Amid ‘retail apocalypse’, this once online-only startup sees hope in stores

I’m lying on a mattress in an adult-sized treehouse on Union Street in San Francisco.

It’s mid-October, and I’m inside the newly opened store of mattress-making startup Casper, wriggling around, trying to assess the quality of the foam bed beneath me. Beyond the faint soundtrack of fake birds chirping, I am listening to Andrew Bradley, a Casper store associate, who is telling me more about the mattress beneath me than I know about possibly any product I currently own.

“The top layer is the latex layer,” he explains. “That’s built in for weight distribution and compression. Underneath that, we have a viscoelastic polyurethane foam and then you have a memory foam layer. Those layers are for sinkability, pressure relief and things of that nature,” he explains. “I’m a sleep geek. I’m more focused on this stuff than saying, ‘Hey, just jump in the bed and try it out.’”

Before this year, Casper did a majority of its business online. Now, the fast-growing retailer is opening physical stores, bringing its well-honed customer-experience instincts into urban shopping districts. Even though the retail industry at large faces the most layoffs and stores closures since the depths of the Great Recession, newcomers like Casper are roaring ahead by grafting a tech-first approach into traditional brick-and-mortar retail. 

“I don’t think retail is dead, I think crappy retail is dead,” Casper co-founder and COO Neil Parikh told me later on in an interview at the startup’s office in New York City. “It is an amazing time to be a customer these days. There is so much competition across the entire retail footprint, everyone is forced to step up their game.”

Following the path blazed by Amazon and then widening by retail startup peers like Warby Parker, Birchbox and Harry’s, Casper is opening 15 pop-up stores in cities such as New York, Los Angeles and Chicago. Casper also is adding 150 store employees to its current 300-some headcount. After several years of selling mattresses exclusively online — earning $300 million in revenue and raising nearly $240 million in funding in the process — the upstart is moving at top speed back into brick-and-mortar retail. Ranked No. 48 on LinkedIn’s Top Companies | Startup Edition List, Casper grew its U.S.-based headcount 32% since August. According to its leaders, it's just getting started.

‘Not a mattress company’

Casper was founded in 2013 on a simple premise: Everyone in the world needs a mattress, but it is frustrating and confusing to buy a new one. A $7 billion industry run by a small cohort of consolidated retailers and bed makers, mattress selling was ripe for reinvention. Mostly twenty-something co-founders Parikh, CEO Philip Krim, CTO Gabe Flatemen, Product Lead Jeff Chapin and Creative Head Luke Sherwin took on the challenge. In the process, they used tech to make foam mattresses more comfortable and affordable. Casper now has dozens of competitors —including Leesa and Tuft & Needle — going after the same market.

“I think it's flattering that there are so many copycats,” Parikh said. “There are also 20,000 shoe companies, but there's one Nike and one Adidas. Hopefully there'll only be one [of us] that figures out how to not only deliver on the product, but also that emotional connection that gets you to think a different way.”

For San Francisco retail associate Bradley, persuasion starts with a momentary glance at my engagement ring. Soon afterward, he tells me how great the mattress is for wives whose husbands get up in the middle of the night. The foam is constructed so movement on one side of the bed is nearly undetectable on the other side, he explains. Invite your fiance so the two of you can test it out, he suggests. With my head still spinning trying to figure out what viscoelastic foam even means, I’m tempted to call my partner and take Bradley up on his offer.

Instead, I head for the exit, but before I can go, Bradley invites me to a housewarming party — yes, a housewarming party — that Casper is hosting later that day with free food, cocktails and a DJ. “Bring your husband! It will be fun,” another associate says cheerily from the back of the store. As I leave, my overarching feeling is that Bradley is not a salesman, but my friend. A friend who wants to sell me not just a queen-sized mattress for as much as $1,850, but a friend who really wants me to get a good night’s sleep.

“We’re not a mattress company, we’re a tech company,” Bradley said several times during my visit. “A lot of these other companies just create memory foam and stick them into a mattress. They are just trying to sell you a mattress.”

