Why Casper Failed to Dominate the Mattress Market- Can D2C Companies Succeed?

An old conference presentation by Casper’s cofounder sparked my interest in the company.

In this post, I want to discuss lessons for Casper’s success and decline.

The Success:

#1/ Choose your market wisely

Let’s list the problems with the mattress market before Casper was launched:

• Sleeping market: The market hadn’t seen innovation in years. Stores were Brick and Mortar and many hadn’t done renovations in years.

• Confused customers: Every store had plenty of options that were very to compare. Many of the options were basically the same mattress with a different label.

“In an industry where everything was just terrible, the bar could not be lower to do anything cool, unique, or fun,” - Philip Krim, Casper Cofounder

#2/ Obsess over the customer experience

The team made sure to give the customers the best experience possible:

• Limit options: instead of having infinite models, Casper started by creating “one perfect mattress”.

• Guarantee satisfaction: The startup started with a 100-day free return policy allowing customers to try the mattress before fully committing.

• Cut the middleman: By going direct to consumers (D2C), Casper was able to offer lower prices by eliminating the need for retailers.

• “Mattress in a box”: People loved filming the unboxing experience and watching the mattress inflate which helped kick off the brand’s growth!

Within 2 months of launching, Casper hit its 2-year revenue target of $1.8 million!

In 2020, the company filed for IPO.

The Decline:

When Casper filed to go public, the ugly truth was revealed… The company was hemorrhaging money. While the hype helped the company reach millions of customers, it failed to build a sustainable business model.

#3/ Differentiate yourself

Successful brands differentiate themselves through unique aspects.

Nespresso has its patented capsules. Redbull has many sports teams and sponsorships to set it apart. Casper has … nothing. Even the mattress in a box concept was invented by another company.

Only a couple of years after it launched, competitors started popping up.

There are currently over 170 players fighting for a piece of the pie.

And of course, more competitors means more marketing is needed.

#4/ Nail your unit economics

It all boils down to unit economics.

By the time Casper filed to go public, the company was losing over $300 for each mattress sold!

You might think that the entire D2C model doesn’t work, but that’s not true. One of the 170 competitors that launched is called Purple. Unlike Casper which raised over $300 M from investors, Purple only raised $2 M so the team there had no choice but to be profitable from the get-go.

By the time Casper was acquired in 2021, it had lost over 75% of its valuation at its last funding round as a private company!