Target gets into bed with Casper Mattress

Dive Brief:

Target has announced a partnership with online mattress upstart Casper, where starting June 18 Casper accessories will be for sale in more than 1,200 stores. The company's signature mattress will be available on Target.com only. Larger items like mattresses and a lounger will be on display for customers to see and try before they order online, according to a company press release.
Update: Target reportedly made a $1 billion offer to buy Casper, but discussions broke down, unnamed sources told Recode. In lieu of acquisition, Target might lead an upcoming investment round in Casper, according to Recode. A Target spokesperson declined to comment to Retail Dive on the report.
For once pure-play Casper, the tie-up continues its move into brick-and-mortar sales, which have included plans for its own stores, pop-ups and a partnership with furniture retailer West Elm.

Dive Insight:

Three-year-old Casper, like rivals Lessa, Yogabed and Tuft & Needle, has disrupted the mattress industry by scaling back the profusion of mattress types, qualities, prices and sellers to offer a lean list of equally priced mattresses.

They're grabbing a growing amount of the $14.2 billion retail mattress industry, which for years has taken the opposite tack — providing consumers with a hodgepodge of mattress types and price points that make comparison shopping between mattress stores and department stores nearly impossible. Tempur Sealy and Serta Simmons made 70% of bedding wholesale shipments in 2014, when half of the industry’s revenue growth came from price increases.

The success of e-commerce mattress retailers depends in large part on a model that allows them to inexpensively ship a mattress in a box so that it slowly unfolds until it’s ready to fit on a bed. But online sales may be hitting their limit in a retail space where many shoppers still head to stores to bounce, lie down and try to imagine how the mattress will feel at home. Not even Casper’s return guarantee may be enough for those customers that want to see and touch the goods before plunking down payment. Indeed, the advantage of brick and mortar is proving irresistible to once pure-play online retailers like Warby Parker and Bonobos, which, like Casper, have chosen to expand their physical locations.

Target's partnership is similar to Target’s affiliation, announced last year, with shaving and grooming products from online purveyor and subscription service Harry’s. The retailer's partnership approach fits with its longstanding collaborations with fashion designers and top brands, an idea the retailer launched in the 1980s after realizing, in the midst of a bruising price war with Wal-Mart Stores, that competing on price alone was an insufficient strategy, Mark Cohen, Professor and Director of Retail Studies at Columbia Business School, previously told Retail Dive.

Partnerships with online companies may be a bit trickier, including the fact that selling and promoting Harry’s products could lead some customers to turn to Harry’s online subscription services rather than to Target for future sales.

The tie-up model is a stark departure from the approach of Wal-Mart Stores, which is going far beyond inking partnerships with online retail upstarts to devouring them whole: The retailer’s recent slew of acquisitions include women’s online apparel company Modcloth, outdoor e-retailer Moosejaw, online footwear site Shoebuy and soon reportedly online menswear site Bonobos. Wal-Mart is spending large sums of money to take on enterprises that are not necessarily profitable and depart from its "always low prices" stance, but that open it up to new customer bases.