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

Ep. 3: GoodBed Data on How COVID Has Impacted the Mattress Shopping Journey

Mike and Jeff share proprietary metrics from GoodBed.com data that illustrate how mattress shopper preferences and behavior have shifted since March 2020.

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Mike and Jeff share proprietary metrics from GoodBed.com data that illustrate how mattress shopper preferences and behavior have shifted since March 2020.

These numbers provide historical context for the metrics and then Magnuson and Cassidy translate the changes into direct implications for retailers and manufacturers.

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Full Transcription:

[Mike Magnuson]

Alright, nice headphones.

[Jeff Cassidy]

Thanks, I got sent some- 

[Mike Magnuson]

Pretty cool.

[Jeff Cassidy]

Some boss of mine sent them, said I have to wear them because we’re doing podcasting or some crazy stuff like that.

[Mike Magnuson]

It’s a hazing ritual.

[Jeff Cassidy]

Yeah, it’s working.

[Mike Magnuson]

Alright, let’s dive in. We’re going to talk about Covid today. Covid has obviously been a huge disruption to so many industries but the mattress industry has not been excluded from that. And you know it’s funny to think back to march how we, you know, what we thought then. Can you even remember? I mean, I remember thinking ‘Oh my gosh, this industry is not going to sell another mattress this entire year’.

[Jeff Cassidy]

Yeah

[Mike Magnuson]

That was my first concern because I mean of course, historically mattresses are a big discretionary purchase and when times are tough, it’s the kind of thing that you can always prolong for another day. You know?

[Jeff Cassidy]

Right. Well I also think that I just like everybody else, I wasn’t thinking about anything. Like any purchase other than water and food. So I got taken aback ‘Oh my gosh, like the world is ending’. So…

[Mike Magnuson]

Exactly and certainly not one that would require you going into a store to the extent you deemed that to be part of how you would want to purchase that product. So yeah, I was pretty worried that we were going to see just an absolutely abysmal year. As it turned out, wow. I mean it’s been a total boon and obviously we can all understand the reason for that with everyone’s focus on the home so it’s been a really unusual economic kind of downturn in that respect. 

I think pretty much, maybe the only economic downturn where we’ve seen the mattress industry kind of actually see a surge but I think more so than just understanding that point and obviously people can understand that online retail has seen a bit of a surge. I think we want to dive a little deeper, a layer deeper into some of the underlying factors of why that is. I think that would be useful for people and we’ve got some data on that but I was thinking maybe to start it off we could give people a little bit of context on how we got here. I think that would also be useful because we’ve obviously been tracking these metrics for a long time now, a lot of these metrics.

So for example, we do have this one metric that we ask people who are in the context of using Goodbed so they’re not taking a survey. They’re actually kind of just using Goodbed as part of their mattress search or mattress research and in that context they’re answering a question about ‘Do you feel the need to try your mattress before you buy it?’ You know, in a store.

And they can say yes or no and we’ve been asking that question of our users since Q3 of 2015. So Casper launched in early 2014. We didn’t ask that question, we didn’t start asking that question as a kind of, in the ordinary course of people using our site, for the first year or so but after that and ever since we asked that very consistently. And pretty much when we started in Q3 of 2015, it was about 20 percent. That was the answer 20 percent of people said no to that question.

That’s how I think of it because I think of it as a line that’s going up and to the right. So the number of people who say ‘no they don’t need to try it’, is the number that has been increasing. Which is kind of a little bit confusing because the inverse of that, yes I need to try it, has been obviously shrinking but we’ll think of it as a line that’s going up and to the right. So, ‘No I don’t need to try it, therefore I’m willing to buy online’ was 20 percent in Q3 of 2015.

Actually a little less than 20 percent and by the way for context I do know with less statistical significance that had we started asking that question earlier it would surely have been well below.

[Jeff Cassidy]

Yeah, it would’ve been almost zero a few years earlier.

[Mike Magnuson]

Pretty much, I mean like I remember having conversations with users one-on-one and also asking that question in more of a survey form on our site and the numbers were in the single digits. And when people did say yes they’d be willing to, in those kinds of one-on-one conversations it was more of the context that ‘Yeah I’d be willing to buy online without trying it but only if I had already tried one that I knew was the same thing in a store’. You know, like they’re basically saying ‘Hey if I can get a name game type of model that’s the same online as one I’ve tried in a store then sure I’ll buy it without trying it but that’s not really the same thing.

[Jeff Cassidy]

Right.

