Known for its “bed-in-a-box” concept, Casper Sleep Inc. was created in 2014 with the simple idea of selling a mattress online. The company’s goal was to create an affordable foam mattress that could be shipped in a box. The direct-to-consumer (D2C) mattress company wanted to bypass traditional mattress showrooms and deliver mattresses direct to its customer’s doors.

Investors initially turned their nose up at Casper’s concept.

They thought no one would ever purchase a mattress online and didn’t see a path for Casper to disrupt the

$14 billion mattress market. The founders charged tens of thousands of dollars to their credit cards to bring the brand to life. Eventually, they caught the eye of an investor who had experience with other D2C brands. When Casper launched, it sold out of inventory on day one. The company expected to make $1.8 million in its first year, but it ended up hitting that goal within two months. The online mattress market is now crowded with competitors such as Leesa, Purple, and Tuft & Needle.

Excitement around the brand ramped up quickly, attracting the attention of celebrity investors such as actor Ashton Kutcher and rapper Nas. Casper became known for its quirky advertising, such as puzzles on subway ads, but its social media mentions, both paid and organic, became the company’s bread and butter.

Happy customers were excited to spread the word about Casper online. Casper implemented a referral program to capitalize on this word-of-mouth communication. The program took off, leading to a wave of unboxing videos on YouTube.

The popular mattress brand has run into its fair share of challenges. The company was initially considered a

“unicorn” leading up to its initial public offering (IPO), meaning the privately held company was valued at more than

$1 billion. This made Casper seem like a good investment, but things took a turn when Casper reduced its IPO price from $17 to $12. Shortly after the IPO, investors filed a lawsuit against the company for allegedly misleading them and not disclosing material information prior to the IPO. While Casper’s revenue was up, so were losses. Additionally, the company spent more than $400 million in less than three years on marketing alone to maintain its edge over the competition.

The bigger issue was that Casper was worth much less than $1 billion.

Some say Casper intentionally mislead investors, reporting steadily increasing profits when the reality was more dismal. Additionally, although Casper’s registration statement detailed growth efforts with the introduction of retail stores in 20 countries, the company stated shortly after the IPO that it would reduce the size of its global operations and wind-down its European operations. This led to a reduction of its workforce by 21 percent. Lastly, Casper also failed to disclose that it was unloading large amounts of old inventory to customers at steep discounts.

Despite these challenges, the CEO and co-founder of Casper, Philip Krim, continues to be enthusiastic about the company’s future. Krim says that by opening more stores and initiating more retail partnerships, the company could spend less on sales and marketing.

Questions

1. How does Casper’s distribution strategy differ from traditional mattress companies?

2. Casper disrupted the mattress industry. Why do you think investors were initially hesitant to back Casper?

3. Describe Casper’s promotion mix.