NEW YORK — Following a boom during the pandemic, home retailers are navigating rougher waters.
While many retailers in the category notched sales gains in 2020 and 2021 as more consumers actively sought out items for the home, many of those companies have faced new challenges. The category continues to see monthly declines, according to the U.S. Department of Commerce’s data. In December, home goods sales fell 7%, per the Commerce Department’s latest results released Wednesday.
“I think it’s going to be a very tough year. It’s been a very tough couple years in home,” Casper CEO Emilie Arel said during a panel discussion at the National Retail Federation’s Big Show on Monday. “With an election, international turmoil — there’s a lot going on in the consumer’s mind.”
Already in the past 12 months, Bed Bath & Beyond, Z Gallerie, Mitchell Gold and Bob Williams, Tuesday Morning and more have filed for bankruptcy. And others like Purple and The Container Store have reported sales declines in recent quarters and lowered their financial outlooks.
For Casper, the challenges come following years of changes at the brand.
A little over two years ago, the mattress brand was acquired by private equity firm Durational Capital Management. That deal came less than two years after Casper made its public trading debut. At the time of the acquisition announcement, the company also said that co-founder Philip Krim would step down as CEO, with Arel — who was then chief commercial officer — succeeding him.
Since her arrival as CEO, the brand has made a number of changes, including selling off its Canadian operations, opening new concept stores and prioritizing profitability.
“We were very loud in the beginning about like, ‘Mattress stores are terrible,’ and ‘It's a crappy experience,’ and ‘We're going to only sell online.’ Well, that's where 80% of the mattresses in the U.S. are sold. So we can either get on board or we can be small forever. Those are the choices.”
Emilie Arel
Casper CEO
Arel’s appointment represents a growing trend in the DTC space: founders stepping down from the top spot in order to bring in leaders that can take those brands to the next stage of growth.
“Casper had five founders when I came in in 2019. What they created was a new way to distribute a product that’s been around for a long time, and made it exciting to shop for a mattress,” Arel said. But “consumer businesses often mimic their founder,” she added, and the company needed to grow.
“When I came in, the majority of our customers were 27-year-old men who lived in a fourth floor walk-up in New York. That’s great. But those guys don’t actually have a lot of money,” Arel said. “We needed to expand our consumer. We needed more women, we needed an older consumer who was buying for a multibedroom home. That was one of the challenges: How do you shift and evolve the consumer base without walking away from who made you who you are?”
Casper needed to find a new way to connect with a broader set of customers. The brand famously became known for its New York subway ads, Arel said, but “that doesn’t matter to somebody who was in Minneapolis or Kansas City or San Francisco. It’s not applicable to them. We had to think a lot about how we evolve and expand.”
Brooklinen also recently saw its co-founder Rich Fulop step down as CEO, with Urban Outfitters and J. Crew alum Billy May replacing him. May similarly sought out ways to maintain the things that have made Brooklinen special, while also driving “more accelerated change,” he said during Monday’s panel.
“Every single decision in a lot of founder-led businesses comes back to the founder,” May said. “When your business scales and you reach hundreds of millions of dollars, it's really difficult to continue to make every single decision. But lots of founders fail to recognize that.”
Shifting from a “single failure point” to a structure that drives more accountability requires many changes, May added. With a lot of founder transitions “you come in either with a heavy fist — which often doesn't work — or a velvet glove, where you're trying to move the organization along, ensuring that they understand what the outcomes are. Be clear about what the objectives are. I can't underscore how important that is.”
Something that both executives are focused on is expanding their distribution through wholesale partnerships.
For Brooklinen, the company is testing out wholesale through its Marlow brand, which it launched in late 2021. This past October, the company announced that Marlow would be sold through 1,000 Walmart stores as well as on the mass merchant’s website.
Casper has cemented its position as a multichannel brand, with its products sold through retailers like Target, Costco and Nordstrom. The DTC mattress brand even opened a branded pop-up shop within Bed Bath & Beyond before that retailer filed for bankruptcy and subsequently closed all of its stores.
“We were very loud in the beginning about like, ‘Mattress stores are terrible,’ and ‘It's a crappy experience,’ and ‘We're going to only sell online.’ Well, that's where 80% of the mattresses in the U.S. are sold. So we can either get on board or we can be small forever. Those are the choices,” Arel said.
