Nectar's parent company Resident seeks to evolve into a 'house of brands' that offers products for every part of consumers’ homes.

Resident, the recently formed parent company of the digitally native Nectar Sleep mattress brand, is embracing store-based retailers in a big way in a bid to win over the roughly 70% of mattress buyers who still make their purchases in stores.

Nectar Sleep began selling mattresses in stores in January 2019, starting with a rollout to Mattress Warehouse’s network of more than 250 stores along the East Coast, Craig Schmeizer, co-founder of Resident said in an interview with Internet Retailer after his presentation at the Internet Retailer Conference and Exhibition at RetailX in June. Nectar now distributes mattresses in 1,100 stores and expects to increase that to 2,500 by year-end.

“We want to be a partner that brings in new, organic foot traffic to the retailer,” Schmeizer says. And so far, that is how things have worked out, he says.

By moving into stores, Nectar has the potential to reach shoppers who have seen the brand’s advertising but would otherwise never buy because of their reluctance to purchase a mattress they have never seen or touched, Schmeizer says. For the retailers, stocking Nectar mattresses brings in consumers who specifically check out the brand, he says.

In some cases, consumers have gone into retailers’ stores and then ordered a mattress online directly from Nectar, but the retailers have not considered that to be a significant problem, Schmeizer says. Likewise, he says there is little evidence that bricks-and-mortar sales are cannibalizing Nectar’s online business, which makes up most of its sales.

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By the end of 2019, retail store sales should reach a run-rate of $100 million, putting them on track to reach 20% of total sales volume in 2020, Schmeizer says. Run-rate is a term for using the current financial performance of a company as a predictor of future performance.

Nectar’s revenue grew 525% in 2018, reaching $250 million, and is projected to exceed $400 million in 2019, Schmeizer says.

It makes a lot of sense for digitally native manufacturers to “go to the dark side,” Schmeizer says, by selling via stores because, according to Internet Retailer estimates, more than 86% of total retail sales happen offline. The mattress business has a much higher rate of online penetration than retail sales overall. But even in that segment, only about 30% of sales are made online, he says.

Memory foam mattress maker Nectar Sleep was the fastest-growing retailer in the 2019 Internet Retailer Top 1000 Report. The brand, which ranked No. 211 in the Top 1000, attracted attention after releasing a “Make America Sleep Again” video ad featuring cartoon characters of President Donald Trump, Russian president Vladimir Putin and Kim Jong Un of North Korea. The spoof received more than 13 million views on YouTube.

Nectar’s growth also comes from targeting consumers prepared to buy a mattress, using methods and tools developed in-house. The process includes using marketing tools on social media sites like Facebook’s “Likely to Move” or “Newly Engaged” targeting buckets, focusing ads on its differentiating factors, such as its lengthy trial period, and getting rated on affiliate sites. But Nectar also looks at where its site visitors originate and how they browse on the site to further customize ads to those shoppers. The company does its digital marketing in-house, Schmeizer says.

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Earlier this year, Nectar established Resident Home as the parent for Nectar and its affiliated brands, which include a newly launched furniture brand called Bundle, the Wovenly rug brand and three additional mattress brands. The other mattress brands are Awara Sleep, an eco-friendly, hybrid (foam plus springs) mattress; DreamCloud, which combines latex and pocketed micro coils; and the Level therapeutic mattress.

The new Bundle brand launched with a couch and oversized bean bag chair, both offered with a 60-day trial period and free shipping.

“We’re growing our family,” and the new structure will help the company grow into a “house of brands that encompasses all aspects of home life,” Schmeizer says. The ultimate goal, he says, is to become a company that offers a diversified collection of products for every part of consumers’ homes.

Looking forward, the retailer plans to focus on creating “great growth,” but might consider going public or entertaining an acquisition or merger offer over the next couple of years, Schmeizer says. But there are no plans in the works for either, he says.

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