[Mike Magnuson]

And of course the return policies and everything in the industry even for the retailers who were selling online weren’t as generous as what Casper kind of ushered in with their business model either. So, there were other reasons I think why people weren’t as comfortable but for sure we knew that number was very low and starting in about a year after Casper came on, it had already risen to those high teens or about 20 percent or close to 20 percent.

And it basically steadily rose for the next couple of years up until kind of early 2018 and then it just kind of plateaued. It kind of hit just a saturation level where there were just no more people who were fundamentally going to be convinced by this kind of online marketing message to buy a mattress online without trying it in the store first. And that plateau level was about 43 percent and it was just really rigid there.

It just kind of bounced around a little bit by a few points here or there on either side of that number but it just was flat for two years. And what’s really interesting is as we go back and kind of historically dissect this other data that we have from that same time period we can see that in that two year time period, two to three year time period, where it was steadily rising between 2015 and 2018. We saw the number of online brands just exploding.

They were coming in at one per week literally for three straight years as you recall. So that kind of makes sense, the market essentially was expanding rapidly. The addressable market for all these online brands was rapidly expanding and so while that was happening, brands were flooding in. And we saw very little attrition amongst those brands during that three year time frame either like they were coming in, they were trying to make the best of it.

We didn’t see a lot of fall off but when we hit that plateau level, then in early 2018 all of a sudden as we tracked these number of brands in the market and those that are kind of dropping out we started to see it wasn’t that new brands stopped coming in but we definitely started to see brands falling off, brands dying off.

So that actually caused the total number of brands to start to kind of plateau right around that time as well or at least it certainly slowed. Eventually, after like a year or two of that plateauing of the willingness to buy online number, we actually started to see the number of online brands in the space start to fall.

[Jeff Cassidy]

And by the way, it’s interesting that steadily increasing willingness to buy, without trying. It seems looking back historically, it makes sense. It feels like it’s always been that way but when you presented some of those numbers at the bedding conference, it was shocking to people. So there was a long lag from what people were expecting with the numbers to what was actually happening in the online space.

[Mike Magnuson]

Exactly. Yeah, there were definitely points in time where we were presenting those numbers along the way where people were of the mindset or impression that maybe this was kind of an isolated phenomenon amongst millennials. You know, a few kinds of e-commerce friendly subsets of the market that were kind of willing to do this. But what quickly became apparent in the data we were collecting was; it was much more widespread. And we can look at it now, we can look at it across age groups because obviously that’s another piece of data that people are sharing with us. Again, not in a survey form just because they’re trying to find the right mattress and that’s one of the criteria that we consider.

But we can stratify that data by age group and see that trend has been super consistent across age groups. There is stratification as it relates to the people of younger age groups as you might expect, in general that line is higher in terms of their willingness to buy without trying than the ones who are older. That’s the lowest line but the pattern in terms of the increase is the same.

So that’s been something we’ve seen from the very beginning and it’s been super consistent. So that kind of takes us up until-

I guess the other thing I should mention that’s kind of interesting context again, where we can go back and look at historical data and reconcile it against these other trends that we’ve seen, is that right around that time of early 2018 when that plateauing happened coincides exactly with when we saw the largest online brands start to dip their toe into the Brick and Mortar waters. Casper starts to open, they’re owned and operated stores, I believe that was probably around the time Nectar started to lay the groundwork for its Brick and Mortar distribution strategy. Although they didn’t come public for a little while after that but certainly by early 2019 they had.

And stores started to open up, Tuft & Needle started opening their own operator stores. They started to experiment with different partners; Crate & Barrel or West Elm those types of partnerships all started to come to fruition right around the time we started to hit that saturation point. So those large online brands were either anticipating this or were seeing similar things in their data that suggested to them that we’re going to hit a saturation point and that in order to continue at the growth rates that we want to continue at; we’re going to need a more omni-channel approach. There’s going to be a segment of the market that we’re just not going to be able to tap into if we don’t.

So that takes us up through early 2020 because that 43 percent plateau number, it stuck hard there right up and through the early part of 2020. So, for two solid years it didn’t move, which convinced me that this was a really hard ceiling. That obviously it’s going to creep up over time but only because as you know with each passing year you’re going to have younger people move into the market for a mattress, older people will have bought their last mattress, and with that generational turnover you’ll see a slight increase over time. But that’s a relatively small, if you think about it, that’s a very slow increase that you’ll barely be able to see even on a year-over-year basis.

