Blog: Delight in Casper’s losses misses growing DTC clout

Spirits were high in bedding showrooms across the World Market Center, for several reasons.

One was the strong attendance in many showrooms and record attendance in some. Another was the buzz about business prospects, the sense that a strong year lies ahead. A third reason was the excitement that bedding producers brought to Las Vegas as they unveiled an aggressive slate of introductions.

There was also a healthy dose of Casper schadenfreude.

If that word catches you by surprise, it means “pleasure derived from another person’s (or in this case, another company’s) misfortune.” One of my friends used that word in offering his take on the delight that some found in learning about Casper’s big losses, which were revealed in an S-1 filing a few weeks before the Las Vegas Market got underway and have been the talk of the industry ever since.

After years of speculation in the industry about the success (or not) of Casper’s business model, Casper’s IPO filing confirmed the company’s massive marketing expenditures over the years and its growing losses, which reached $92.1 million in 2018, the last full year for which Casper released financial results.

There was a sense of relief in some circles in Las Vegas, a feeling that the threat posed by the Caspers of the world to traditional business models is over. How can a company with a history of losses, and no clear path to profitability, be a long-term player?

Casper is heading for its day of reckoning, and it already appears the company’s goal of a $1 billion valuation is vastly overstated.

But — and I can’t emphasize this strongly enough — it would be a huge mistake to dismiss the power of the direct-to-consumer retailers. In case you haven’t noticed, the bedding landscape has been dramatically reshaped since Casper’s launch in 2014.

In that year, the direct-to-consumer channel had a 6% market share, according to Furniture Today’s research, while bedding specialty stores had a 47% share and furniture stores a 34% share.

The rise of bedding e-tailers, a trend supported by increasing boxed bedding capabilities and soaring mattress imports, helped push the DTC share to 12% in 2016 and to 21% in 2018, according to Furniture Today’s market analysis.

In four short years, the DTC channel gained 15 points of market share, while bedding specialty stores lost eight points of market share and furniture stores seven points. Needless to say, those are industry-transforming shifts in market share.

Does anyone think that the DTC channel won’t gain even more share in the years to come, whatever happens to Casper? The online genie is out of the bottle.

The future belongs to retailers who combine savvy online skills with the power and reassurance of brick-and-mortar stores. That’s what I think. Or would you rather close your eyes and delight in Casper’s hefty losses?