Philip Krim, CEO and cofounder of Casper. Benjamin Lowy for Fortune
How Casper Flipped the Mattress Industry
In any random commute, I hear my favorite podcast host sing the praises of Casper, the online mattress company that would like me to know it is about so much more than boring old beds. I look up, and my subway car is wallpapered with ads featuring Casper’s quirky illustrations of animals and humans sharing beds.
Mindlessly scrolling Instagram, I catch a photo of a woman hugging a fluffy white duvet, captioned, “If you’re not on a Casper mattress, are you even sleeping?” Like! On my walk to the office, I spot Casper logos atop taxicabs and on phone booths. Later, a friend posts a Facebook link about the big August solar eclipse. A few lucky contestants can win a trip to witness the eclipse—the first of its kind in nearly a century—from a luxury tent in Casper, Wyo., courtesy, of course, of Casper.
Once I started noticing Casper, I could not avoid it. Thanks to a mountain of positive press, an estimated $80 million annual marketing budget, savvy social media magic and—oh, right—a product that people seem to really like, America’s urban-dwelling, podcast-listening millennial professionals like me are hyperaware of the company. Put another way: A generation that’s supposedly allergic to advertising is, improbably, all too happy to accept a Facebook friend request from a mattress company.
Casper is the latest and arguably most successful in a class of upstarts turning mundane, unloved consumer products like beds, toothbrushes, suitcases, water bottles, and vitamins into something covetable and cool. These companies have relationships with their customers that go beyond clean, welcoming webpages and cute Instagram posts. They make the shopping experience simple. They go over-the-top on customer service. And most important: They inject aspirations—the promise of some deeply meaningful purpose beyond the product itself—into the run-of-the-mill things we own.
Take Soma, a water-filter company with a mission to “hydrate the world.” Or Bouqs, an online florist founded “with the bold intention of bringing romance and delight back to what was once a noble exchange.” Or Ritual, a multivitamin startup with a mission of transparency (down to its clear pills) and the slogan, “The future of vitamins is clear.” Or, most egregiously, bkr, which markets its water bottles as beauty products. “This luminous beauty essential will motivate you to drink 10x more water, and love it (like it’s cake),” the company’s website states. Price tag for one glass bottle: $35.
It doesn’t really matter that these companies often make their products at the same factories as their uncool competitors, sometimes with barely perceptible improvements over their rivals. They’re selling something totally different. Casper’s beds aren’t just providing a place to sleep. They’re giving customers better sleep, which, the company’s website declares, is “the foundation of a great life.” And who doesn’t want a great life?
Casper “is focused on the benefit, not the feature,” says Mike Duda, founder and managing partner of Bullish, a tech accelerator and investor in Casper. “People want to buy into something better. They’re buying into a set of values.”
The promise of a great life is how Casper sold $200 million worth of mattresses, sheets, pillows, and dog beds last year, its third year in business. It has allowed the more-than-300-person company to raise $240 million in venture funding, valuing it at $750 million. (The company hasn’t said whether it’s profitable.) It earned Casper a name-check among the “risk factors” in analysts’ reports about publicly traded mattress companies like Tempur-Sealy, whose sales were 15 times that of Casper last year. It has spawned more than 100 copycat mattress startups, some of which have aped Casper’s strategies down to the exact wording of its ads. And most recently, Casper’s success enticed Target (tgt, +0.53%) to float a $1 billion buyout offer, which the company quickly declined. “We didn’t get that far with it,” says CEO and cofounder Philip Krim (No. 28 on this year’s 40 Under 40 list). “We’re a three-year-old company, and we think we can be a lot bigger than this.” (Target opted to make an investment instead.)
When it launched in 2014, Casper called itself “the Warby Parker of mattresses,” referencing the popular direct-to-consumer eyeglasses startup. But mattresses are only a $16 billion market in the U.S. The company’s ambitions have grown. Now, Casper aspires to be “the Nike of sleep.” Krim explains that athletic gear wasn’t much of an apparel category until Nike (nke, +0.82%) turned sneakers into the core of a lifestyle. Lululemon (lulu, -0.43%) did the same thing for “athleisure,” now a $78 billion market by some estimates. “We want to create sleep as a category,” Krim says. “That’s a really big opportunity.”
A common résumé feature among successful entrepreneurs is the childhood hustle. Warren Buffett sold packs of gum door-to-door at age 6. Elon Musk sold a video game he built at age 12. Philip Krim, a straitlaced, impassive Texan who took inspiration from his entrepreneur dad, sold sodas on the local golf course. “I was the nerdy kid reading the Wall Street Journal in middle school,” Krim, now 34, says.
In college at the University of Texas, Krim taught himself HTML and built a mini-empire of e-commerce websites for manufacturers to avoid having to get a summer job. His sites spanned everything from sports tickets and online poker software to window blinds and, yes, mattresses.
