Sramana Mitra: 2010 was when you decided to launch the company.
Ron Rudzin: That’s correct.
Ricky Joshi: It was a soft launch. We got kickstarted towards the tail-end of 2010.
Sramana Mitra: Talk to me about the very beginning. What is a soft launch? What were you doing in 2010? What were you trying to do to validate or get your ducks lined up?
Ron Rudzin: There are two factors here. I’ll give you the manufacturing and product research side. We knew that we wanted to be in the ultra luxury mattress market. The ultra premium class is what we call it. We started doing research and gathering the cost of products and raw materials. Obviously, we would go to all the main retailers in the country. We wanted to go for the most popular item in the $2,500 price range. That was an individually-wrapped coil system with a euro pillow top.
I knew that was the type of bed I wanted to make. I did all the research on the raw materials’ cost. I realized that by selling on the Internet, my raw materials cost would be the same as the beds that were selling in stores for $2,500. If I took out the commercial rent, utilities, and commissions, I actually can sell that same product for $1,150. You had Zappos already selling online. I realized that people can save this kind of money if they were willing to sit and read a website, which they were.
People were shopping online and willing to read and learn. We were the first ones in the luxury mattress market to come up and say, “We’re going to give an in-home trial.” It was really about those three things. The in-home trial is very personal. I like to take a long shower. I like to keep my right leg up. I knew that going to stores, it would be a test for three minutes. I never really believed that the sales person was aligned with what I was looking it. I thought maybe because their managers said, “We have extra Simmons bed. Push this.”
I just felt that there was this opportunity to be completely transparent. They weren’t showing us what was inside the bed. I said, “Boy. From the day we launch, we’re going to have our spec sheet. We’re going to show everyone exactly what our foams are, exactly what our steel is, exactly how our bed is made.” As I did all this, the thing that was sticking out just as much as the cost structure was also the fact that the industry had developed a horrible reputation for itself. Everything you were reading online, you had major companies not adhering to the warranties.
People were writing horrible things about them. The service was poor. The experience was poor. If I’m able to sell online and save all of these other costs that these brick-and-mortar retailers deal with, I could treat my customers so well and give them an experience they’ve never seen before in the mattress industry. Using that basic theory, coupled with Ricky’s efforts and his team, we’re able to bring the business this past year to upwards of $160 million.