If building a business with strong competitive advantages is tough, sustaining the competitive advantage is many degrees tougher. In retailing, the internet makes it relatively easy to replicate at scale, an existing business model. And this makes it tough for incumbents to protect their market share till the time they have built enough scale for network effects to start positively strengthening their economic moats. But how does a single-product, online-only business thrive? An online mattress retailing company thinks the answer is in selling ‘sleep’ not just a mattress. Casper, a start-up wants to be the ‘Nike of Sleep’.
“A mattress primer: For a long time, the American market has been dominated by Tempur Sealy and Serta Simmons, both of which date back to the 19th century. But the current state of the industry began to take shape in 2014, when a group of men at a co-working space noticed the direct-to-consumer trend and figured that a good industry to disrupt might be one whose incumbents had been around since Thomas Edison was messing with electricity. They started Casper, and before long it was synonymous with the mattress-in-a-box concept.
But in the years since, Casper has had to shift positions. Dozens of mattress-in-a-box competitors crowded the market. Realizing the limitations of an entirely virtual business model, Casper began opening storefronts and selling products like pillows and sheets. All the while, the wellness industry rose up, with companies attaching their wares to a sense of higher, healthful purpose. While businesses devoted to optimizing most of the core bodily functions abound — start-ups that promise more healthful eating, more holistic hydration, etc. — no company has yet established itself as the clear leader of the sleep space.
So ahead of a possible initial public offering, Casper is trying to recast itself as “the Nike of sleep,” in the company’s phrase. It has assembled a “sleep advisory board” that includes Dr. Lipman, who contributes articles and recipes to Goop.com, in addition to impressively credentialed academics and supposed sleep experts from Brown, the University of Arizona and elsewhere.
“If I’m wearing a pair of Nike shoes, a little part of me feels connected to the Olympic athletes that wear those shoes, and maybe I feel like I’m a little bit faster of a runner. That’s the mentality shift.
There’s no doubt that there is money to be made in sleep: Consider the $149,900 horsetail hair mattress from the Swedish company Hästens, or the parents who spend thousands of dollars on sleep consultants for their newborns. The Centers for Disease Control and Prevention has decreed sleep deprivation a public health problem, saying that about a third of American adults do not get enough rest — contributing to the sense that quality shut-eye is becoming a luxury.
Today Casper has a $1.1 billion valuation and a slew of imitators, including Purple, Avocado and Leesa. The wrinkle is that Casper has never posted a profit. And its biggest rivals say they are not, well, losing sleep. “Our stock’s up 80 percent, and we’re a $4 billion company,” Scott Thompson, Tempur Sealy’s chief executive, told me. “We’re having a great time.”
But while Mr. Thompson may scoff at the start-ups’ business model, his company has been forced to play catch-up. Tempur Sealy now offers Cocoon, a bed-in-a-box that, just like Casper, comes with a 100-night trial period. Direct-to-consumer sales now account for about 10 percent of the company’s sales. (Last year, Serta Simmons acquired the Casper rival Tuft & Needle.)
Mr. Parikh said Casper’s customer base was “everyone — everyone is in the market for sleep, because everyone can sleep better.” It may be true, but for now, in a business sense, it’s very much a dream.”

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