we’re going into the specific versus the aggregate.  

[Mike Magnuson]

Okay yeah, I take your point about the aggregate stuff- 

[Joe Megibow]

Again most consumers don’t say I occasionally sleep badly, they say I consistently sleep badly. And most consumers will happily pay some amount of money if they genuinely believe, if there is a dream of a potential of improving health. And by the way, this is why people join health clubs, this is why people buy fitness equipment, this is why people buy trackers, this is why people invest in all sorts of crazy things on this promise of life improvement. The question is which ones actually drive results? and the ones that do the most are the ones that figure out working feedback loops. And often it’s as much about psychology as it is about technology. I mean you look at Peloton fundamentally it’s a media company, I mean in my own opinion. It’s because they figured out the issue isn’t how do you get higher performance equipment, the issue is how do you make using the equipment more enjoyable or better feedback loop while using it. And it turned out it wasn’t about the equipment at all. I mean look at Tesla it’s not ‘hey, every year we’re going to release a new model and have envy on I should have waited six months’, it’s ‘hey, it’s a software company, the hardware itself is somewhat fixed and we’re just going to keep making the product better over time’. I mean it’s just you got to reinvent how you look at this and no one is. Again I think there’s opportunity here.

[Mike Magnuson]

Is there anything that when you look around the category, you see in the marketplace, does impress you as innovative?

[Joe Megibow]

Sure. There are a lot of really interesting things happening on the fringes. A lot. Some we may pick up, some we may do our own way, and there’s a difference between discovering a real need and coming up with a novel way to attack it, and having something that’s truly consumer scalable, something that really works for the masses. I mean the IPod wasn’t the first mp3 player, in fact there were many successful ones out there but they were the first to figure out how to take it to scale. And the innovation wasn’t we invented the mp3 player, the innovation was how do we make it easy to use and comprehend for someone who isn’t an enthusiast mp3 player person. And that’s the gap, how do you take it to scale where it’s not invasive where it just works and  easy to wrap your head around and is priced for scale too. I mean and that’s a lot to figure out. 

[Jeff Cassidy]

It’s interesting to hear you talk about that, because obviously Purple innovation, the innovation for which you’re most known in the company, is built on  material science right? Like the hyper elastic polymer, yet what you’re talking about here is innovation beyond material science, innovation in lots of different areas. 

[Joe Megibow]

Jeff it’s easy to draw that conclusion, I think we are underestimated as our innovations are really in two places. One you’re absolutely right is around material science. We have come up with novel materials, genuinely novel materials. I mean we’ve got some Phd chemists running around right now, who are having a field day because there is no academic literature that describes the behavior of our materials. We’re inventing, we’re doing full spectral analysis of the materials and rheology and all these things to understand the behavior of these materials because there’s no documentation anywhere. It’s our own stuff, and stuff that we keep very tight to our chest. Which also by the way means,  we use different materials and different formulas in every one of our products, our pillows are different than our seat cushions, our seat cushions different from our beds, our beds are not all the same, this isn’t just like rubber molded into a grid shape or hexagon or triangles. I mean we put a lot of science into the materials, but the other thing that really is what’s fueled our capability to scale is our manufacturing. We had to invent machines that could do the injection molding and extrusion with our unique materials because it didn’t exist. So I mean we have a lot of experience in mechanical engineering, electrical engineering, the software that drives these things. It’s just been all on more like the industrial side, the manufacturing engineering and capabilities. We’ve got machinists and tool makers and I mean there’s very little we can’t build. It’s just we’ve always done that around manufacturing, not around consumers and we’re starting to realize we’ve got some skills that we can put to the consumer side as well. 

[Mike Magnuson]

One thing I think that maybe retailers would be interested in hearing about is, obviously you’ve got the four main mattress models today, like all of them are currently utilizing the Purple grid, you just mentioned slightly different formulations people don’t even realize of what’s happening in that polymer. But nonetheless, from a branding standpoint that component is at the core of, at the heart of, all four of those models. I guess what might an expanded product line look like from here? without obviously getting into any specifics of things that are coming, but just is there a picture of…. for example, one person asked me to ask you do you hate memory foam? because it’s the subject of attack in many of the ads, and yet at the same time it’s a material that would offer your products maybe a very different feel and therefore could diversify the lineup in some way that might appeal to new customers, so in that sense what an expanded product line should look like? 

[Joe Megibow]

Well let me address the ‘do I hate memory foam?’ It’s a fair question and we’ve had some creative work out there that clearly is directed toward memory foam. Going back to where I opened about sleep health, as you think about a sleep surface there is a tension that has existed for all time on sleep health around the trade-off between support and comfort. Support means you get the body aligned so that your spine doesn’t hurt, your neck doesn’t hurt, and that actually promotes really good health as you get through the night. But the problem is to get good support, it’s often at the expense of comfort and what comfort gives you is the ability to stay asleep. If you are comfortable and not being disrupted, you stay asleep. The challenge has been, there’s been a massive trade-off between those, the simple way to drive more comfort typically is around making a softer mattress. The problem is with softer mattresses is you get the hammocking effect at the expense of support. How do you get support and comfort? With everybody it’s turned out to be a trade-off. You find the balance where you give up either the support or comfort to a point, that you get the best overall sleep. But clearly again most people would happily take better sleep, so we haven’t found the magic combination. Now memory foam comes along, and actually comes up with a novel new way to solve the support piece, because typically whether it’s coil or foam the more you compress the more it fights back. There’s an actual compression curve with both foam and spring, which means as you’re shaping your body, which is what you want to get even support it’s fighting you more where you have your pressure points where you’re indented more. And memory foam has this miraculous ability, because it doesn’t fight back. It’s slow to react that it ends up actually shaping your body which gives you this magical combination of support but comfort, game changer. It’s why for 30 years now it’s been a dominant premium play, and it’s very impressive. And memory foam also has the added benefit of not disrupting sleep, its density, its structure means you have very good motion isolation. So yeah I mean their original campaigns where the champagne fluke glass in the corner of the bed is the kids bouncing up and down and it doesn’t disrupt your partner’s sleep soundly when you move around. Okay game over, done, we’ve solved it. 

