Amazon is so dominant that even successful retail startups are playing its game
Tuft & Needle is a success story, growing over the last five years to push a new model of e-commerce that's upending traditional bedding sellers. Now, it's heading for the big time with a big expansion of its own brick and mortar stores.
Who does a successful startup call when its making such a big move? Amazon, of course.
Starting with a forthcoming showroom near Amazon's Seattle home base, Tuft & Needle plans to launch 30 locations across the country by 2020. Each storefront will prominently feature the Amazon logo emblazoned under Tuft & Needle's own brand—and be stocked with Amazon gadgets to bolster the experience.
Such is life for retailers these days. You're not going to beat Amazon, so you might as well join 'em.
"We view Amazon as the most powerful force in the future of retail, and instead of resisting it like many other brands, we are fully embracing our relationship with them," Tuft & Needle co-founder Daehee Park said. "If this works for Tuft & Needle, other retail categories can learn from this experiment to plug into Amazon and overtake their own incumbents."
As Amazon's chokehold on the online shopping world grows, Tuft & Needle is one of several retailers who've decided they'd rather work with the e-commerce behemoth than against it. Bigger companies like Nike and Sears have made the same decision in recent weeks, and each of Tuft & Needle's primary competitors sells through Amazon to some extent.
The joint effort comes as Amazon pushes aggressively into the home furniture category, one of the few remaining consumer markets that has escaped its grasp.
These won't be Tuft & Needle's first stores. The company launched its three existing locations in Phoenix, Scottsdale, and San Francisco back in 2012. Like many other e-commerce startups, it's found that brick-and-mortar operations can offer a customer service experience that the web just can't match.
The need for Amazon's help, however, comes with everything the ecommerce giant does better than any other company.
The company is betting that Amazon's own cheap and speedy delivery capability can match that experience and improve it. Each of the Tuft & Needle stores will offer two-hour Prime delivery, a policy the company found boosted sales by 50 percent when it was tested in Phoenix.
Tuft & Needle will sell their wares exclusively through Amazon Prime (though the company says you can still buy them without a Prime membership if you forgo the shipping). Customers can read Amazon reviews on bedside tablets, seek help from an Amazon Echo shopping assistant, or make a one-click purchase by scanning a barcode attached to each product in the Amazon app.
The deal gives Amazon entry into the growing market for online purchases that just a few years ago seemed bizarre.
People tend to be reluctant to make big purchases sight unseen, but they're now warming to the idea more than ever. Emarketer expects the online furniture market to grow to $55 billion in the next three years.
A big driver of that growth has been the success of mattress delivery startups like Casper, Leesa, and Tuft & Needle, which offer generous trial periods and hyper-compact shipping.
Tuft & Needle and many of its biggest competitors have sold mattresses on the site for years through Amazon Launchpad, a program meant to showcase goods made by startups. Tuft & Needle currently brings in around a quarter of its revenue through Amazon sales.
"Historically, mattress retailers have designed the physical space to drive sales and optimize maximum product display," said Tuft & Needle chief operating officer Nick Arambula. "We’ve taken an alternative approach: our store design and development considers the customer first."
Amazon has also begun to see the value in stores — much to the surprise of the countless chains it's put out of business over the years. It's already opened eight bookstores with plans for a half a dozen more, and its blockbuster merger with Whole Foods will bring hundreds of supermarkets under its umbrella.
For Amazon, stores serve as a marketing front for its gadgets and services as well as a mini-distribution center that saves costs on the most expensive final stretch of the delivery process.
While Amazon's logistics and customer service teams will facilitate all the shipping and returns, Amazon is not involved in operating the stores themselves with no formal agreement in place.
Tuft & Needle plans to concentrate the new stores in areas where traditional mattress retailers remain the strongest — states like Texas, Florida, Illinois, North Carolina, and New York.
"Until now, industry incumbents like Mattress Firm have held the e-commerce wave at bay with their vast network of brick and mortar stores," Park said. "The impending demise of traditional mattress stores is now a foregone conclusion."
This post was updated Monday, July 31 5 p. m. PT
Topics Amazon
Patrick Kulp is a Business Reporter at Mashable. Patrick covers digital advertising, online retail and the future of work. A graduate of UC Santa Barbara with a degree in political science and economics, he previously worked at the Pacific Coast Business Times.
