Report: Target to stuff $75M into Casper funding round

Dive Brief:

Target is joining existing investors in Casper, a startup that has disrupted the mattress industry, and will put $75 million into a funding round that could top $100 million, Recode reports. A Target spokesperson confirmed the investment to Retail Dive, but declined to comment on the amount.
Lerer Hippeau Ventures, IVP and New Enterprise Associates, which have already invested in the startup, will also participate in the round, according to the report. Target was reportedly interested in acquiring the startup outright to the tune of $1 billion; a Target spokesperson declined to comment to Retail Dive on that report.
Earlier this month Target announced a partnership with the online mattress upstart, where starting June 18 Casper accessories will be available for sale in more than 1,200 stores and the company's signature mattress will be available through Target's website.

Dive Insight:

Target has a long history of working with premium and trendy designers and brands, and through its TechStars partnership the company has also invested money and mentorship in startups. Those Target practices make both its investment in Casper and the in-store tie-up unsurprising for a retailer that has sought to differentiate its merchandise for decades.

"Target invested in Casper because we believe in their team, their ideas and their vision for reimagining sleep," a Target spokesperson told Retail Dive. "The strategic partnership offers Casper access to an established retail brand and gives Target an opportunity to work with a future-focused digital brand that is exploring an area that is meaningful for our guests — sleep and wellness. We’re looking forward to exploring the future together."

In fact, that approach reportedly came from losing a bruising price war with Wal-Mart in the 1980s. Once Target realized it would never beat Wal-Mart on price alone, the company found other ways to get customers into stores and keep them coming back.

These days Wal-Mart, too, is partnering with outside brands to boost its behind-the-curve e-commerce sales. The retail giant, in contrast to Target’s more cautious approach, has used its massive cash reserves to buy startups outright, starting with its $3.3 billion takeover of Jet.com last year. Target reportedly also looked at buying Jet, but found the company over-priced. Target similarly contemplated acquiring online consumer product bulk sales company Boxed, according to an earlier report from The Wall Street Journal. Instead, Target is piloting its own answer to Boxed and Amazon Pantry, dubbed Target Restock.

Meanwhile, late last year Wal-Mart bought online shoe retailer Shoebuy, in a challenge to Amazon's Zappos, for $70 million. So far this year Wal-Mart has paid $51 million in cash for online outdoor retailer Moosejaw and another $40 million to $60 million for vintage-inspired online women’s apparel Modcloth. Wal-Mart is also reportedly in discussions to add once pure-play menswear site Bonobos. So far, Wal-Mart continues running those businesses as operations distinct from its own, in light of their widely differing branding and pricing.

On the other hand, Casper and Target fit neatly together, in terms of branding and in terms of both companies' broader strategies. Target is seeking to expand its slate of compelling merchandise and its e-commerce, while Casper is looking to broaden its sales strategy beyond e-commerce. The startup has plans for its own stores, pop-ups and a partnership with furniture retailer West Elm. "With only 5% of mattresses currently being sold online in the United States, I suspect this is more about bringing Casper mattresses into Target’s stores than an investment by Target in a pure play internet retailer," Nick Egelanian, president of retail development consulting firm SiteWorks International, said in an email to Retail Dive.

But Target's different approach to adding new brands doesn't mean that the general merchandiser won't be taking on whole companies, Target Chief Information and Digital Officer Michael McNamara told The Wall Street Journal. “Thinking about possible mergers and acquisitions is something we do every day as a regular course of business,” he said.