Race to the bottom in DTC land

I’ve been taking classes at Saints and Stars which is the Dutch Barry’s Bootcamp and have generally been impressed. This morning I took the boxing version of the class and man it was pretty bad. I wanted to leave halfway through due to pure boredom but I stuck it out the entire way and walked out with barely a sweat. The instructor was not inspiring and the music was bad, like really bad. Energy level in the room was nearly 0.

Onwards…

The DTC mattress company Casper has filed for an IPO. This is of particular interest to me as there has been a nice trend towards high end sleep products which I wrote about previously.

I have not had a chance to look at the S1 but going off a few articles and tweets from people who did, it appears that Casper is no different than many of the other direct to consumer companies. Good revenue numbers with bad margins, high marketing costs, and large annual losses.

It’s hard to imagine Casper getting to profitability based on just their core business product, mattresses. As someone who recently bought a new mattress, the market is very saturated and the different products are not very differentiated. Every company has different “foam” and “technology” but at the end of the day, they all generally feel the same with minor differences such as firmness.

So what is Casper going to do? Well, according to their S1, their plan is to transition into a technology company that sells high end sleep products. Think accessories that help you sleep better such as natural light lamps, aromatherapy, temperature control, and supplements to promote sleep.

This has been the trend with a lot of DTC companies as they strive towards profitability. SmileDirectClub just announced now offering other dental products besides braces.

Casper is riding the business of sleep and it’s going to need to be creative in the R&D department. Consumers like myself are willing to pay top dollar for high end equipment to help you sleep. This has been a growing trend and will continue in the future.

What is yet to be seen is whether Casper will develop any unique and useful products that help you sleep better or if they’re just going to continue to play in a saturated market with no product differentiation.

Investors will be betting on whether Casper can convert on this. I will be in a wait and see approach here.