But it turns out and by the way, I’m going to preface and say Purple hasn’t solved it either, we’re just all moving forward. We think there’s a lot of opportunity for going, but what’s the downsides of memory foam? Well it turns out there’s two sleep disruptive downsides to memory foam, one is it’s slow to adapt, I mean that ‘s how it works and they’ve spent years with open cell and improving the reaction times but by definition if it was instantly reactive it’s not memory foam anymore. It’s how do you get it so that it adapts to your body, but as you’re moving around and in sites you’ll talk about sleeping in the mattress, and what that means is you kind of get in it and if you if you’re in motion and you watch stop motion of anyone sleeping and it looks like we’re running marathons. I mean you’re kind of in constant motion as you’re sleeping so how does it not fight you as you’re trying to move around is challenge one, and that’s one of the criticisms people have on memory foam. It’s just I feel stuck or I feel I’m in the mattress and it’s really a statement of it’s slow to react, it’s just not adapting to using it. That’s problem one, the other is despite all the best efforts it absorbs heat and energy. It’s just that simple,  it’s the difference of a kitchen sponge underwater, you pour water into it and the sponge fills up with water. It’s a very similar open cell cellular arrangement that traps heat and energy as it’s moving through the surface and as it fills up. I mean you think you put a sponge under water as it fills up, at some point the water starts splattering off because the sponge can’t take anymore. And it’s the same thing we’re human batteries emitting heat as we sleep and it’s why you often go to bed cold but then wake up hot, because the energy is getting absorbed into the sleep surface and at some point it can’t take anymore and it radiates back at you. It’s just the nature of these foams like a sponge, it’s what they are. 

What do they do around that? You can use phase change material to have some cooling impact, you can ventilate by drilling holes into it, you can try to put layers that are more breathable than aren’t memory foam, basically try to make memory foam anything other than memory foam. So there’s some tremendous benefits you get from memory ,and it really I think advanced sleep health forward a lot, but it’s not without its flaws. That’s where I’d say okay, well let’s keep reinventing. Let’s keep trying to get there. How do you keep moving forward? What we’ve come up with is what I’d call, take what’s great about memory foam. How do you come up with a way to evenly shape the human body but maintain support over a large surface area, which our network of columns that individually collapse do, it’s very memory foam-like, and how it shapes to the human body, you’re in the mattress the same way. But because of the nature of the recoil of the elastic polymer, it instantly reacts, it instantly adapts so you solve problem one. And because it’s basically 90% air, it’s like pouring water into a colander versus pouring water into a sponge, the energy flows through. I mean you take the coolest phase change material mattress out there and put it into a lab, and look at heat absorption, heat resistance, thermal resistance, and our mattress is interesting. We don’t have cooling properties, we don’t get hot properties, we actually stay cooler after hours of heat radiation in our mattress than the best cooling mattresses out there, because we just don’t heat up in the first place.Again this is a step in the process, and by the way other than our sleep surface, we’re a fairly traditional mattress. It’s the same foam around the outside, it’s the same coil underneath, and you talk about where do we go from here? Well two things; one we don’t believe we’re done on inventing the best sleep surface, so we continually are looking at the material science, the geometry of the grid, the performance of it, and we think we can do better and we’re going to continue to reinvent there. But there’s the rest of the mattress too, and it all plays into sleep quality and sleep health, and we have a lot of work we’re doing into the whole sleep experience top to bottom. 

[Mike Magnuson]

Okay that’s good, that’s very helpful. 

[Joe Megibow]

Does that mean I hate memory foam? 

[Laughter]

[Mike Magnuson]

No, I didn’t sound like it at all. Actually you were much less critical than in the ads. By the way, it was just sort of a playful question someone had asked because of the fact that memory foam in the ads is targeted as like the negative alternative. But of course everything you’re saying makes sense, and it actually reminded me of being in the a showroom in high point with tony pierce in 20, what was that like 2014 jeffrey? 

[Jeff Cassidy]

Yeah 2014. 

[Mike Magnuson]

Yeah where he explained to us the non-linear resistance property of the grid, and it just blew my mind. I was like that is cool, that makes a lot of sense. But then at the same time I was like, man how is that ever going to get explained through an RSA and of course it wasn’t ever explained to an RSA, it was explained through these really clever videos that you guys did. That’s really what puts you guys on the map.

