Nectar Mattress Founders See Big Opportunities Beyond the Bedroom

Online mattress brand Nectar went from startup to star performer in two years. Now, the founders of the company plan to use their success in the bedroom as a springboard to direct-to-consumer sales of furniture, rugs and everything needed to furnish the rest of the house.

Nectar’s founders have formed an umbrella company, Resident, which will offer consumers a range of complementary home furnishings.

It has lined up a network of U.S. manufacturers that can deliver customized online couch orders in a week, and it is selling those couches and other seating options under the recently launched Bundle brand name. Expansions into the rest of the home, with everything from dining room tables to housewares and home decor, are in the works, to complement Nectar, Bundle, and a Wovenly rug brand.

The company has created a management team with e-commerce and home furnishings clout, recruiting executives previously at Google, Facebook, Warby Parker, Amazon, Wayfair and Williams-Sonoma.

Resident co-founder Eric Hutchinson says jumping from mattresses to the rest of the house is an opportunity to go after a vastly larger market.

Home furnishings is a $304 billion market, compared to the $14.3 billion mattress market, Hutchinson noted.

“The way consumers are shopping is changing, and there’s a real opportunity today to create the brands of tomorrow,” said Hutchinson.

Hutchinson and his partners, Ran Reske and Craig Schmeizer, started Nectar in late 2016, after meeting to talk about which consumer product categories were candidates for disruption.

Looking for categories ‘ripe for innovation’

Hutchinson, a self-described serial entrepreneur, previously was a co-founder of online hair coloring brand Madison Reed and a co-founder of insurance product Home Value Protection. Schmeizer also was a co-founder of Home Value Protection, and Reske was a venture investor in Madison Reed.

[See more: Here's How Madison Reed Is Disrupting the Haircare Industry.]

“We were looking for the next area of commerce that was ripe for innovation,” Hutchinson recalled in an interview with CO—. “What we were seeing was, and this was 2016, most of the purchases that were happening online were one-click purchases, or low-consideration purchases,” he said, not higher cost items like mattresses or home furnishing that involved more consumer research.

Starting in 2013, Casper began demonstrating that customers were willing to buy mattresses online. Hutchinson and his partners felt there was plenty of room for other players. As a category, mattresses were “really under-penetrated online — it was about 10% at the time,” Hutchinson said.

The Nectar brand was launched within 90 days of that initial meeting between Hutchinson, Reske and Schmeizer. The partners are based in San Francisco and the company has offices there and in New York, London, Tel Aviv and Mumbai.

The trio shares the duties of running the company and no one has the CEO title. “In some ways it’s like having three CEOs,” Hutchinson said, “or Chief Everything Officers in charge of whatever needs to happen today.”

A sales bounce of 525% in 2018

Nectar did $40 million in sales in 2017, its first full year in business. Sales jumped by 525% in 2018, to $250 million. Nectar was named the fastest growing e-commerce retailer in North America for 2018 by Internet Retailer.

The company added three mattress brands to its original Nectar memory foam line in 2018 – DreamCloud, a luxury hybrid, Awara, an organic, natural latex mattress, and Level, a lumbar support mattress. It also launched a rug line, Wovenly, last year.

Nectar and the other Resident mattress brands are also sold in over 1,000 mattress and furniture stores, thanks to deals made last year with brick-and-mortar retailers, including the Mattress Warehouse chain.

David Perry, executive editor of Furniture Today, said Nectar and the other Resident brands are projected to have sales of over $400 million this year.

Part of what is driving the Resident expansion strategy, Hutchinson said, is the need to pull away from the growing number of direct-to-consumer mattress companies.

The online mattress category is crowded, with over 200 companies competing for sales. Between mid-2015 through mid-2018, online mattress brands were being launched at a rate of 50 per year, or roughly one per week, said Michael Magnuson, founder of GoodBed.com, an independent mattress shopping website. That pace has slowed to about one new brand per month, and as companies go out of business the number is beginning to decline, Magnuson said.

Hutchinson said as competitors have targeted niches within the bedding industry, with Casper wanting to be known as the sleep brand, and Purple focusing on technology, Resident is setting itself apart by being the first online mattress brand to offer a broader range of products for the home.

Nectar’s success thus far revolves around being excellent at finding people who are in the market for a mattress, Magnuson said. He expects they will be equally good at connecting with consumers looking to furnish other parts of their home.

Nectar grew rapidly, Hutchinson said, because it was able to understand what mattered to consumers looking for a mattress. Price is important, but so are features such as a trial period, a warranty and free shipping and returns.

“Those are all intangible aspects of the value proposition,” Hutchinson said. “With mattresses we created that value proposition, and now as we move into the home, each category has a similar group of benefits consumers want,” he said.

With the Bundle seating brand, those benefits might be custom fabric and trims, or the ability to have a couch delivered within a week. Bundle can offer a core couch and let the consumer pick options for materials or legs to give it a traditional, midcentury modern or modern look, putting the consumer more in charge of design choices than corporate buyers.

“We’re doing some interesting things with augmented reality and sending out real time swatches, to improve the shopping experience,” Hutchinson said.

“We were founded with mattresses, and we see that as the beachhead into the home,” Hutchinson said. The rest of the house, he said, “is the exciting frontier of where the consumer is going.”

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.