If you’re competing in a sector ruled by three powerhouse brands, a logical strategy might be to sell low-priced generic products. For Gerry Price, that would be like hitting the snooze button.
When he launched Price Mattress Inc. in 1998 as a 14-year industry veteran, Gerry Price took a smarter approach. He figured out how to add incremental improvements to the mattresses made at his plant in Toronto, yet charge less than Sealy, Serta and Simmons. He then wooed key retailers with exclusive deals on a mix of attractively priced private-label brands and models licensed by Oklahoma City-based Lady Americana Associates Inc. His resulting revenue growth has been anything but sleepy, from $1.3 million in 2000 to $21.6 million in 2005. This 1,588% increase placed Price Mattress 38th on the 2006 PROFIT 100 ranking of Canada’s Fastest-Growing Companies.
Gerry Price says he can sell for less because his rivals’ overheads are 10% higher than his, thanks in part to their hefty ad budgets. His firm has also mastered the low-cost art of enhancing products at the margins instead of aiming for big breakthroughs. In July, it introduced mattresses with nine-inch pocket coils. This wasn’t a revolutionary change over the standard seven inches, but gave retailers a feature — firmer coils in the middle and perimeter — to talk up to shoppers.
The company also benefits from Lady Americana’s diligence in sourcing low-cost components from overseas. For instance, Price Mattress makes Lady Americana’s Powerrest Adjustable Bed for its licensed territory of Canada and the U.S. Northeast using a mechanism made in Asia. The bed boasts the stability of 30% more steel than its rivals, an extra set of legs to avoid tipping and two motors instead of one. Yet it wholesales for 25% less than comparable adjustable beds, says Price, while the average Lady Americana mattress sells for 10% less than its rivals.
Working with Lady Americana also helps Price Mattress establish retail distribution. Between the former’s seven product lines and the latter’s private-label models, Price Mattress has the selection required to offer different exclusives to retailers in the same geographical market. “If you sell the same product to two customers that compete, what’s going to happen is that one is going to discount by 10%, the other by 20% and [so on],” says Price. “Before you know it, both customers aren’t making a profit on your product.”
His firm also pleases retailers with low-cost innovations in its private-label lines. It developed several proprietary products that helped double mattress sales over five years at Bob’s Discount Furniture, a Manchester, Conn.-based chain with 2005 revenue of US$280 million. These include the Bobby Bear Mattress, a spring mattress covered in teddy bear fur. Price knew Bob’s could sell the exclusive furry wonder through its quirky TV ads. The Bobby Bear, priced 20% lower than a standard spring mattress, was a hit, quadrupling Bob’s sales of premium-priced models.
Price’s focus on lower-cost and exclusive mattresses has landed five clients with at least US$100 million in annual sales stateside, where his firm does 65% of its business. “If we were a $100-million mattress company, it’d be a hard strategy,” Price admits. “But we still have considerable growth potential using this strategy, because with continued product innovation, you create your own opportunities.”