Invasion of the Direct Sellers

Posted by Dallas Market Center on September 10, 2019

Casper 1When the first wave of direct-to-consumer sellers like Warby Parker in eye wear, Casper in mattresses and Bonobos in fashion came along, they had a very simple – and contrarian – business model: no stores, only selling online straight to consumers.

Very quickly they discovered that both the cost of customer acquisition – largely through increasingly expensive social media advertising (up by 50 percent over just the past year according to one study) – and the limited number of shoppers who would only buy online meant they had to do something else. That turned out to be forging their own brick-and-mortar stores, and today, companies like Warby Parker say they get the majority of their sales through their approximately 100 physical stores rather than e-commerce.

Other direct-to-consumer sellers started moving in the same direction, and in the home space, Casper is believed to have the largest physical presence with about 35 stores. The company has said that it eventually expects to have as many as 200.

A new study from commercial real estate company JLL estimates that direct-to-consumer brands will open 850 stores over the next five years.

Casper went beyond just its own stores, though, first selling its mattresses in West Elm and then moving over to Target, being one of the first direct-to-consumer sellers to have third-party distribution.

Now it, along with others, is upping the game again and it will impact the entire home furnishings segment, including lighting and home décor. Along with a competitor that started in mattresses with its Nectar brand but has since expanded into a broad range of home products under the Resident umbrella, it is opening up distribution to the entire home retailing sector.

Resident, in fact, says it now has products in over 1,000 traditional furniture and home stores, selling not just mattresses but upholstered good and decorative accessories.

Goldman Sachs estimates there are now 175 different companies selling mattresses online, so clearly the race is on for them to differentiate themselves – and broad retail distribution seems to be the tactic of choice for some.

Casper, which introduced its first lighting product – a smart table lamp – earlier this year is acting a little cagier on its wholesale strategy, but the company also seems to be going for broader retail distribution.

They are not alone. In August, home textiles company Boll & Branch reported it had received $100 million in new financing from a venture capital investor and said it planned to use the money to both expand its product offerings and selling channels. Right now it only one has one store in an upscale suburban New Jersey shopping mall, but after this announcement one has to assume there’s a lot more physical retailing to come.

Will other direct sellers move into wholesale distribution? Based on the lemming pattern we’ve seen so far from this group, you shouldn’t be surprised if many more do.

Topics: Lighting, LightSource