[Joe Megibow]

We’ve obviously done well, but the average consumer… I mean we’re a young brand and a young company, which means we don’t score high on trust, no new company does. And even on differentiation, I mean we  every time we talk about being different, everyone else tries to use the same words. I mean this is just a trait of the category, we all just pile on top of each other saying the same things. I mean there’s a little bit of a long game as you educate and it’s one reason our best marketing channel, I mean we’re spending over 100 million dollars in marketing right now, and our best marketing channel remains word of mouth. CSAT and consumers selling the real benefits of the product, and you talk about how hard it is to measure the efficacy of something, I’ll tell you when people have been sleeping in your mattress for six months or a year and they’re still singing its praises and telling people you should go buy this thing, that’s pretty good measurement. That’s what gets us up every day, is knowing that we’re getting that kind of benefit out there and improving, genuinely delivering on the promise. It’s not for everyone, and not a hundred percent of our customers are satisfied, and again we still haven’t solved the big sleep problems, but we are motivated to keep moving this advancement forward,

[Mike Magnuson]

Since you mentioned marketing let’s shift gears a little bit to that, to advertising and customer acquisition, I want to start… Tell us about the decision in March of 2020 or I guess it was thereabouts, I mean you guys did something that proved to be incredibly smart, which was you stepped on the gas rather than retreated, talk about that decision as well as  the media channels you ended up relying on during this time and why? 

[Joe Megibow]

Yeah, you almost have to go back before the pandemic, what I had us focused on building in the year and a half before the pandemic, was essential to what we did in the pandemic.  I came into a company that had outgrown its capabilities. When I joined, we took a 10 million dollars loan from one of our investors in February of 19, which was a hail mary, we need cash or we die. 10 million dollars and we ended Q1 with 12 million in the bank with that 10 million, I mean we were at zero. We were unprofitable, we were negative cash flow. We were burning people in the manufacturing plant, we had over 100% attrition meaning every year we turned over everybody at least once on average. I mean it wasn’t a well-run company for our size at that time, we had just started with wholesale and our sales were so bad I would have kicked me out if I were them. And leaving customers, I mean we had some customers who were…  It’s been 45-60 days and they still haven’t received their mattress, I’m pretty sure that’s not okay. We had a lot to clean up, and a big turnaround in front of us, and spent the next year and a half getting really laser focused on the unit of economics. On how we drove our business, on what we should be doing, what we shouldn’t be doing, and building up  the foundation, meaning the right data measurement, the right visibility, the right teams, the right controls, the right processes, to actually run a profitable business. And  it’s a slog, but we got there. 

By the time the pandemic hit, we were already profitable, we were already producing cash, and I had at least the core team in place and the platforms and foundation. So by the time things hit in the pandemic, we had really good data and a really good team that we were able to pivot really quickly. I mean we had the data, and we saw holy cow there’s an addressable market showing up here, while by the way marketing costs are dropping, competition’s disappearing, people are pulling out of the market, and we’re seeing demand and traffic grow, there’s a pretty simple playbook there .In the demand gen sense, there is no budget on spend, you spend against returns. I worked with companies where I would say, hey if I can guarantee you 400 dollars back if you give me a hundred dollars would you take it? and they say man that sounds awesome. I just don’t have the budget, I’m like that’s crazy. If you can give me 400 bucks, I’ll find a hundred, I’ll take a loan for a hundred dollars. I’ll give you a 100 every day of the week. That’s how you run performance marketing, and we saw that and we said there’s no budget, spend. And we spend every dollar we could, and normally there’s an efficiency curve. I mean it’s not like hey if I double my spend, I double my business. I mean it’s just with each incremental dollar you’re capturing, it’s it’s harder and harder to capture the area under the curve and you get diminishing returns, and the data is not perfect, so you’re kind of getting in an aggregate where half the dollars I’m spending aren’t working and half are, and how do you find that  equilibrium to maximize the area under the curve. That’s the goal of performance marketing,  but we weren’t seeing those diminishing returns. The curve had grown so much, that we were spending in, doubling our spend, and doubling our business. It just never happens. But we had the data, we had the ability to lean in, and we did. You lean in and you spend every last dollar until you hit that marginal efficiency, and it turned out we just-

[Mike Magnuson]

Tell us about the media mix that you were finding effective at that time? Because I think this is an interesting wrinkle in the story, as it relates to what worked then vis-a-vis like what normally works?

[Joe Megibow]

Well, normal is a tricky thing. Because what happens is a channel becomes attractive, and all the money flows into it, and then it’s no longer as attractive, and then the money goes somewhere else. Is it video, is it not videos, is it social, is it affiliates, is it traditional, direct mail is coming back…And then they get expensive, or they get crowded, and you go somewhere else. So part of being a good digital marketer is not falling in love with channels. It’s just constantly looking at the performance and finding ways to arbitrage and get more reach and get more performance. When money is pulling back and people get nervous, what they tend to do is spend more money on lower risk channels, so things like retargeting. These are people who are highly qualified, a much higher probability of conversion, they’re deeper in the funnel, we saw a lot of money flowing in there. Because at a period of uncertainty and risk, it’s human nature, you end up spending where you feel like you’ve got the most likelihood of getting some return on your dollar. But in reality what happens is prices go up, it becomes very expensive, and you’re not really getting that return-

[Mike Magnuson]

At that time you were also competing for those retargeting avails with every other mattress company, who was also experiencing demand at that moment. 