When Tempur-Pedic (tpx, +1.06%) went public in 2003, Krim couldn’t believe a company of its size wasn’t doing any business online. And a decade later, Krim saw little evolution in the industry. It’s dominated by just two companies (Tempur-Sealy, formed in 2012 when Tempur-Pedic bought Sealy, one of its biggest rivals, and Serta Simmons Holdings), it boasts margins as high as 50%, and the buying process, where commission-based salespeople use confusing jargon and novelties like “cooling gel beads” to pressure shoppers to spend an arm and a leg, can be unpleasant. “In an industry where everything was just terrible, the bar could not be lower to do anything cool, unique, or fun,” Krim says.
Alongside Jeff Chapin, who had worked with big mattress brands at design firm Ideo, and three other cofounders, Krim cooked up a plan: He’d cut out the overhead of stores and salespeople by selling memory foam mattresses in a box, directly over the web. On April 22, 2014, they pushed Casper.com live, expecting to sell one or two beds. Maybe a handful in the first week. They’d lined up some press, but Krim, who is so levelheaded his cofounders have called him “Krim-bot,” wasn’t even sure if the reporters, investors, and family members they’d invited to their office in New York’s SoHo neighborhood for the launch would actually show up.
As guests trickled in and took turns flopping onto a mattress set up in the Casper loft’s back room, the company’s tiny staff remained glued to a computer screen showing site activity. People were buying mattresses. Sight unseen. Online. From them. “We were shocked that people woke up, read an article, and said, ‘Ah, fuck it, I’ll buy a bed,’ ” Krim says, a hint of surprise in his voice three years later. “Sure as shit, it was like, order, order, order, order.” And so on, until Casper sold 40 beds—its entire inventory for the first six weeks—in a single day.
To thank its early customers, the team inserted leather-bound vintage books from Strand Book Store into each box. They spent every waking moment live-chatting, emailing, and talking on the phone with customers. The company’s website even had a button that said, “Chat with a founder.” When the wait for a bed stretched past a month, they bought Aerobeds on Amazon and sent them to customers while they waited.
That extra care, along with the novelty of Casper’s delivery method (a queen-size mattress smushed into a box the size of a mini-fridge), earned the company outsize positive buzz. Today’s consumers have sky-high expectations for service, and little tolerance for inconveniences like being put on hold. Casper’s customer service representatives are encouraged to send baby gifts to customers who mention they’re expecting, or to pay to ship beds overnight if an order gets lost in the mail. Casper and its direct-to-consumer peers “solve user problems in a completely effortless way,” says Aaron Shapiro, CEO of Huge, a digital agency. “That’s rapidly becoming how business is done in the modern economy.”
Casper’s team pairs that responsiveness with an obsession with improving their product. That first winter, customers told Casper their beds felt firmer than they had before, which led the company to discover that a hydrogen-bonding issue in the bed’s Visco memory foam caused it to harden in colder weather. To fix it, they created a custom foam. Now, with a team of 35 engineers, industrial designers, ethnographers, and a contracted polymer chemist working at “Casper Labs” in San Francisco, the company is on its 14th iteration of the bed. “If there is one thing that makes it into the product for the customer, there are 50 things they do that don’t and 1,000 iterations they obsess over,” says Tony Florence, a Casper board member and general partner at venture firm New Enterprise Associates.
Eighteen months ago, Casper was planning to expand into Germany, where people prefer firmer mattresses. That forced the company to learn more about the ergonomics of its mattress’s foam construction. The team wound up developing a five-layer bed design that featured a new kind of foam, and uses “channel cutting” to vary the firmness in different zones of the bed. Testing showed customers loved it, but the materials were too expensive to use at Casper’s current price point ($950 for a queen). On Aug. 15, Casper unveiled the Casper Wave, its first premium bed, featuring the new materials and construction. A queen costs $1,850. It’s a big departure from the company’s message of “one perfect mattress,” says Chapin, the head of product, but “we just wanted to put some of this more advanced thinking out into the market.”
That market has woken up to Casper. At first, big mattress companies dismissed the “bed-in-a-box” trend as a niche phenomenon, hardly worth acknowledging; but that was before the startups grabbed 9% of U.S. market share. In August 2016, Sealy launched Cocoon by Sealy, a bed-in-a-box brand boasting minimalist fonts, an uncluttered scrolling webpage, and a price point half that of Casper’s. “It’s been a delayed reaction, but now they all have bed-in-a-box products,” says Seth Basham, senior vice president of equity research at Wedbush Securities. As for Casper, Basham adds: “They’ve already got a foothold. Now it’s a matter of how big they’ll grow.”
On Labor Day 2015, the heat was so cruel that before I even boarded the 105-foot sailboat moored in New York’s harbor, a mix of sweat and sunscreen was dripping into my eyes. But the scalding sun didn’t spoil the mood on the Good Ship Casper, where a bevy of young Casper mattress owners sipped rosé, bounced around on a mattress, dabbed at their faces with Casper-branded handkerchiefs, and Instagrammed their heads off as we glided around the Statue of Liberty. Casper had invited the bed buyers on a boat ride—some pun about a Labor Day Mattress “Sail”—and hey, why not? It sounded cool! It was cool!
