The Cost Of Free: Casper Pays A Price For Generous Mattress Returns
AUDIE CORNISH, HOST:
Economists say there's no free lunch. So when a company says sleep on our mattress for a few months and return it for free, that actually costs money. How much money? Well, that's the question now that online mattress seller Casper has filed to go public. NPR's Alina Selyukh reports.
ALINA SELYUKH, BYLINE: Casper was not the first company to sell mattresses on the Internet, and it wasn't the first to squash those giant things into a box to ship more cheaply. Casper's success story was about changing how people think about shopping for a mattress. Here's Jaimee Minney from market research firm Rakuten Intelligence.
JAIMEE MINNEY: When Casper first came out, the idea of getting a box that contains a bed delivered to your home just seemed like a crazy idea.
SELYUKH: And Casper made this crazy idea a new normal. There are now almost 200 online mattress brands. Casper made mattress shopping seems simple and even cool. Note - Casper is one of NPR's financial supporters. Here's co-founder Neil Parikh on CNBC's "Make It" last year.
(SOUNDBITE OF TV SHOW, "MAKE IT")
NEIL PARIKH: Long term, to become the Nike of sleep requires us to change the way everyone thinks about the whole category.
SELYUKH: Becoming the Nike of sleep is massive branding work. Marketing is how you stand out in the business of selling basically different combinations of foam and springs. And Casper founders spend hundreds of millions of dollars on marketing. They drew celebrity investors like rapper Nas and actor Leonardo DiCaprio. They made quirky ads, meditation audio streams.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON #1: Welcome to the Casper Sleep Channel.
SELYUKH: They even built the so-called Dreamery in New York, a space selling 45-minute naps for 25 bucks, a magnet for YouTubers and Instagrammers (ph), free social promotion. But the biggest disruption of them all...
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON #2: Try Casper in your home for 100 nights risk-free.
SELYUKH: ...Was the promise of a free trial. Few mattress companies did free returns before Casper. But how else do you convince someone to buy this thing you'll sleep on for years sight unseen?
MICHAEL MAGNUSON: They came up with an innovation that said we're going to eat the cost entirely.
SELYUKH: That's Michael Magnuson, founder of mattress recommendation website goodbed.com. He has tested over a hundred mattresses. And more to the point here, he's done detailed analysis of what it costs to sell a mattress. Casper was long suspected to be unprofitable - in deciding to go public, it had to disclose just how much. In 2018, it lost more than $92 million. And one huge cost was refunds, discounts and returns - almost $81 million worth.
MAGNUSON: My educated guess is the Casper's return rate would put it somewhere in the 12% to 14% rate.
SELYUKH: As in roughly 1 out of 8 Casper mattresses might be sent back. That's pretty average for an online purchase, with one major difference.
MAGNUSON: Unlike those shoes that you send back, this mattress that you're not going to keep will never be resold.
SELYUKH: You can't sell a used mattress as if it's new. And sanitizing, refurbishing and reselling a used mattress has so many rules and costs that most companies, including Casper, try to donate returned mattresses to the Salvation Army or maybe a homeless shelter.
MAGNUSON: Given all the mattresses that are being sold online, the donation ecosystem is feeling pretty full, I think, at the moment.
SELYUKH: Magnuson says, in some states, it's actually illegal to donate used mattresses, so many of them just get thrown away. He says he's been concerned lately as more and more people write to him.
MAGNUSON: I've tried these three mattresses, for example, and none of them have worked. That could literally mean that, essentially, four mattresses got made, three of which theoretically could have ended up in a landfill just to get that one household mattress that they want.
SELYUKH: And Casper is likely to continue facing the question of whether this problem keeps its executives up at night.
Alina Selyukh, NPR News.
Copyright © 2020 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.