So, that’s kind of where I thought we were at with this whole thing and I thought ‘Wow, this is going to be a great year for Brick and Mortar because we have finally seen a little bit of inflection here, an ebbing, some kind of sealing, or just curbing of the growth that has been otherwise unabated in terms of the online guys and the share that they’ve been able to steal’.

And then of course Covid-

[Jeff Cassidy]

And again, that plateau was again how long of a total amount of time at that point?

[Mike Magnuson]

Two years, two full years. Yeah, it’s long enough to feel very confident that we had some statistical significance. And by the way every data point we put on that chart or I should say across that full two year period we’re talking about many tens of thousands of data points, and so every data point that we plot on a line is one month of data which has thousands in its own right of users and their responses in that data.

So, it’s definitely well beyond any kind of statistical significance levels and then Covid hits and obviously catches the entire world by surprise. And just to clarify, the reason we spent that time up front explaining the history of what led us into the Covid period is that I think it’s important context to have. To appreciate both the significance of that number, the percentage of people who are willing to buy without trying. Because it affects everything from the number of players in the market to the online players moving into a more omni-channel strategy, it’s driving a lot of things.

So it’s important to understand the significance of that number as well as where that number had been going into Covid and what it had been doing. And when Covid hits, we see the impact of Covid in that number immediately. So it immediately starts to spike up in March, by April it peaks at 71 percent.

So again, having been flat at 43 percent for two years and looking like it’s going to be more or less at that level ad infinitum, It now spikes up in the span of 30 days to 71 percent. Which really speaks to people’s change of mindset in light of this pandemic. So it does settle down if you recall, May was ultimately a good month especially the latter part of May was a good month for the whole industry but particularly it was good for Brick and Mortar retailers.

So it had come down by May and then certainly by June it had come back down to a more steady state level. But it was not back to 43 percent, it had come down to about 53 percent. And really what happened in the months since then is; it’s more or less stayed at that level. It’s come down just a tick or two but it’s still a solid eight, nine, close to ten points higher than it was for what seemed like, would be forever.

And that to me is a massive lasting legacy of Covid. I see it as the kind of thing that is analogous to what we’ve observed with so many other facets of our lives, how Covid has affected it. I mean video conferencing being a perfect example, we’re on a video call right now. You and I have been doing video calls for many years but we now do video calls in the course of our ordinary business that previously would have been phone calls or in-person visits and never in a million years would have been a video call because it just would’ve felt weird. Now we’re, kind of as a society, just over that and we do video calls with our friends more, we do video calls for work more, and that’s just going to stay I think. I don’t see that going away in the post-Covid world.

And likewise the degree to which we rely on e-commerce for everything from groceries, like typical more mundane errand stuff that we didn’t usually previously rely on e-commerce, to stuff you would get from a hardware store normally. Just anything that we would have previously not necessarily thought to look online for, there’s a whole lot that we now do think to look online for. And again I think there’s going to be a lasting impact of that.

And I think this is going to be similar. So there’s going to be a degree to which this is ultimately in the annals of history, a step function change in terms of people’s willingness to buy online and buy without trying in a store first. And the other area where we can sort of see less readily measurable data but certainly data nonetheless in another form, is the extent to which people’s research journey is happening online during Covid.

I mean we already knew before Covid that probably 80 percent of people if not- no it’s probably more like 90 percent of people research their mattress online at some point during their process. We already had a really high level of saturation there. Now it’s a hundred percent, right? Now that I don’t think there’s anybody who doesn’t spend at least some amount of time researching their mattress online as part of that process and much more significantly, I think the portion of the decision-making journey that’s happening online we’ve seen go up significantly during Covid.

And that’s really where we had more upside because in the past, they might do some research online but it could be just one step of their journey. It could be; I’m going to do a little bit of confirmatory research, read some reviews, and make sure it’s not trash. Or I’m going to do a little bit of upfront research, just educate myself about the different types before I go into a store. But their intent or at least the result of their process would be that a good portion of their decision-making journey was happening in the store. They’re spending a lot of time in the store being educated or educating themselves.

They may be going to multiple stores, getting multiple perspectives from different people and different experiences in those stores. That is happening much less obviously and so as a result, the portion of the journey that’s happening online is much higher and it’s not just by default. It’s not that the amount of time that they’re researching these purchases is lower. It’s also that they’re actually increasing the amount of time they’re spending online to compensate for the loss of time they’re able to spend in stores as part of that journey.