[Joe Megibow]

Yeah and then in the meantime, more broad things like PPC, just google search terms, or things like that, money was pulling out of. Which historically are like oh this is saturated, it’s too expensive, you shouldn’t be there. So we just followed the market, and we leaned into a lot more of traditional channels, where we saw enormous opportunity, and the lower funnel more expensive channels were getting crowded, and we pulled money out of those channels, and we went where the opportunity was. And by the way, those higher funnel opportunities meant at a time that there’s addressable markets showing up that’s new to the online category. You want to cast a wide net, you want to capture those eyeballs. Weak competition is not a great strategy, I mean some of this was just, we saw an opportunity where I think we went left when everyone else was going right. But that’s not a long term play, like today over the last year, everyone figured out there’s money to make online, we should probably figure this out and suddenly it’s a competitive market again and we got to win on merit. But anytime that others miss, we’re going to lean in and we did  and it was really good nonetheless.

[Mike Magnuson]

It’s an interesting anecdote to tell I think,  as it relates to both how you saw the opportunity as well I think it’s interesting  that you found success with these traditional channels. It was really a unique moment in time, where you could go broad, where the economics did work out to do that, but I find that particularly kind of interesting, in the context of the fact that  most of the mattress industry, at least the traditional side of the mattress history, never left that. It’s all they’ve been doing, whereas you saw it as a unique moment in time where those economics could work. I think a lot of the retailers and other traditional manufacturers out there, kind of need to put that in more context, that worked then but that’s not maybe the normal approach-

[Joe Megibow]

But the category has been a very traditional category of manufacturers and retailers, and the notion of having a relationship direct with the consumer, with the exception of like Sleep Number who went 100% direct, there really hasn’t been a meaningful play that is a direct relationship with the consumer. That’s what the retailers do, the retailers curate the right assortment, acquire  the traffic and the customers, and match consumers with products. That’s what great retailing is, as well as historically the inventory management side too,  they carry the inventory, they carry some risk potentially, and get the product to the consumer efficiently. That changed during the pandemic, because retail fundamentally got shut down, so suddenly it’s who can service the customer. I mean the wild card was ,does the consumer defer or does the consumer shift how they buy? 

[Mike Magnuson]

What do you mean by that?

[Joe Megibow]

Well, if 85% of the premium market is Brick and Mortar, and suddenly Brick and Mortar disappears, do consumers wait it out? Do they say I can go another six months without a mattress? I’ll wait till things open back up.  Or do they say,  I need a new mattress and if I can’t go to my local retail store I got to find another way, how do I buy a mattress? Again w the stuff you buy in Wayfair and Amazon or Ikea or whatever, I mean that’s not us. Those are great companies,great businesses, great models but it’s more the commodity side of the market, which is high unit volume but not a lot of margin. We’re on the premium side, which is more… it’s a bigger price point, it’s more considered purchased, it’s a more discerning customer, it’s a little more competitive product to product, and it’s been very traditionally Brick and Mortar. I think part of it is yes, how do you think about the marketing tactics, but the other is, how do you even service that customer? And this was a very unusual time, where Brick and Mortar wasn’t an option.

[Mike Magnuson]

One of the things we see consistently from Purple is, we like to look at trends of  branded search queries just as a barometer of marketing effectiveness. I think it’s a great sign of our signal for how many people out there their curiosity being peaked about your brand. This is a chart that Purple has really dominated from the get-go, and to your credit, I think when you joined the company it was 2018, they were coming off a couple years of very successful viral videos. But the viral videos, I mean  it’s like I come out of the media space so we think of entertainment or content is hit driven, and viral videos, viral ads you could almost think of in a similar way it’s hard to just say yeah that’s our strategy we’re just going to keep doing viral super hits. But nonetheless, my point was going to be that you’ve kept this going. The line for Purple has continued to go up and to the right  even since then… What do you do better than others in this regard, that’s the question?

[Joe Megibow]

Mike we’ve lost our way, yes we have continued and thank you for that. But actually, our strategy when I joined was to keep doing viral videos. I mean if you signed up for our email series, the promise and the benefit in the email… like hey Mike, I think it said Whoa! ,exclamation point, like we’re Keanu Reeves or something. And it said congrats on signing up for our email, you’re going to be the first to know when we release new content or new videos. I mean it was like we’re a media company. I started looking into the demographics of engagement on all these views and it was indexing young, it was indexing mail, the affinity groups we’d see, were like technophiles and gamers. And then I look at the category, and I’m like oh well it indexes a little older, it indexes a little more female, and it’s people who like home, travel, and fashion. So it’s almost like a dopamine rush of this feedback loop of success, we’re getting the views and they love it, and we’re getting positive feedback, but is it actually translating into our core mission? which is what these videos were intended to do to educate our customer? As you said, how do we get the RSAs or how do you directly hit the customer and say hey there’s something different here that we want you to learn, and we became more funny than educational. And we came more about the hook of virality, than the hook of getting people into a better night’s sleep. We lost our way, we lost our way. And we also had been in a pattern of rapid fire content, constant testing and learning and seeing what worked, we were okay. If things didn’t work, we started to put more pressure on ourselves that it had to always be hits. And it’s almost like the movie industry, where you end up with these colossal bombs, and we had some big bombs. Part of it was getting back to our roots.