Much of my in-store experience, COO Parikh later explains, was inspired by 40 hours of training that store associates must complete before setting out on the floor. The feedstock for those sessions: thousands of hours of logged calls with Casper’s online shoppers. In typical tech startup fashion, Casper mines every call to spot trends or customer annoyances with purchasing or delivery that can be avoided in the future. As the company builds out stores, the co-founders are hoping that data will make the selling process more seamless for associates.

The other potential key to their success: Associates like Bradley don’t work off commission.

“You have to form a certain bond and trust because you are spending a lot of money,” Parikh said. “If you walked in that store and it looks super disorganized and no one knows anything, then you ask yourself why would I spend a thousand dollars with this company? They don’t have their stuff together.”

‘Not in a creepy way’

A few blocks from Casper’s retail location in San Francisco, the startup is doubling down on what the co-founders are convinced is their competitive edge: technology. Two years ago, co-founder and head of product Chapin moved to San Francisco to start Casper’s research and development lab. Filled with roughly 40 industrial designers, mechanical engineers, anthropologists and researchers, the lab is where the sleep startup begins testing new ideas for mattresses, sheets, dog beds and more.

The R&D process starts with ethnographers who observe people’s sleep patterns within the lab. Recently, for example, Parikh shared that the ethnographic team picked up on the fact that many sleepers kick their feet out from under the sheets in the middle of the night. After further testing, they discovered that this happens when the body experiences a spike in temperature and humidity. By partnering with Casper’s industrial designers and mechanical engineers, researchers developed a new weave of sheets that could mitigate the increased temperature problem.

Like many tech companies, Casper moves rapidly to build an MVP, or minimum viable product that it can test with consumers. Then it cycles improved variations of the product through its lab, and sometimes its stores, until settling on a version that’s ready for widespread release.

“It just allows us to test a lot of stuff a lot faster,” said Parikh. “Sometimes there will be people from our [R&D] team walking around the store looking how people interact with stuff. Not in a creepy way but just so that we can understand how people are using it.”

The Amazon ‘obsession’

With just a few hundred employees and only 11 products ranging from mattresses to duvet inserts, Casper is smaller and nimbler than long-time mattress giants such as Serta or retail goliaths like Macy’s. Both Parikh and CTO Flateman said their top priority is keeping customer service strong as they scale. After raising $170 million from retail giant Target in June, CEO Krim all but confirmed that Casper is setting its sights on IPO, but with no fixed timetable in place. Target considered buying Casper earlier that year, but talks didn’t lead to a deal.  

Referring to opening 15 stores in less than three months “crazy,” Parikh is adamant that controlling the customer experience, end-to-end, as opposed to just selling its products in places like Target, is crucial to survival. In July of last year, it started to sell its beds in privately-held furniture company West Elm, but often its delivery system was more seamless — and faster — than West Elm could offer for its bed frames and related products. This led to a less-than-optimal shopping experience that was partly the reason for Casper pulling its beds from their stores this August.

"A majority of the people shop with us online, so their expectations are a little higher,” he said. “They're expecting seamless service, easy returns, easy delivery, easy all that stuff. So we have to actually be able to provide that through the store as well.”

Meanwhile, Amazon keeps redefining retailing norms in a way that spurs Casper (and all other retailers) to keep innovating, too. On top of offering free same or one-day shipping for millions of items in hundreds of cities, Amazon is also pushing aggressively into drone delivery as well as a system that would allow couriers to drop packages inside your home when you’re not even there. The online retail giant is on course to account for nearly 50% of all U.S. e-commerce sales by the end of the year. While online sales remain a relatively small portion of total U.S. retailing, Parikh acknowledges that Amazon’s innovations have an outsized impact on shopper assumptions from what they can expect in stores like Casper.

Casper’s co-founders say they can be innovative without needing to copy all of Amazon’s moves. For example, Casper’s leadership team initially wanted free, same-day delivery for its up-to 91-lb mattresses in major cities. But when the service went to market, very few people actually used it. “There's this obsession that everyone is going to want everything within an hour,” Parikh said. “I don't think you're going to get freer, better, faster and cheaper forever.”