Written by When is the last time you bought a mattress? Five years ago? Ten years ago? More?
It’s recommended to replace your mattress every six to eight years. Americans don’t buy mattresses like they do other home goods. Still, the global sleep industry pulls in $425 billion a year. You’d think an edgy mattress startup would thrive.
This is what Casper Sleep hoped for when it launched in 2014. The direct-to-consumer (D2C) brand began selling mattresses in a box delivered to customers’ doorsteps. The novelty and ease of the delivery impressed customers. At first.
Soon though, Casper hit rough waters.
Falling prey to Business 101 Concept
CB Insights told Casper’s story in its D2C Survival Guide where it lays out common mistakes made by new D2C companies like Casper. In Casper’s case, it fell prey to a business 101 concept: figure out how to turn a profit before overspending on marketing.
Considering the fact consumers don’t buy mattresses often, Casper did what many D2C businesses do. It launched an entire line of ancillary products: pillows, sheets, and sleep technology. It attempted to position itself as not just a mattress company but a sleep company.
How General Counsel Services can help
These efforts, however, didn’t get the company to the profit level it needed to be. As CB Insights explains, “The conflation of high customer acquisition costs, steep R&D costs to make better mattresses, and low customer lifetime value — in addition to factors beyond its business model — made Casper bleed cash.”
In addition to these mistakes, Casper met further obstacles:
By 2020, Casper let go of 21% of its staff, and a new CEO and COO were named. It went private in 2021 and sold to Durational Capital Management. Its future is still unknown, though it did recently sell its Canadian operations to Sleep Country.
Not seeing the writing on the wall
It seems Casper’s founding CEO Philip Krim failed to see the writing on the wall. When Casper went public in February 2020, its shares were valued at 50% of what they were a year prior. Krim said he wasn’t worried about it, and the company continued to invest in customer acquisition, and continued to bleed profits.
Casper’s new CEO Emilie Arel said, “We’re not in the business of not making money anymore.” She said Casper will pivot back to focusing on its hallmark product—the mattress—as seen in its latest T.V. ad, shown below:
What we can learn from Casper’s cautionary tale
D2C companies are a working case study for any business owner or entrepreneur. When you cut out the retail middleman, it’s hard for things to go right and very easy for things to go wrong. This is why we’re sharing Casper’s cautionary tale and will be sharing others in the coming weeks. CEOs need to focus on who’s doing what’s right just as much as they need to keep an eye on who’s doing what’s wrong.
As experts in corporate law, we’ve seen companies thrive and we’ve seen them fail. We’ve worked with thriving startups, and we’ve worked in-house for fledgling Fortune 500 companies. We’ve seen brilliant CEOs sink their own companies due to a lack of wisdom and counsel, and we’ve seen unlikely CEOs grow their companies year after year due to smart strategic planning, humility and the ability to delegate to the right people.
Our General Counsel Services provide what every CEO, entrepreneur and business leader needs: perspective. When you launch a new brand, promotion or initiative, it’s easy to get upside-down in the work and not be able to see your way out or not have the perspective needed to know if you’re on the right track. This is why we created our General Counsel Services, so you would have the expert perspective and guidance needed when scaling your company.
Our General Counsel Services provide everything an in-house legal team would at a fraction of the cost, including:
In-house legal teams are expensive and out of reach for many mid-level companies. Hiring a firm is equally pricey and often comes with services you don’t need. Our General Counsel Services meet you in the middle. We do what you need us to do. You work with one, or more, members of our staff, depending on your needs. This tier of service we offer makes sound legal counsel affordable and saves companies from expensive mistakes.
The future of Casper is still unknown, but if its struggling past is any indication of its future, it could end up in the D2C acquisitions graveyard. In hindsight, its mishaps were avoidable. Take a note from Casper’s cautionary tale. Be proactive with where your business is today and where it’s going.
