Next up in our mattress executive interview series we’re chatting with the co-founder of Nectar, Craig Schmeizer, about the company’s meteoric rise and how they’ve handled the growth, additional brands they’ve developed and where they’re headed next. We were able to get exclusive photography from the Nectar factory so those are included throughout the interview.
When you finish reading, enter to win both a Nectar mattress – giveaway ends on Black Friday AND a Dreamcloud mattress – giveaway ends on Cyber Monday – in the size of your choice! Both are staff favorites in their respective categories and a terrific value.
Having worked in the financial services sector for your entire career, starting an online mattress brand seems to be a surprising career choice. How did you and your co-founders make the leap to developing a mattress?
My experience was around very crowded consumer markets and even the financial service products were all consumer products in highly competitive spaces. We looked at the mattress category and we saw another large scale space, a commodity category (everybody sleeps) and an opportunity to bring in some of the toolset advantages that we employed in financial services to this category. By bringing these, we thought we could scale powerfully and quickly.
When Nectar launched early last year, the online mattress space was already quite crowded. Looking back, how were you able to set yourselves apart and become one of the top brands in such a short period of time?
We recognized that the space was crowded with over 100 entrants but only 5 native digital brands had generated scale. Since those 5 which are 4-5 years old had developed scale in their business, no other entrants in the category had been able to achieve meaningful scale and I define scale as $100,000,000 or more. We developed a strategy that we thought could move us into that top tier group rapidly by offering a higher value product with a stronger feature and consumer benefits that we could distribute across our digital performance capabilities. A year later, we are fortunate that our strategy had worked. Clearly there are very few barriers to entry into our market but there are considerable barriers to scale.
The Nectar mattress found traction in the space seemingly out of the gate, but also found itself in a tough situation of not being able to fill orders in a timely manner. Walk us through the emotions the team was going through when it was difficult for supply to meet the demand?
This was a champagne problem. We were lucky to see terrific consumer interest in a higher quality offering sold at an advantage price but yes we did not reinforce our supply chain for the massive demand that we encountered. It was daunting but we worked very, very hard to scale up both our production and our customer service to get ahead of the backorder that formed early in the company’s lifecycle.
Since those early customer service struggles, there seems to be a huge emphasis on building out the customer service team at Nectar. What did you learn from that launch experience and what steps have been made to ensure your customers receive their mattress as soon as possible?
We ship every mattress within 2 days of order. Being able to achieve that was a defining priority for the business when we realized how important and valuable that service standard would be. In order to make sure we also had a world-class service level in our chat, telephone and email, we overstaffed and we did so deliberately. In fact, increasing to service staffing level that we think are unmatched in the space. Maintaining that extra capacity allows us to always be able to now respond to consumers quickly and decisively.
Most online mattress brands construct their beds in the United States, while Nectar has chosen to fabricate the mattress in China. Take us through this decision, and the difficulties of keeping inventory in check from halfway around the world?
Interestingly, we originally chose to manufacture in China because we felt that production capabilities were of equal quality to anything else we saw domestically but we were able to bring our customers a better product at a better price and we felt they would value that. Many top brands are manufactured in China; Apple manufacturers in China. Overtime we diversified our production. Manufacturing in the UK for instance for our UK business and now manufacturing in the United States for our US business. Our goal is always the same, to find the highest quality, the most consistent production environments that can meet the standards of Nectar. Nectar is unique in that in incorporates handwork on the top layer quilting. Diversifying out of China has given us the ability to react more quickly to surges in demand. We’ve been insulated from the China’s anti-dumping issues and noise in the marketplace because we now no longer are actually producing in China factories although we work with other Asian factories that we find meet the required standards.
Has it been difficult for your team to manage the factory from such a long distance, and how often is someone from your team visiting to be sure everything is going smoothly?
Our supply chain maintains people on the ground in the factories that we operate regardless of where those are based so we always have line of sight on quality control. Working overseas means more focus on forecasting and logistics management but we still think our approach to sourcing provides the best product at the best price to consumers.
The price point of a queen sized Nectar is at $824, while most of the foam counterparts in the space are in the $950-$1,000 range. During some promotions, the consumer can receive an additional $125 off the Nectar and also receive two free pillows. How have you been able to produce a a competing mattress to those $1,000 offerings at such a deep discount?
That’s a good question. We made a conscious choice with Nectar to forego pulling in the kind of profits our competitors might. What we wanted was a product that more people would like and recommend to a friend. So we put the highest quality material handwork and our unique 1 year trial period and forever warranty at a better price. That formula was successful and many many customers started buying Nectar and recommending Nectar to their friends. Today, while we still choose to make less profit on a Nectar we are certain we are delivering the best value in the marketplace and the volume of sales more than offsets the sacrifice.
Not only is the Nectar mattress offered a compelling price point, but also features a 365 night sleep trial while the industry average is around 100 nights. How was the decision made to allow your customers to test the mattress for an entire year before deciding if it is right for them?
When we surveyed the marketplace, we realized that the trial period was very important to consumers. We understood that they valued the 100 day free trial which was a standard in the industry. We felt if we could offer 100 days, why not see if we could offer a full year and let people test the mattress through all 4 seasons. We understood that those that wouldn’t like the mattress early on would let us know quickly and we would see returns early. People might feel with a longer trial period they didn’t have to be rushed to get accustomed to a new mattress particularly if they are making a switch from a spring mattress to a memory foam bed like Nectar.
Many people refer to online mattresses as ‘bed-in-a-box’, but the Nectar mattress actually ships in a bag. There is no question that boxes can be beaten up while shipping a heavy mattress, but are there any other benefits for shipping the nectar in a bag?