I got a lot of inspiration from Dyson. It’s a company that I would love, I would be thrilled if we could somehow emulate their success. Real innovation and engineering driven company that got its first decade and a half in one category, that dominated that category. But they also built a real brand connection, I mean same in mattress I’ll ask people like name four vacuum cleaner companies and people get to Dyson and it’s amazing how quickly it falls off. Mattresses are a similar thing, what mattress do you sleep on right now? it’s like I don’t know, I bought it at Costco it started with an S. You can have a big company brand in a category, it doesn’t mean you have any real consumer brand connection. It doesn’t mean it’s a coveted brand, it doesn’t mean it’s a lifestyle brand. You can name manufacturers of appliances, but most of them aren’t coveted brands. That’s what mattresses are, it’s an appliance, it’s something you buy, it’s often been referred to as a grudge purchase, as you do journey mapping on the process, it’s not always a positive one. So part of the goal was, hey if consumers really love our product, and if we really have something different to offer, how do we get back to our roots, and really focus on celebrating that customer, celebrating the benefits, and leaning into their happiness. We’ve gotten less wacky funny, we’re focusing a lot more on the real consumer benefits, and a lot of our social is around our customers and the benefits, and influencers that genuinely have found great use of our product. I mean we’re trying to really get into the reality of it, and that doesn’t mean we lose our way and we take ourselves too seriously, or there isn’t some joy or whimsy. 

I mean we’re not going to ever lose that, but this is a serious need, it’s a serious subject.  I’d say there’s nothing funny about a good night’s sleep, and we were making a joke of it. We’re getting back to our roots and really focusing on who our customer is, and you do that over the long haul, and you build a real brand connection, and you rebuild a real relationship, and it happens. I mean we see it in interesting ways, I mean we’re now selling more pillows and seat cushions, than we are mattresses. And more than half of those pillows and seat cushions are the customers who are new to us, they haven’t bought a mattress. They’re buying into the brand, they’re buying into the benefit, it’s not just a fashion play. We’ve got the Purple tag on an otherwise high quality pillow, they’re buying into the product differentiation, and we’re building that connection, and that’s the goal. By no means have we solved it, by no means are we there, but how do we build a sustainable heritage brand, that really connects with people, it means that opens up the right…  all these things we want to do, it all starts with trust, it all starts with a belief that we’re going to do what we say we do, and that’s the focus. It’s relentless, every day we focus on this.

[Mike Magnuson]

You were talking about the traditional Brick and Mortar retailers, and obviously that’s a channel that you guys have leaned into a lot, you’ve now been in traditional retail stores for what like three years or more now?

[Joe Megibow]

Over three years, yeah.

[Mike Magnuson]

What have you learned from that about what works? you obviously have pretty much all the geographic coverage you need just through your partnership with Matt firm, What have you learned from just all of your partnerships in the Brick and Mortar retail space, that has given you a sense of what you’re looking for in a retail partner? like what makes for a great retail partner for Purple?

[Joe Megibow]

More than half of our sales are from the furniture stores we’re in, separate from Mattress firm, Mattress firms still our largest single partner. But I mean we’ve sort of matured our approach a little, and they’re different journeys, and people buy in different places, different relationships, specialty mattress retailers. Obviously they’re the single largest retailer of mattresses, out there and a terrific partner. But part of this is to be where the customer is, and we’re discovering there’s different journeys and different desires in different places, and how do we be where the customer is, which is sort of a general omnichannel approach. Finding partners that are willing to invest and recognize that this isn’t just a gimmick, that this isn’t just another brand on the floor, makes a big difference. And those who can sell the story and bring the product to life, I mean it’s been… we are often the highest converting mattress on the floor, because we have a different story and it’s not a gimmick. It’s not just snake oil, there’s something to it.

[Mike Magnuson]

Well, presumably part of that is attributable to the fact that you’ve done a good job on the front end of educating that consumer before they even got into the store?

[Joe Megibow]

We do, and this is part of the win-win with retailers. We’re driving foot traffic into the stores and even driving a different demographic into the stores, than they’ve seen. Sometimes they may come in looking for Purple, and sometimes they may get sold up into a Temper or some other. It’s giving traffic that the retailers are able to monetize, sometimes we get the sale. Sometimes they come in, try the product out, and buy from us. Again it comes down to consumer choice, and we don’t try to steal that customer away. It’s different customers, have different preferences, and it’s symbiotic. They profit off our traffic, we profit off of the Brick and Mortar presentation, and it’s been really good for all parties, sort of the rising tides raise all ships. But fundamentally, what we realized is this isn’t about distribution, this is about experiential. Our goal wasn’t how we get boxes on shelves, like a lot of the bed in the box players, have looked for retail distribution. But at the end of the day it’s more a CPG play, it’s how do I get inches on shelves and displays. What we realized is that’s not the game here, the game here isn’t how do we just get the logo out there,  or be available to be put into a shopping cart, it is how can people experience our product if it’s so different and hard to explain. We can do all the videos we want, it’ll still never be the same as laying on the mattress with an educated sales associate who can talk to you about it. That’s what we needed, and what we’ve looked for is partners who are willing to give us the square footage, give us the presentation, and are willing to be educated to sell the product. This is where like Sleep Number, I think ultimately, if you go back to sort of when they… because they used to sell through wholesale partners, I mean when they took it in-house, their big beef was  at the time they didn’t feel the sales associates were doing their product justice, and they realized okay they just had to do it themselves. I think that a pendulum swing isn’t necessary, I think you can give more credit to the sales associates of these terrific retailers,  but I get the problem. You’ve got to find the opportunity if you’ve got a differentiated product, find retailers who are willing to present well, merchandise well and take the time to get educated and it’s all about experiential selling.

