"Casper's CEO states the company is no longer shying away from earning profits: the new direction"
Casper, a direct-to-consumer (DTC) mattress company, is making a strategic shift following its exit from public markets and transition to private ownership. The new leadership, headed by CEO Emilie Arel, is committing to drive the brand towards profitability.
After taking the helm in November, Arel, who joined as president and chief commercial officer in late 2019, admitted that the brand had overextended itself. Casper had been attempting to extend its reach beyond mattresses, offering a diverse range of products such as dog beds, smart nightlights, and CBD gummies to capture market share in what it called the "sleep economy." Yet, this diversification proved to be confusing for consumers and was not profitable for the company.
In light of this, the brand is now focusing exclusively on mattresses in an effort to streamline operations and allocate resources more efficiently. "We miscalculated. We made the wrong call as a leadership team," Arel acknowledged at eTail's Boston conference last week. "We weren't making any money. We're not nonprofit."
The shift in strategy is particularly relevant given the challenging environment facing Casper and other DTC brands. The pandemic disrupted nearly every aspect of the retail industry, including supply chain issues. As a result, Casper faced a net loss of nearly $90 million in fiscal 2020, despite an increase in demand for home products during the early stages of the pandemic.
With the brand now privately owned by Durational Capital Management, it has the opportunity to cut extraneous costs and maintain a greater focus on its core product. Arel emphasized that controlling costs and becoming profitable is paramount to the brand's survival, stating that "a culture of frugality is very important."
To achieve this, Casper will also be rethinking its approach to marketing. In the past, the company spent over $150 million on marketing, representing almost 30% of its total revenue. While this spending generated brand awareness, it did not lead to profitability. As consumers begin to pull back on discretionary spending, Casper will need to be strategic about its marketing efforts to attract and retain customers.
One change Casper is making is moving away from the concept of being the "Nike of sleep." Arel explained that this approach was confusing for consumers and difficult to execute on. Instead, the brand will focus on being a mattress retailer that offers customers comfort, support, and breathability in their mattresses.
In addition to a change in product focus, Casper is undergoing internal changes as well. The company is focusing on building a team with the right blend of skills and experience to lead it into the future. "Taking a company from zero to $50 million is very different than taking a company from $500 million to a billion," Arel noted.
With consumers becoming more cautious with their spending, the mattress category is expected to show signs of inflation before other sectors. Casper will need to stay agile and respond to these market fluctuations while maintaining profits. As a result, the brand does not plan to open any new stores in the near future due to the high cost associated with building them.
Instead, Casper will focus on optimizing its existing stores to make them profitable, even if that means making drastic changes like putting store associates on commission to drive sales. The brand understands that its physical stores are valuable for showcasing its products and creating an engaging customer experience, particularly since almost 80% of mattress purchases are made in-store.
Overall, Casper's current strategy emphasizes cost efficiency, product innovation, and a focus on its core offerings. Under new leadership and with a new focus on profitability, the company is well-positioned to navigate the evolving retail landscape and continue to serve its customers' needs.
- Casper, after exiting public markets, is transitioning to private ownership and is driven by new leadership to achieve profitability.
- The diversification of Casper's product offerings, beyond mattresses, was not profitable and confusing for consumers.
- In response, Casper is focusing solely on mattresses to streamline operations and allocate resources more efficiently.
- A challenging retail environment, including pandemic-induced supply chain issues, led Casper to record a net loss of nearly $90 million in fiscal 2020.
- Privately owned by Durational Capital Management, Casper aims to cut extraneous costs and maintain a focus on its core product.
- To become profitable, Casper is rethinking its marketing strategies, shifting away from being the "Nike of sleep" and focusing on comfort, support, and breathability in its mattresses.
- The brand is building a team with the right blend of skills and experience to lead it into the future, understanding that the journey from $500 million to a billion is different than zero to $50 million.
- With consumers becoming more cautious, the mattress sector is expected to show signs of inflation before other sectors, and Casper plans to optimize its existing stores to make them profitable, even if it means drastic changes like putting store associates on commission to drive sales.
