Normally I would try to talk about something like this merger fairly soon after it happened but I had a something much more important to do, which is to attend the Seena Magowitz Charity Golf Tournament in Boston this week. I will be writing about that next week but just know this, if you’re not attending this event yourself you are missing out on something that is pretty incredible. Congratulations to Roger Magowitz and his entire group for putting on what I think was the very best one yet; more next week.
As you already know by now, Serta Simmons Bedding is merging with Tuft and Needle and that is some pretty big news for our little industry. My phone has been blowing up with people wanting to talk about this so I thought I would share some of those conversations with you. For this one, I also reached out to several large retailers, industry analyst and thought leaders, to get their opinion so here are some of the quotes from that cast of characters.
- “We are thinking about bringing in an e-commerce brand so we will give Tuft and Needle some thought.”
- “If we were to add it to our floor, the brand would need to drive people to us and we don’t think that Tuft and Needle is that kind of brand.”
- “I don’t think that we can sell Tuft and Needle products at the same price they are online and still make the kind of margin we need to make and we would not sell above what they have it for online.”
- “Serta and Simmons aren’t that strong at retail and now that they are going to be more direct to consumer; it’s going to hurt their distribution.”
- “This industry is changing very fast, you just have to find the opportunity in it all.”
- “Just wait until the guys at Tuft and Needle collide with the culture of SSB. That’s not a fit and culture is a bid deal.”
- “The management team at SSB can’t get it right as things stand today, if they merge with Tuft and Needle that makes their business much more complicated so I don’t think they can handle that successfully.”
- “Why are they calling it a merger, why don’t they just call it what it is which is SSB purchasing Tuft and Needle?”
- “This is great for Tuft and Needle and for SSB because they both get something they don’t have.”
- Will you bring in Tuft and Needle now that SSB might be distributing those products? “I don’t think they can meet my margin requirement. I’m pretty greedy.”
I certainly don’t know what will come from this but strategically it could be good for both parties IF they execute. For Tuft and Needle, they could have access to a much larger manufacturing footprint and retail distribution network for their products. They should also be able to buy raw materials at a discounted rate. I have met both Daehee and JT and I am very happy for them as they have always been great to me. This is a HUGE event in their lives so guys…enjoy the hell out of your ride!
On the SSB side of things, they are going to have access to a strong digital marketing team that can bring them forward in the supply chain and give them some help on understanding how to create a more meaningful relationship with their customer. SSB can develop other products that can be shipped in a box to consumers and supplement their business with a strong direct to consumer channel to compete with their largest competitor Tempur-Sealy.
If I were Advent, the private equity owner of SSB, I would seriously consider a hard push to buy Mattress Firm. (Which I’m sure they are.) Why not? They are the largest supplier to Mattress Firm, have a lot to lose in terms of retail distribution if someone else buys it, and now that they have a strong digital approach, they could control the consumer experience with their brand in a very significant way. Sleep Number is doing a pretty good job of that don’t you think? Yes they will lose some other retail placement but that is in the short term and can be mitigated IF SSB CAN DRIVE VALUE in their products with the consumer creating leverage with other retailers.
What do you think? Was this a good move by these companies?