We sell Nectar mattress in a bag and in some instances, like retail, in a box and there are advantages to each. The mattress quality in both cases is equivalent and exceptional but you are right, it’s very important to work on the durability of packaging. The bagged mattress can be a little more difficult for delivery but are less subject to scuffs or wear during shipping.
The team behind Nectar formed a stand alone brand with DreamCloud, a hybrid mattress, in November of last year. Have you seen the same growth trajectory with Dreamcloud as you saw with Nectar from the outset?
We actually saw strong initial growth because we understood what worked and had the experience with Nectar. Dreamcloud in just 8 months has grown to be the 7th or 6th largest brand in the space at this time delivering $100,000,000 of sales pace in just that short time.
The product expansion didn’t stop with DreamCloud either with the acquisition of Level Sleep in July. What was it about Level Sleep that intrigued the team enough to make them part of your holdings group?
Level Sleep is truly unique. Level invested significantly in product development and then in conducting sleep survey studies with Stanford university and others to demonstrate that people sleep on a better and healthier way on their mattress. We thought that was very unique. Level had also earned the support of chiropractors and developed a network of hundreds of chiropractors that were recommending level to their patients. We thought that was a noteworthy differentiator from other brands. We thought that brining level into the family of brands would help equip us with the health oriented offering that would resonate well with people with back pain that are looking for a super premium health and wellness mattress.
Many sleep companies sell different branded mattress at one website, while you spread each mattress out to individual websites. Do you see a scenario where you would bring Nectar, DreamCloud and Level Sleep under the same roof (website)? Do you see an advantage with keeping the brands separate?
We believe there are different types of consumers for different kinds of brands and products. Nectar, a premium memory foam product is different from DreamCloud, an ultra luxurious hybrid spring and foam mattress with a Euro top and quite different from Level in the health and wellness category. Rather than confuse the consumer, we think it’s important that each brand stand alone and describe their unique attributes and value to the different audiences that are interested in each brand.
There is no question that Nectar has excelled with their online marketing efforts, and getting in front of the consumer who is mattress shopping. What do you feel has been the catalyst to have you not only compete with, but begin to surpass some of the brands from a marketing standpoint that have been in the space for nearly five years now?
Our team came from industries where data and analytics were used aggressively to power marketing and we brought those tools early on into our performance marketing approach. We feel like our ability to identify consumers who are purchasing and then promote the right product to them surpasses the tools and abilities of many of our competitors. We feel that this is one of the reasons in addition to stronger value that consumers have helped the business grow so fast.
As the online mattress industry continues to grow, it is seemingly becoming much more cut throat with negative paid ads saying things like ‘Don’t by XXXX mattress’. It doesn’t seem that Nectar is participating in these negative campaigns, and am interested in your thoughts on the practice.
We like to focus on sharing the best of Nectar and on running our business in a high quality way. We don’t think that taking jabs at competitors is constructive and we choose to not to employ that practice while some others might.
With the growth of the company to where it is today, launching only 18 months ago, how have you been able to been able to hire strong people so quickly to fill necessary roles, and how big is the team today?
Nectar business today is approaching almost 200 people spread across 5 continents. We hire the best talent we can find wherever it might be. That’s been defining for the business because when you hire and bring on the best they create the best business and offerings for the consumers. The business, even as it continues to grow also maintains a culture that is unique. Everybody is aligned to the customer at every level and are awarded based on customer satisfaction. We think that is very important.
Sticking with growth, there are plenty of other markets in this world that are interested in mattresses. The Nectar mattress became available in the United Kingdom only a couple of months ago. How is that coming along, and are there considerations being made to expand beyond the UK?
The UK has been a terrific launch and already the nectar business there is growing at a phenomenal rate. We additionally identified a number of international markets to expand into in 2019. We’ve already begun hiring teams in Japan, Italy, France, Spain, Germany and other countries. We believe that international expansion is absolutely key to bringing our high value brand to consumers worldwide.
Things have obviously moved very quickly with the growth of Nectar. With two additional brands on board as well as the expansion to the UK, has it been difficult to juggle new initiatives, while still focusing on the core aspects of the business?
Fortunately, we’ve been able to hire and bring on some of the best talent in both product marketing and ecommerce, supply operation and customer service. Thanks to the talent of the team, we’ve been able to maintain a terrific pace of growth and expansion. Even now, we’re moving to launch 2 more brands serving 2 more customer groups and we’ll have those up within the end of the year. We’ve begun launching furniture brands in order to bring the same value mindset to a whole new category and to our customers.
What questions should a Tuck reader ask themselves when trying to decide between a Nectar, Dreamcloud or Level Sleep mattress?
I think that each brand serves a different kind of sleeper. People tend to prefer memory foam or luxury spring and foam hybrids or therapeutic mattresses. The biggest question for consumers is, what kind of sleeper and what kind of sleeping experience do you prefer.
Without question, product growth and expansion has been key for the first two years of Nectar. Any insight as to where you plan to take the business next?
We like mattresses but our consumers are buying mattresses are also going through life changes and are interested in buying other products that are for the home. We want to make the home the most comfortable place a person can return to and we’re working right now to bring products in other furnishing categories to address their needs for when they are ready to buy.
The online sector has taken a big bite out of brick and mortar stores in recent years, with no bigger evidence than the news about Mattress Firm filing for bankruptcy. Where do you see the online mattress landscape five years from now?
Increasing the lines between online and offline will be blurred. Right now, online is being led by companies that are specialized and have unique tools to market online and to operate online. Retail businesses will increasingly incorporate those skills. At the same time, online brands will increasingly evolve to be able to serve customers wherever they prefer to purchase online or in store. Our retail efforts have been progressing here in order to allow customers that may find us online to buy offline. Or those that find us offline to buy online.