[Mike Magnuson]

It’s rare that, I mean when I look back on that decision from Sleep Number,  I think of it as it’s rare that the differentiated unique product is going to be the path of least resistance for that RSA to sell. Therefore it was just a structural impediment, when you’re trying to sell through that channel for someone who is unique and differentiated. You guys have really done a great job. I think we’ll put it this way, this technology Purple, this grid technology, has been around long before Purple and all the success you’ve had, I think the fact that you were able to go direct and communicate this message to the consumer in your own words, probably  what has enabled it to now to find success in retail, where it really never did in the decades prior. So that combination has been very effective,  As far as the retail partners, so I’m curious you’ve got now what 10 of your own stores at this point or so?

[Joe Megibow]

I think we’re officially at 11 right now, if you’re if we’re counting … yeah we’ll have 20- 25 more by the end of the year,  we’ve got a very strong pipeline going right now.

[Mike Magnuson]

Oh wow, that’s pretty… that’s more than I would have thought.

[Jeff Cassidy]

Throughout the country or still geographically concentrated?

[Joe Megibow]

Well we’re right now in DC, Columbus, Texas, Southern California, Seattle… I mean with only 11, you’re not going to get that many DMAs, we’ve learned having a couple of stores and a DMA is better than just one and spreading ourselves polka dot all over the place. I mean we’re picking DMAs and getting some brand penetration there,  but it’s interesting what we can do in our own showrooms, that we can’t do in a retail setting. I’ll give you an example, and this is something we’re doing pre-pandemic Interestingly, we spend so much time trying to make the mattresses look good and part of that is just wholesale. When you’re on the floor next to all these other mattresses, you want your product to stand out. It’s kind of silly, because it’s like what the inside of your shoe looks, I mean it’s just one of those things that once you buy it, and put a protector and sheets on it, you almost never look at the product again. I mean the product is designed to not be looked at, felt yes, but not looked at. So why do we spend so much time, it’s where I also get fascinated by all the feel of the mattress, the PCM and the phase change materials. It’s so buried by the time you actually have it. In our own showrooms, where you would think oh here we can really bring our beautiful mattresses to life. What we realized was a huge consumer unlock,  it’s that people don’t like laying on naked mattresses, especially ones that they know, or in the back of their head they’re thinking about a whole lot of other people have laid on. And this was pre-pandemic. And we also, by the way, put a lot of engineering into our sheets, because it turns out if you put a really tight woven sheet over a mattress that’s designed to locally displace weights, you actually just kind of baffle or or mute the benefit… and our sheets are a big part of the story, and our protectors for that matter. So we cover all our mattresses with our sheets in the store, and they all look identical, because we use the same color sheet to just get a consistent look, and we change the sheets daily. Every day it’s fresh sheets, which sadly is far more often than most people change their own sheets. We change the sheets daily, we have daily laundry service, it’s always fresh sheets and it’s familiar, it’s how you engage with a mattress in the real world. It has the added benefit of we sell more sheets, but it starts with the consumer, and the showrooms have just been an amazing way for us to understand the consumer better, engage with them, and learn through the journey mapping, how they really think about the product, how they engage. 

Another simple design thing we did,  it’s really weird to lay down on a mattress in public. It’s just awkward. Some mattress retailers have created little partition rooms or curtains, but it turns out that’s weird too, anytime you go into a clothes room and a mattress it just conjures up all sorts of things that no one wants to talk about out loud. We came up with these louvered walls, it’s just remarkable what the team came up with, where in the store looking at the exterior where the mattresses are, it feels very open and spacious which is what you want in retail. But when you’re laying on the mattress, at the angle of the louvered walls which are like just half length of the mattress walls, it creates a optical barrier where you don’t see the beds next to you, and you sort of have a sense of space and intimacy in your own mattress, which is what you want when you’re laying in it. It’s just again, we’ve been really focusing on that consumer experience, and a very weird public thing to do, and how do we make it comfortable and familiar, and we can only do that in our own showrooms.

[Mike Magnuson]

Are you then trying to feed some of that success? some of what’s working over to your retail partners?

[Joe Megibow]

We do, and it comes through to the website too. I’m a big believer in humans, I mean I’m a digital guy who loves people, and part of it is that websites are very impersonal, they’re very mechanical, they’re great for self-service, they’re great for automation, commodities and replenishment, it’s great. But when you’re talking about a very emotional considered purchase, not the best platform. Who we’re choosing and our wholesale partners, what we’re doing in the showrooms, the other thing we’re doing is leaning in very heavily into our contact center. We have hundreds and hundreds of agents now, when I joined one percent of our sales were through chat or phone, I mean it was our online sales. And that was almost accidental, my credit card fails like you need help. iIt’s way into double digits now, I mean we could feasibly do this year, on a run rate certainly, but on an absolute basis it’s not unreasonable we could do a hundred million dollars of business through our contact center this year. But it’s all about the power of humans, and that experiential selling and helping, I learned this in travel. I mean it’s just a really powerful technique, and what we learn in showrooms, we bring into the contact center. In fact by the way, when the pandemic hit we had to close, we had six showrooms at the time, it ultimately went down to five because some of them were pop-ups, we had to close the showrooms and  the questions, what do we do with this labor? Do we just… Do we let them go? I mean that sucks. We weren’t leaning as hard into selling over chat, and we pivoted them all into chat agents, and they sold the heck out… Believe it or not, in total they drove more sales through chat, than they were driving through the showrooms. Which then creates a tough dilemma, as showrooms start to open up, I’m like do we put them back to work or do we keep them where they are? It turns out it’s not a choice, it’s an ‘and’. But it all comes from this idea, of learning how to engage with the consumer, leaning into humans that are really good at this. I envision a day that you’re on chat or phone, and we can patch you directly into an associate in a store who can walk you through the product in a one-sided video. I mean there’s so much that can be done here. It starts with the consumer and understanding how we can best service them, and leveraging all of these ways that we have to create that experience.  

