Editor's note: Inc. magazine will announce its pick for Company of the Year on Monday, December 11. Here, we spotlight a contender for the title in 2017.
The New York City-based online mattress retailer launched three years ago on the premise that a single mattress design--one with a "unique combination of high-density foams," according to Casper's website--could be perfect for everyone. It quickly gained attention with its online-only, direct-to-consumer, mattress-in-a-box business model.
Then, in May, Target invested $75 million in Casper, opening a partnership that placed Casper's sheets and pillows in Target's brick-and-mortar stores. And this past August, Casper unexpectedly released a second mattress design, the Wave. A third model, the Essential, appeared on Casper.com in October.
To a casual observer, it would seem that the company--an Inc. Company of the Year nominee both last year and this year--is moving away from its original thesis, which garnered it $100 million in sales in 2015 and double that figure last year. (Casper declined to disclose revenue or sales figures for 2017.) And in a way, that's right.
But Casper isn't abandoning its core principles by doing so, according to the company's founders. Instead, it's reacting to the circumstances that brought its initial success.
Standing out from the growing crowd
Countless online mattress companies--like Tuft & Needle and Leesa--have popped up in recent months and years. Partially thanks to Casper's popularity, the business model is no longer as unique as it once was. That puts more emphasis on the product--and how people find it.
"You don't tell the story of being first--you have to get over that fact," says Luke Sherwin, one of five Casper co-founders and the company's chief creative officer. "The consumer doesn't care. They want a great product, and they want it with a great experience at a great price."
He adds: "It's challenging, sometimes, because everything down to the exterior of your mattress can be emulated, and you're having to deal with that without getting very angry."
The company is dealing with it through a combination of growth and data-based strategy. Casper is up to 300 employees, with plans to eventually expand to 400 (co-founder and CEO Philip Krim declines to put a timeline on that expansion).
About 40 of those staffers work at Casper's shiny new San Francisco-based facility called "Casper Labs." The facility, which co-founder and chief of product Jeff Chapin calls a "long-term investment," opened in early 2017. It includes a research center, a fabrication space, and a test lab--which puts a whole new spin on sleeping in the office. "We make [employees] tape little sweat and thermal sensors to their body," Chapin chuckles. "In New York, I don't think they have to do that."
Taking on an ambitious strategy
The focus on research and development is how Casper hopes to keep improving product quality and creating future product designs. A more human approach to audience research--listening to customers who said they wouldn't buy a bed without trying it first--explains the company's push toward an increased brick-and-mortar presence.
Statistics back that decision up: At least 95 percent of consumers prefer to buy beds in stores, even despite the popularity of online-only retailers, according to IBISWorld retail analyst Anya Cohen.
That's why Casper now sells pillows and sheets through Target and encourages customers to test mattresses at pop-up stores across the country. Krim says the dual online and offline presence is necessary for the company to become a household name--but it significantly complicates the business model.
"To do it at the level we really want to do it adds so much complexity," explains Gabe Flateman, co-founder and chief technical officer. "I'm sure, even now, we're not thinking about all the implications."
"It's a huge learning curve for us," Krim adds.
Readying for a gigantic fight
They might need to learn quickly, because industry leaders are starting to wake up.
Traditional brick-and-mortar mattress retailers still control a dominant percentage of the market share for a mattress industry estimated at $29.1 billion, according to Cohen. Mattress Firm leads with an 11 percent market share. Select Comfort is just behind at 4.5 percent. Casper tops the online retailers at 0.7 percent, followed by Tuft & Needle's 0.4 percent.
In late September, Serta--one of the largest mattress brands in the United States--sued Casper for patent infringement, noting alleged similarities between Casper's Wave design and Serta's "channel cut technology." Casper filed a counterclaim calling the lawsuit "meritless" in November.
Two weeks after Serta's lawsuit, Mattress Firm announced a new "tulo" brand. It's a bed-in-a-box with free shipping and 120-day returns, offered in soft, medium, and firm variants. It's available both online and in Mattress Firm stores. The tagline--"one is not a choice"--dispels any doubt over whom it's targeting: Casper and the other one-size-fits-all online brands.
"We created a little bit of a startup team within Mattress Firm," says Sunni Goodman, Mattress Firm's senior vice president of communications. "It was really fun and exhilarating to have that startup mentality, but now be able to lean into the size and scale of Mattress Firm."
Co-founder and COO Neil Parikh insists he isn't worried: If industry giants are starting to punch back, Casper must be doing something right. "We spend very little time thinking about this, candidly," he says. "If people from Casper decided to go work at one of the big mattress companies, maybe--but I don't think that's going to happen anytime soon."
In Parikh's eyes, it comes down to culture. "Can your team build and execute and innovate on a regular basis? Doing it once is easy," he notes. "Doing it over and over and over again and upping your game? That's the hard part."