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In its first two years in business, the mattress startup Tuft & Needle has done pretty damn well for itself. It has built a multi-million-dollar business that is bootstrapped and profitable by making the No. 1-rated mattress on Amazon. All of this while selling its stuff exclusively online.
But the Phoenix-based company is realizing what many fast-growing e-commerce startups are these days: That the vast amount of purchases still happen in the brick-and-mortar retail world, and it would be foolish to ignore it.
So Tuft & Needle plans to open its first retail store this summer in San Francisco’s SoMa neighborhood, hoping that by letting people touch and feel its line of foam mattresses, sales will rise even higher.
“We really think the majority of sales are going to be being offline,” co-founder JT Marino said in an interview.
To help build out its retail strategy, the startup has sought counsel from Andy Dunn, the co-founder and CEO of online men’s retailer Bonobos. Bonobos started out as an online-only seller but has said it plans to have 40 retail locations by the end of next year, where customers can try on different styles and colors and place orders for delivery. Other popular e-commerce startups like Birchbox, Nasty Gal and JustFab have recently delved into brick and mortar to boost brand awareness and attract customers who still would rather see goods before buying.
From its earliest days, Tuft & Needle’s founders figured selling in stores would eventually be required, since it seemed logical that most people would want to test out something that they spend a third of their life on. So the company took baby steps in the retail direction when it opened a showroom inside the warehouse that houses its office in downtown Phoenix.
The building is located in an out-of-the way location and only one potential buyer stopped in during the first week. But in Week 2, 75 people came to check out the upstart mattress maker, some even walking out with a mattress that very same day. That helped confirm Marino and team’s thesis that their San Francisco store wouldn’t need to be in a highly foot-trafficked area, which allowed them to choose a location with monthly rent between $5,000 and $10,000 rather than $20,000 and up.
“The first thing people do when looking for a mattress is go online and look for where a store is,” Marino said. “If we were a fashion brand, I think foot traffic means a lot. For us, especially because we’re bootstrapped and cautious, we’re first trying to go off the beaten path.”
The plans for a retail store come as Tuft & Needle is, for the first time, seriously considering taking on outside investment. Net revenue jumped from $1 million in 2013 to between $5 million and $10 million in 2014. And if December sales are any indication — $1 million in net revenue in that month alone — the company is in for another year of growth in 2015. Also, a year ago about a third of sales came through Amazon; now that number is just 5 percent, which is good because those are less profitable sales. Those numbers, combined with the fact that the startup has been profitable from Day 1, have investors lining up.
“If we are to raise any capital,” Marino said in a follow-up email, “it would be to help accelerate growth, not out of any necessity.”
This article originally appeared on Recode.net.