I told myself that I’d write about this moment if the current tech bubble ever came violently crashing down. A mattress company was burning investor money on pun-themed boat parties for people who had already bought a mattress from the company (meaning they weren’t likely to be repeat customers for several years). But Casper followed the Mattress “Sail” with the Insomnibot-3000, a chatbot it built to entertain people who can’t sleep. And the Late Night Snap Hacks, a tool for posting videos from dance clubs, concerts, dinner parties, and taxi rides to “trick your friends into thinking you’re out getting turnt. From bed.” And the napmobile, a semitrailer outfitted with four bed pods resembling hipster cruise cabins, which took a 120-day road trip to 36 cities last fall.
All the while, Casper’s sales kept growing, making what had seemed like excess look savvy. “We love leaning into the crazy stuff,” Krim says. “It’s how we built a brand.” The company doesn’t worry about whether stunts convert people into customers. It’s more about keeping the brand top-of-mind, even for people who already have a Casper mattress. “If one person we take on this boat tells a dozen of their friends about it, that’s an amazing [return on investment],” Krim says.
And remember, Casper is not selling a rectangular pile of memory foam, but the dream of a better life. The brand appeals to people because of how simple, aspirational, and, ugh, “authentic” the company seems. In the Instagram era, everything we do, eat, and own is designed to be cropped, filtered, and hashtagged into a neat little tribute to Our Just-Perfect-Enough-to-Be-Believable Lives. Consumers want better, more beautifully designed things, and they want those things to make them better, more perfect humans. So they buy ethically sourced T-shirts from Everlane and vitamins made with better “nutrient forms” from Ritual. And even if a customer doesn’t buy into the mission, she can use it to justify the splurge.
Casper’s trippy animated TV ads, its Labor Day Sails, and its striking blue-and-white packaging hit every note: a sleek, well-designed product that gives you better sleep, which gives you a better life, but not such a good life that you can’t laugh at yourself when the company tweets, “You’re following a mattress on Twitter. 2017, man.” Perfect, but not too perfect! Authentically perfect.
Ben Lerer, a managing partner at the first firm that invested in Casper, Lerer Hippeau Ventures, was initially hesitant about the team’s ability to build a strong brand. (Consider the fact that the company’s original name was Duke’s.) But Casper’s modern simplicity, in a category full of traditional, loud, garish marketing based on discounts and novelty, has become a “magnet” that other brands want to be associated with, and that people want to buy into, Lerer says.
Still, Krim says brand recognition remains Casper’s biggest obstacle. New York City’s millennials might be hyperaware of Casper, but its market share is just over 1% nationwide. My Midwestern mother was unenthused the first time I suggested she check out the mattress-in-a-box startups. “I’ll just call 1-800-Mattress,” she said. “They come and set it all up for you.” But that could change. With its latest retail partnership, Casper is taking aim at the skeptics.
In mid-June, 1,000 Target stores began selling Casper’s $55 coated fiber pillows. The retailer sold “thousands and thousands” in the first week, according to Krim, far exceeding expectations. But the pillows are just one piece of a new partnership: Target is also featuring Casper’s sheets, bed protectors, and exclusive lounger support pillow in its back-to-college promotions. It will incorporate the products into its baby and kids displays, home displays, and health initiatives. Target is selling Casper’s dream, live in bricks and mortar, to 30 million visitors a week. “Our guests now have everything they need in one convenient place to get a better night’s sleep,” Target CEO Brian Cornell tells Fortune, saying he admires Casper’s “vision for the sleep ecosystem.”
Krim and his team are now plotting what role Casper could play throughout the home. That includes products that elevate the quality of sleep, possibly through temperature or sound controls, and others that could address the emotional side of sleep, like products that ease the anxieties that keep people up at night. Eventually, they hope to expand beyond the bedroom. “We want Casper to be one of those handful of brands that people are proud to showcase in their home,” Krim says.
Unlike many well-funded startups, whose offices boast well-manicured plant walls and meticulously curated stacks of knickknacks and books, Casper’s office, while stylish, is, well, a little bit messy. Many of the plants are dead or dying. A naked mattress leans against one wall in a corner filled with various out-of-use promotional display items. Inspiration boards burst with Post-it notes bearing phrases like “hug a pillow,” “pillow fort,” “body envelope,” and “body bed.” A large bookshelf sits empty, save for a lonely handful of titles. Not exactly Insta-worthy.
I point to a copy of The Interpretation of Dreams, Freud’s treatise on dreaming and wish fulfillment, and joke that it’s the only book Casper needs. Ever the business nerd, Krim can’t resist calling out the more important book below it. “That,” he says, “and Value-Added Selling.”
A version of this article appears in the Sept. 1, 2017 issue of Fortune with the headline “Dream Weaver.”
http://fortune.com/2017/08/23/casper-mattress-philip-krim/
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