Shopping Centers Today, the popular trade rag among retail brokers and developers recently published an article “Comfortable Profit” stating “mattress stores’s profitability helps landlords sleep soundly”. The article goes on to tout the per bed profit margins and says store growth “has been so ravenous that store operators are willing to take what they can get.”
According to Garrick Brown, the vice president of retail research for Cushman and Wakefield there are 7,000 stores in the U.S. now with room to grow by an additional 2,000 stores. I’m quite skeptical operating physical stores will remain profitable and predict a massive slowdown in store expansions in the future. While it’s true consumers want to test out beds, its also true many online retailers such as Saatva are overcoming these hurdles by offering no hassle return guarantees by not charging any pick-up or restocking fees. An online retailer can sell for a lot less because their lower e-commerce cost structure gives us them the best competitive advantage. Prices at an online retailer are on average about 15% less than the asking prices at a brick and mortar retailer for the same or similar mattress.according to a Sleep Like The Dead survey.
When Amazon started to sell books exclusively online, Barnes & Noble with their magnificent large stores and high rent couldn’t compete when the consumer started to feel comfortable buying online. Borders has gone out of business and Barnes & Noble has closed many stores and aren’t opening as many new ones. Amazon just keeps growing and growing and growing. At the end of the day, the consumer can often get a greater value if they purchase from a pure online retailer. For online mattress retailers, it’s critical to make the consumer feel going online to buy a mattress is a simple and smart smart way to shop. Already Saatva, and others are making big inroads. Landlords should take notice and tighten up the termination and assignment lease language before they lose sleep. For more information on retailers, please go to capitalretail.com.