And again I think that while some of that is going to prove temporary, there’s going to be for sure a residual lasting impact there. That seems clear. So that is kind of the fundamental, like biggest impacts and we see it in other forms of data too. I mean we definitely see it in google trends data for example. You know, we saw for sure that searches for online brands popped a lot more in those early days of the pandemic. We often look at this ‘best mattress’ as kind of an online searching phenomenon and that has popped a lot.

And that kind of leads me to one of the other implications of this for retailers. I mean in general the implications for retailers are that you’re going to have to be found online. You can’t rely on the fact that you have a convenience store location that’s on a busy street that people pass by all the time. And again this is not just in the Covid time period this goes beyond.

You are going to have to be found online because increasingly that’s where people are not only starting their journey but that’s increasingly where a higher and higher portion of their decision is being made. And that step that’s taking place in the store is becoming more of that confirmatory step so your journey with that consumer has to begin on your website. That’s one implication, that your website has to provide more information to them that is going to be along the lines of the type of information that will help them make a decision.

[Jeff Cassidy]

More information and well-presented information. To your point earlier about; before when more people, a higher percentage of people would start their journey in the store or they would be assuming they’re going to buy in a store they might go to multiple stores, physical stores.

[Mike Magnuson]

Yeah.

[Jeff Cassidy]

Now those same people, who had that same desire to get multiple data points, would have gone to multiple physical stores now they go to multiple websites.

[Mike Magnuson]

Right.

[Jeff Cassidy]

We also see this in people calling in to Goodbed or people emailing in to Goodbed. A lot more of that is happening than before and some of those people are older people and they’re not as comfortable online but they’re forced to do it now. They feel like they’re forced to do it now and some of them have a harder time navigating websites. So I think not only being found but also having a website that’s helpful, that’s easy to understand, that’s easy to navigate, that’s easy for me to get to the information that I want about a product, that is even more important than before.

Because they’re going to find websites that are very good and that’s part of the sales process now. How well can I navigate that website? How well do you help me with my  education process on your website in a quick, easy, and efficient way for people who maybe weren’t as internet savvy.

[Mike Magnuson]

Yeah. So, to kind of boil it down maybe even more succinctly-

[Laughter]

No, believe me your part was way more succinct than mine so I’m not casting stones. I’m saying more succinctly to cover all the ground that we’ve covered in this whole episode so far or to kind of sum it up to how we’ve gotten to this point. It would be that more people are starting their journey online, more people are comfortable buying, and ultimately concluding their journey without having the ability to try a mattress in a store without buying it. And more of the decision making that’s going into that process, that ultimate decision, more of the information seeking, and ultimately the factors that lead to the decision are happening online.

And as a result of those three key dynamics, and again we believe that those are not temporary, there’s a degree to which the pop is temporary but there will be a residual effect that is lasting. And as a result of those things retailers need to do two key things like to your point; they need to not only be found online because that’s where people are starting and that’s where people are deciding but also the information that they provide online through their website needs to be better to help people get closer to that decision point.

Because that’s what people are doing, they’re getting closer to that decision point online. If they can’t do it on your website they’ll do it on somebody else’s so those are the two key factors. And by the way that first factor is one I described that I think is a helpful rubric to think about; for all the great things retailers focus on in providing their customers with a great experience you can’t provide consumers with a great experience if they never find you.

And so those are some key things and, by the way, there are some pretty nasty headwinds facing retailers as it relates to being found online in today’s environment and we’ve touched on this and we will come back to this topic in future episodes for sure but one of the biggest of those headwinds is spammy review sites.

That is a huge headwind because those guys, their only expertise in the world is showing up highly in google essentially tricking google into thinking that they are a helpful authoritative trustworthy resource for consumers and they’re darn good at it. But also, they go to very if not illegal lengths then certainly illicit lengths to do that. To show up highly and that’s unfair.

[Jeff Cassidy]

That’s a topic for multiple episodes.

[Mike Magnuson]

It is, for sure, a topic that deserves multiple episodes because it’s one that we can really unwrap and help retailers understand both the impact of it on them but also what are some things they can do about it. So yes, we’ll come back to that for sure but I just want to place-mark that as one of the challenges. One of the real clear challenges that retailers are facing as it relates to being found online today and going forward.

So that’s kind of the key and we’re going to come back. I’m going to tease our next episode, we’re going to talk about this question that gets batted around. Is Brick and Mortar retail walking dead? And a small spoiler; I don’t think it’s walking dead at all but, and if you’ve heard me speak before you would know that but I’m going to tell you why I think that. And it’s going to come with some strings. It’s going to come with some strings about sort of; they’re not walking dead provided that they do some things because the future is not the same as the past year.

