Luke Sherwin, co-founder of the mattress tech startup Casper, stares in consternation at a remote-controlled sailboat. "They're all set to the same frequency," he explains, setting down his scotch and coaxing the toy from the edge of the pool. Because of this, the other remote-controlled boats will all move in the same direction. This is a problem, he tells me.

Sherwin and co-founders Neil Parikh, Gabriel Flateman, Philip Krim, and Jeff Chapin were throwing a pool party for themselves on Tuesday evening, in part to announce the upcoming launch of several Casper products--including pillows and sheets--in 1,200 Target stores nationwide. While the mattresses themselves won't be available in stores, customers will soon be able to purchase them online through Target.com.

Of course, it's exactly this kind of charming nerd-dom--on display by Sherwin and others--that vaulted the business to a more than $550 million valuation in less than four years. The five were inspired by the early success of e-commerce companies such as Warby Parker and Dollar Shave Club, which each made the prescient bet that consumers would purchase more personal products (eyeglasses, razors) on the internet. So in 2013, Casper launched to deliver beds-in-a-box in a clip of the standard time. Despite early challenges--which included helping small, domestic manufacturers expand to meet demand--Casper recently managed to hit $300 million in sales. The company has attracted nearly $70 million from investors such as Lerer Hippeau Ventures, NEA, and Ashton Kutcher's A-Grade Investments.

So it might come as some surprise that Casper, which is rumored to be considering a public offering this year, is now launching with a physical retailer. Poolside, Parikh concedes that in the current climate, "businesses need to constantly reinvent themselves"--though he characterizes the Target deal as more of an extension.

Casper is the latest in a series of e-commerce companies to turn to the physical space. Last summer, Harry's inked a similar deal with Target to begin selling razors and cartridges, with co-founder Jeffrey Raider admitting toThe Wall Street Journal that profit margins on e-commerce were not as large as he'd initially hoped. Similarly, Warby Parker began opening retail stores back in 2013, and recently announced that it would expand to a total of 70 locations by the end of the year. Even Amazon continues to expand into retail. In 2015, the e-commerce giant opened its first-ever bookstore in Seattle--where it cross-sells pricier items, such as the Amazon Echo speakers. And last year, the company said it would be expanding its grocery business with a series of Amazon Go convenience stores.

Analysts suggest that the shift is inevitable. "Companies recognize that the vast majority of retail is still happening in physical spaces," said Brendan Witcher, a principal analyst at Forrester, in an interview with Inc. last year. To his point, and despite the appeal of e-commerce, Forrester data shows that around 90 percent of all retail sales are still transacted in brick-and-mortar stores. Customers like having the ability to touch, taste, and feel a product before purchasing it, explains Witcher.

Still, Casper says it does not have plans to open up its own stores, at least not in the near future. "We've learned a ton through pop-up shops, and we'll think about how to continue to scale the offline experience," says Parikh. "But we want to be careful about how we figure it out. It's very easy to build a store that looks like the corner mattress store--and harder to reinvent the entire experience."

Why the Co-Founder of a $550 Million Mattress Company Couldn’t Sleep for a Month
Published on: May 17, 2017