[Mike Magnuson]

I’m curious, I want to ask you about, what I consider to be the ultimate self-service e-commerce website out there, which is of course Amazon. Amazon had a huge amount of success in the mattress category, as I’m sure you know. We look at Amazon, and we have a fundamental concern about their platform as it relates to the future of this industry. We sort of see Amazon providing mattress brands, for that matter any brands, with really kind of two key ways to win it’s price and ratings. And as it relates to the mattress category, we found that cheap mattresses fundamentally are advantaged in getting good ratings, particularly when they’re asked after two weeks or whatever Amazon asks. As a result when you take that out, then you’re basically just left with price. and It becomes not just a coincidence that the best-selling mattresses on Amazon are the cheapest ones, it’s almost like that’s the only way the story could ever end. I’m curious as to from your standpoint, as you think about Amazon like what is your strategy? And do you have a vision for how a brand like Purple can actually win long term on Amazon? because I’m not sure we see a path for that.

[Joe Megibow]

Yeah, I mean betting against Amazon is rarely a successful strategy. I saw a tweet about a year ago which was if Amazon is in your business, get out, you’re going to fail. If Amazon is not in your business, get out, you don’t have a good business. It was something along those lines. But I actually think you can compete with Amazon, I’ve framed it as there’s three ways to compete with Amazon. The first which is what we do is, have a premium product that people want to buy, that only you sell. There are a lot of retailers out there, I mean think about apparel, Gap brands, American Eagles, Abercrombies or going on and on. I mean they basically only sell through themselves, they’re vertically integrated brands. And there’s a lot of brands that have leaned that way. And  there are whole categories that are basically. Automotive I mean you buy from an Audi…  not from Amazon-

[Mike Magnuson]

Not yet. 

[Joe Megibow]

So have differentiated premium products that consumers want to buy, I mean it has to be something that there’s demand for, that only you sell. That’s one way. The two other ways which aren’t directly relevant here,  I think I’ve differentiated supply, I look at… or companies that have found a market and have captured a corner of the market on supply that Amazon doesn’t currently play in, is a way to compete. And the other is differentiated service,  Amazon has been less service focused, and if you add some value-added service on top of a product, that Amazon can’t offer. Which by the way can be things like, in-home setup and delivery, or mattress removal, it’s not to say they won’t get into those things. Yeah, there’s a commodity play there, I lived in apparel through fast fashion, which is a wave that comes  once a decade or so. Quality does matter to consumers, especially with durable goods, if you’re buying 12$ jeans and after six months of washing they fall apart, you start to ‘I need to go back into my Levi’s that I can count on that I’ve been wearing for five years or six years’. Same thing with these mattresses, you know you’re in the industry, that a lot of these mattresses you’re going to be sleeping in a divot for two or three years. And you could say oh well it was only 300$, I’ll just buy another one, but I don’t think consumers want to get into that cycle. It’s unlike the denim which might fail in 90 days or 120 days, this might take years, but I do think you’ve got to take a long view here in durable goods, and over time I think some of these things will play out. I think people will start to realize ‘hey you can buy this but don’t plan on using it for more than a couple of years’. That will take its course, it’s just obvious, and we’re starting to see some of that now, it’s been added for enough years that you’re starting to see some of that backlash. 

I think that’s part of it, but the other is recognizing you’re hitting on commodity versus premium. And Amazon has tried and tried to figure out Premium, I’m sure they will at some point, they’ve had less success there. It’s a different kind of selling, I mean 75% of mattress units sold of commodity, high volume, high engagement, high activity, high reviews, but that’s not where the money is. I mean that was one of our first observations, two-thirds of the industry revenue was on the 25% of units that are premium, and there’s not a lot of premiums sold on Amazon. It’s a different buyer, on a different journey, who has different expectations. Again we could talk a lot about what’s wrong with the commodity side, or the value side of the industry, I don’t lose a lot of sleep on that. because it’s just not where we play, and it’s where we’re not having a lot of interest. By the way, the other challenge there besides Amazon in a traditional sense is, when I look at the top four of the top six retailers of furniture mattresses are Amazon, Wayfair, Ikea and Walmart. And all four of them have vertically integrated in the mattress, Ikea’s been there for decades, forever, decades now. Walmart as well, and both Wayfarer and Amazon have launched house brands. Which of course is commodity within margins, and high unit count, or high volume, I mean of course they’re going to vertically integrate. That’s not unique to this category, that’s how you win.  I mean most of Costco’s revenue, most grocery stores, it’s all house brands. 