It’s not going to look exactly like the past. So there’s going to have to be some change to adapt but I definitely believe there is a future for Brick and Mortar retail. But I’m going to talk about that and obviously the sort of ‘What can you do about this post-Covid world as a retailer?’. Some of that will be a good venue for us to talk about. So if you’re wondering why we’re not going to get into that in this episode we’re keeping this content snackable.

[Jeff Cassidy]

It might have ended up being a couple of snacks today but I think to your point earlier-

[Mike Magnuson]

I hope you didn’t eat anything before you listened to this because…or consumed any other information because otherwise you might be really full.

[Jeff Cassidy]

Yeah, or done anything entertaining because…

[Mike Magnuson]

Yeah, if you did consume anything entertaining prior to watching this then this will pale in comparison no question but hopefully you’ve been deprived of any kind of entertainment and therefore this really stands out and is exceptional in your mind.

[Jeff Cassidy]

Alright wait, before we go, let’s pick up real quick on something that you mentioned in the first episode which is your background and your history with podcasting. Maybe pick back up on that real quick.

[Mike Magnuson]

I’ll pick back up on that. I’ll just tell a little bit of that story so we can spread it out over these first few episodes and it doesn’t become an episode of its own. Previous to starting Goodbed, I was working in finance. I was a private equity investor, as you know, focused on media marketing services, types of investments. I was kind of at the intersection of private equity as well as venture capital, kind of right in that in-between area where I was looking at some forward thinking types of theses.

And one of those forward thinking investment theses that I had was that there was an opportunity for spoken word audio content that was going to make spoken word audio content more valuable. What I was seeing was; we had more and more people who had devices on their person that were capable of storing that type of content and playing it, we had more and more of a stronger network. This was, by the way, the time frame here was 2003-4 that I kind of developed this thesis.

[Jeff Cassidy]

It was even earlier than we thought.

[Mike Magnuson]

I know, I looked it up because I wanted to see. I said 2006 last episode and it was actually well before that. It was the 2003-4 time frame and you know seeing that iPods were kind of a thing at that point and at that point in time we didn’t have iPhones this is way way before iPhones but we had iPods and we had increasingly the ability to download content more quickly to those iPods. So I was seeing the people were able to sync their iPods quickly and then take them with them in the car for example. And I was anticipating that eventually iPods would have some way of connecting wirelessly to data. You know I didn’t necessarily anticipate the iPhone per se but I knew you wouldn’t ultimately have to sync your iPod to a computer every time you wanted to grab new content onto it.

So I knew that type of thing was coming and that there was always going to be a need for people to consume audio content, right? That there’s a certain amount of time people spend in their car for example or doing other things where they can’t be watching video but they’re still going to want to be informed or entertained and what have you. And at the same time of course we were all getting more and more accustomed to asynchronous programming. Meaning watching things when we want to watch them, watching what we want to watch when we want to watch it. It started with DVRs when that started and that was all happening, you know TiVo goes back to the late 90s and by the time this 2003-4 time frame was coming around it was becoming more and more accepted by a wider portion of the population.

That people are just getting used to it, like I don’t want to just turn on the radio and see what’s on. I want to listen to what I want to listen to for that time that I’m in my car and maximize the information or entertainment that I’m getting during that time.

So I just anticipated that these things were going to be coming and I felt like there’s an opportunity for audio spoken word content to increase in value because it’s going to have so much more demand. Good good content will have so much more demand than it ever had before at least in recent years. So I was looking at even buying into Westwood One radio or you know looking at libraries of King Biscuit Flower Hour and just trying to find opportunities to put money to work in finding good spoken word audio content. And that was kind of my thesis and that’s what I was actively working on or one of the things I was actively working on in that 2003-4 time frame and this was all before the term podcasting had ever really been coined.

So we can continue that story in the next episode.

[Jeff Cassidy]

Yeah, ‘Other interesting background for a future time not now’ is one of your other theses during that part of your life which involved mattresses so more on that to come in the future too.

[Mike Magnuson]

True, very true. Alright, good.

Well, we appreciate you guys listening if anyone is listening.

[Jeff Cassidy]

Your mom and my mom.

[Mike Magnuson]

Exactly. Hey mom, thanks for listening.

And you know, if you do like what you’re hearing be sure to subscribe with whatever medium you’re using and leave us a review. We’d love it, that helps other people find the podcast. So, in the meantime Mike It Up. We’re out.

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