Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/739734
N O V E M B E R 2 0 1 6 / S C T 19 hoff International Holding. Steinhoff manufactures, sources and retails a variety of furniture, household goods and apparel in Eu- rope, Africa and Australia through some 40 retail con- cepts and about 6,500 stores across 30 countries. "Steinhoff, which is com- mitting over $3 billion in capital to buying Mattress Firm, obviously believes that four-wall specialty mattress retail is a good investment," said Baugh. Still, opinions vary on how much room is actually left for additional store growth. Some analysts, especially those who think more buying will shift on- line, say the industry already has too many stores. There are roughly 7,000 mattress stores in the U.S. now, with room to grow by about an ad- ditional 2,000 or so, accord- ing to Garrick Brown, a San Francisco–based vice presi- dent of retail research for the Americas at Cushman & Wakefield. There are still op- portunities, but the market is nearing saturation, he says. One thing that makes mattress stores attractive to landlords is that they tend to be more e-commerce- resistant than other retail categories; most people like to shop for mattresses in stores, even if they do end up making a final pur- chase online, says Brown. "Because it is such a large purchase, people do want to test it out," he said. And the headache of trying to return such a large item if neces- sary is a deterrent to the on- line shopper, he says. Mattress retail remains a profitable business with good margins. While gro- cery chains make do with markups of 2 to 4 percent, a mattress might cost $300 to build and will then retail for $3,000 — or more, for some of the higher-end products, says Brown. "That is how these stores have been suc- cessful," he said. "They have very high markups. They don't necessarily have to deal with a big volume." Adjustable beds and simi- lar innovations have helped drive sales and revenues too, observers say. "Over the past 10 to 15 years, we have seen an escalation in price points and what consumers are will- ing to spend on a mattress," said Baugh. Premium-priced mattresses sell for $1,000 and up for a queen set, and mattress manufacturers and retailers have done a good job of educating consum- ers about the importance of sleep and the mattress solu- tions now available to help people sleep better, he says. The apparel and other retail sectors are facing increased pressure from value-price competitors, but mattresses are the opposite, Brown says. "While everyone else has been on the discount race to the bottom, that hasn't happened with mat- tresses," he said. Consumers can find mattresses at a vari- ety of retail venues these days: furniture, department and home-improvement stores, or discount warehouse clubs and even e-commerce sites. Specialty mattress stores, though, remain a destination for consumers, and they like to be front and center with highly visible locations peo- ple can see every day. Most mattress retail- ers are versatile and op- portunistic when it comes to real estate locations, it seems. They are looking for high-traffic corner loca- tions, so they will grab a 3,000-square-foot site with more-limited inventory space, or they will stretch up to 8,000 square feet and enjoy more space for inven- tory, says Bomar. "Their growth has been so raven- ous," he said, "that they are willing to take what they can get and make it work." S C T SPORTING- GOODS GIANT Bass Pro Shops is to acquire Cabela's for about $4.5 bil- lion in cash, in a deal valued at some $5.5 billion and which creates an entity of 184 out- doors stores across the country. Bass Pro also owns the White River Out- doors boat retailer. Cabela's reported last year that it was exploring its op- tions, under pres- sure from Elliot Management Corp., which held an 11 percent stake in the company. Cabela's operates 85 stores, primarily in the Western U.S. and Canada, while Bass Pro Shops operates 99 stores, mostly in the Eastern U.S. and Canada. While everyone else has been on a discount race to the bottom, that hasn't happened with mattresses