consumer-tech

The explosion of companies selling mattresses and other big-ticket items online is based on a clear gamble: You’re not going to want to have to return that giant thing, even if it’s free to do so.

It’s a bet that these companies are winning, even when items are returned.

“Some of our biggest promoters are actually people who’ve already returned their mattress,”  said  Aaron Bata, head of customer experience at Phoenix mattress startup Tuft & Needle. “Those are some of the people we find who are recommending us to their friends and family more than those who keep the mattress because they’ve gone through the returns process and they know how easy it is.”

Tuft & Needle is just one of a bevy of startups that have emerged in the past couple years to sell mattresses online. Any person who has listened to a podcast has probably heard the pitch: Ditch that nightmare “mattress showroom experience” and get your next bed stuffed in a mind-bogglingly small box in the mail. 

The scale-tipping selling point? A months-long no-cost and ostensibly hassle-free trial period meant to put to rest any doubts you might have about sinking around $1,000 into something you’ve never even seen. If you don’t like it, the company takes it back and refunds all your money.

“‘Hey, try this mattress for four months.’ What a weird company!”

“Leesa gives you 100 nights to try your mattress for free. That is insane—that’s a third of a year” Comedy Bang Bang host Scott Aukerman says in one representative ad. “‘Hey, try this mattress for four months.’ What a weird company!”

That formula has allowed these bed-in-a-box startups to upend the traditional mattress industry, in which return and exchange fees of more than a hundred dollars were commonplace. Casper, Leesa, and at least half a dozen other companies are now operating with this model and it’s spread to similarly unwieldy items you might not otherwise think to buy online like sofas (Burrow and Joybird), bed frames (Pons), and flatpack furniture (Greycork).

But there’s a flip side to the promise at the heart of this new vision of home shopping: Returns are an expensive drag on bottom lines. There’s a reason that showrooms have always charged an exorbitant fee; they provide a buffer against hefty losses. 

Returns are an inventory-wasting headache for any e-commerce business—they tend to be by far the biggest fulfillment cost on retail balance sheets—and especially intensive for those selling big-ticket items like sofas and beds that oftentimes can’t be resold, according to Forrester retail analyst Ananda Chakravarty 

The new breed of online furniture retailers have to rely on the assumption that the overwhelming majority of customers won’t follow through with their return.

So far, they claim that’s working out.

“Returns are obviously a cost, but that’s something that has to be built in,”  Bata said. “We think it’s going to be perfect for so many people—for the vast majority of people out there… But it’s not going to be perfect for everybody.”

Image: casper

But their marketing has to balance the confidence that people will like their product with reassurance that the refund will be easy and painless if they don’t.

“We don’t want to make people jump through a bunch of hoops,” he said. “It’s one of the most important parts of our relationship with our customers is being able to have that trust.” 

Even so, perhaps an unspoken factor in the online furniture space’s success is that, however stellar the customer service, there will probably always be a few who see it as too much of a bother. In those cases, customers might opt to make do with a so-so product. 

“People are reluctant to send back their mattresses because it’s a hassle.”   

“Furniture probably has a lower return rate in general—people are reluctant to send back their mattresses because it’s a hassle,” Chakravarty said.

Of all the human characteristics to build a business around, laziness might be among the more consistent. Around three in five millennials admitted in a recent survey that they’ve kept items they disliked simply because they didn’t want to go through the trouble of returning them — around 18 percent more than shoppers over 30. That’s probably because nearly half of them say the returns they have made have been bad experiences, the report found.

“Retailers who want to remain competitive will find ways to reduce friction in the returns process, whether that’s communicating more updates, providing more transparency, or offering free return shipping,” said Sucharita Mulpuru, a retail industry analyst who worked on the study.

Many retailers do just the opposite. Walmart-owned Jet.com tries to dissuade returns by offering customers a discount if they forfeit the right to send an item back upfront. Other stores discourage them with restocking, shipping, and processing fees.

Old-school mattress sellers are one of the worst offenders. The Wall Street Journal reported in 2004 that most local and regional retailers barred returns altogether, and national chains made them frustrating and arduous with missed appointments, long waits, and fees of up to nearly $250.  

Casper changed that. The startup took advantage of the blatantly consumer-hostile practice by touting an unprecedentedly returns-friendly model that doesn’t cost customers a dime.

“They pioneered the 100-day trial/return free that others in the category have tried to adopt,” said Michael Duda, a managing partner at venture firm Bullish Inc. who’s invested in Casper.

A Casper spokesperson declined to reveal any specific returns data beyond a claim that its rate is in the “low single digits.” But the co-founders have discussed in previous interviews how they keep the cost down.

In the case of a return, Casper arranges for a local church or charity like the Salvation Army to come to the customer’s home and take the product for donation. The loss is actually cheaper than shipping the mattress across the country and washing it for resale, the company’s chief creative officer told Inc. last year. Casper also gets a tax write-off out of the deal.

Image: casper

For some customers, those steps played out seamlessly and conveniently.

“It was super easy and they were very helpful,” said Amy Luo of San Francisco. “They asked why I was returning it, but other than that, they didn’t pressure me to keep it or anything, which was really nice.”

But other mattress buyers found the company decidedly less enthusiastic. John Geletka of Chicago said it took him “a few attempts by their third-party donation service and some complaining on Twitter” before he was able to lock down an appointment.

“It’s an awkward and messy experience,” he said of the grunt work of getting the mattress in and out of his home. “I think a lot of people would deal with a Casper because it’s not terrible for sleeping on in the center.”

Another customer claimed on Yelp that Casper wouldn’t send a mattress topper for free after the deadline because a representative said that was “only used to dissuade folks from returning it.” (For the record, the offer mentioned isn’t Casper’s current official policy). Someone else called the process “a big hassle.”

Then there were a few people who seem to have more or less resigned themselves to the mattress.

“It is now an enormous, gigantic, expensive paperweight,” said one customer who missed the deadline.

“It is now an enormous, gigantic, expensive paperweight”

In Casper’s defense, the number of testimonies claiming customer service was helpful and easy outweighed complaints like that. A Casper employee also responded to many of the negative reviews.

Bata claims Tuft & Needle has a return rate of around 5 percent, and its three physical galleries where customers can try mattresses out before having them shipped to their door all boast average reviews of 4.5 stars or higher on Yelp.

He said some of the incentive to discourage returns in the name of lower overhead is at least partially offset by the word-of-mouth marketing the company can earn from people who tried the product and decided it just wasn’t a good personal fit. 

Even so, at least a few Yelp reviewers of the company claimed their returns didn’t go as advertised and the company wasn’t forthcoming in trying to coordinate a pick-up. But there were indeed rave reviews from people who ended up sending theirs back.

“This review is about how Tuft and Needle is blazing a trail to retail utopia,” one particularly enthusiastic refund recipient wrote. “They have managed to take virtually all of the risk out of a very difficult and confusing and expensive purchase.”

That reviewer probably meant that risk if gone for consumers, but it’s businesses that have figured out a way to make sure people aren’t returning stuff—but getting it in their homes before they can think twice. And it’s turning out to be a lucrative strategy.

Read more: http://mashable.com/2017/08/31/mattress-returns-gamble/