[Mike Magnuson]

When I was on the Purple page on Amazon earlier this morning, just to see what you guys were doing on Amazon, and right there at the top of the page a similar product to this item was the Rivet mattress for 800 less than a king size, so yeah there you have it.

[Joe Megibow]

We do a very small digit percentage of sales on Amazon, and it’s mostly advertising. By the way Amazon has figured out that media is a big unlock for them, they’re becoming one of the largest ad platforms out there. And we actually do a lot of innovative advertising. I mean we can talk negatively about Amazon all we want, and then we go home and spend thousands of dollars on Amazon. I was on Amazon last night and I saw an ad for I think comcast, it’s a big media platform now, and we actually do a lot with Amazon ads.  It is a valuable place for us to get our message out there and reach customers, so Amazon is going to be an important platform for us for making sure our brands out there, our name out there, that we are in the consideration set. But it may not be the traditional way, put it into the basket and get prime delivery two days later, it’s just in premium, it hasn’t proven to be a platform that we can win at. 

[Mike Magnuson]

That’s super helpful and insightful. I’m sure it’s for anyone out there who’s thinking about these types of questions, whether to list their products on Amazon and so forth. For what it’s worth, I’d add my two cents as it relates to even having your products listed as a kind of advertising or awareness thing, I think there’s a risk holistically, if all products are listed on Amazon. It makes Amazon more viable as a research channel, and the more time people spend on Amazon as a research channel, I think the greater chance they have of trading down to an ultra cheap mattress. I think it’s actually a risk that maybe brands ought to contemplate, about whether it’s even worth having the brand the products on there in the first place, because I think if consumers don’t find the products they’re looking for on Amazon, they go research them elsewhere, and that takes them out of that destructive race to the bottom kind of environment. And that’s probably a good thing.

[Joe Megibow]

Yeah, we are very anti-race to the bottom, I don’t know if you remember a couple years ago for April fool’s, we launched a fictional one dollar mattress, to right here right now we’re going to end the race to the bottom, this is it. A one dollar mattress. Unfortunately, it’s the size of a matchbox, but you get the Purple grid and it’s one dollar. I’m thrilled to report that two years later on April fool’s this year, we actually launched our little mini squishy bed for sale. You can buy them today, and we are selling a crazy number-

[Mike Magnuson]

Of matchbox sized mattresses for a dollar?

[Jeff Cassidy]

Three dollars I think- 

[Joe Megibow]

It’s three dollars with shipping and handling. Or thirty for thirty!

[Mike Magnuson]

You get 30 of them for 30 bucks? Wow!

[Joe Megibow]

Yeah they make great gifts, and party bags, and favors, and kids love them. In fact a crazy TikToker, this gets into the strength of the brand, he figured out that if you connected… I forget the number, I think it was like 820 of these little mini mattresses, that you can make a full dimension of a queen mattress. Which by the way, we sell the queen mattress for 1,200$ so he hacked Purple and figured out that if you buy these thirty packs, he can actually get a full Purple grid for hundreds of dollars less,  and  created a TikTok video about it that has gotten over 10 million views, and we had nothing to do with it. We don’t even know the guy.

[Mike Magnuson]

That’s awesome.

[Joe Megibow]

It’s fun to see this stuff take off, and some of it again is just building the brand ,be true to who you are, and let them go.

[Jeff Cassidy]

But that’s also a brilliant little idea, because you’re getting… Each purchase is an experience of the hyper elastic polymer, and it’s marketing that you’re actually getting paid for. It’s great.

[Joe Megibow]

That’s right, and we actually, we give a coupon back with everyone you purchase. So it’s technically free. I think right now it’s three bucks for the mini mattress, and you get five dollars back toward any purchase, so we’re paying you to try it. And pretty fun.

[Mike Magnuson]

Joe, being sensitive to how much time we’re taking up. I want to ask you one more question, is there anything that I didn’t ask you or we didn’t ask you, that you think is important?

[Joe Megibow]

Ummm Your focus and our discussion has been about mattresses, and we’re going to dominate there, that’s our aspiration, let’s get as many people sleeping better as we can, and we think we’re going to continue to push things forward. At our core, we don’t think of ourselves as a mattress company, I mean we just see so much opportunity, I mean I’ll give you… this isn’t necessarily good economics, but a passion of mine. I hate airplane seats, I want to see an airplane where every seat has Purple seat cushions built in. Something fierce, but even saying wait what does that have to do with sleep and mattresses? There’s so much potential here, and  to me that’s part of the excitement, is while we have this highly lucrative opportunity to help with sleep and that is where we spend most of our energy, it’s so much fun to think about how far we could take this thing. Once we get our footing here, and that’s the real excitement with Purple.

[Mike Magnuson]

Awesome. Well on that note, we’re going to wrap it up. Joe, it’s been awesome talking to you, I really enjoyed the conversation. I hope it wasn’t too painful for you, and  yeah we would love to love to do it again. There was so much more that I had on my list of questions for you that we didn’t get to, so maybe down the line we can revisit this.

[Joe Megibow]

Happy to, and keep up, I love what you guys are doing. Keep up the good work over there.

[Mike Magnuson]

Appreciate it. Well speaking of that, thank you all for listening. And if you like what you’re hearing, please subscribe. Leave us a review in the Apple Itunes store, it helps other people discover the podcast. In the meantime, thanks for listening and we’re out.

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