I know that mattress showrooms have extraordinary markups, but I’m wondering how much these markups are. Are there former (or current) employees that know? I’m trying to argue my mother into not buying a showroom mattress (that these aren’t really “deals” because of their constant sales &c.) and, well, yes, I’m trying to make a point about how corrupt these places are.
And what’s the commission typically? It just seems to me that, well, my guess is that 75% of the price of the average showroom mattress (we’ll say that it’s MSRP for the sake of argument) actually goes to overhead and commission. I guess commission is probably part of overhead. But what’s a typical commission? Do these guys get minimum wage otherwise?
This markup can vary quite a lot, typically in big box stores that carry ‘unidentifiable’ product the mark up is much higher. So big brand mattresses that are basically the same every where you go but use different names, different fabrics that are nigh impossible to cross shop. Those are the worst offenders in terms of profit %.
Typically more transparent companies that put all the info out in the open and the names are easier to find and compare will not have the same markup. Although granted you are not also likely to find the product @ 40~50% off because that would be all or almost all of the profit gone for the retailer.
Tempur-Pedic specifically I know is different in the US and Canada. I am actually a retailer in Canada that carries Tempur-Pedic and I can tell you at MSRP the margins vary from high 40’s to mid 50’s. (48~55%) depending on the product which is certainly healthy markup however I am a small family business, I would suspect that the big national chains that carry the product probably do pay less for it but that is my own personal assertion. I have heard that in the US the margin’s are significantly higher but I have no way to independently verify this. Typically the margins are higher in the US market.
You can see a few examples of some of the gross margins for a few companies at the end of post #2 here. There are also margins along every step of the supply chain from the production of raw materials to the final sale to a consumer so the more steps there are in the chain the more the margins will compound.
MSRP is usually a fake price that has been artificially marked up (say double) for the sake of making mattress sales look good and has little to do with the price the mattress is ever sold at but you would probably find that 75% of the MSRP would be profit if it actually sold for that much. You will also find MAP pricing (minimum advertised prices) and also MSP (minimum selling prices) with some manufacturers. Based on actual average selling price though a reasonable example may be a company like Mattress Firm which has a gross margin of about 40% based on their actual sales.
Most retailers will have margins in the range of 40% - 50% at the end of the day (after returns and exchanges etc).
There is a wide range of sales commissions depending on the retailer or whether they are on straight commission or a combination of base wage and commission but they are usually on a sliding scale up to about 20% or so calculated as a percentage of the gross profit of the mattress. If the salesperson gives a bigger discount their percentage commission can also go down. In some cases they also receive a SPIF (or SPIFF) which is a Sales Performance Incentive Fund from the manufacturer which “encourages” them to sell certain mattresses. At some times of the year some stores will also have contests where employees are more willing to reduce their commissions in order to win cash prizes.
MSP of the Tempurpedic line in the US is well north of 50% MU (double cost). Not taking returns/cost of doing business into account. Without naming brands, some of the “lower-end” brands that visit my store - brands that talk about being “just as good as” premium products and rely upon look instead of substance - tend to run at a 50% MU. The whole sales pitch is, “You can run this bed in a queen at a cost of 150 for 299 all day long.” They never talk quality - only margin. Those beds aren’t MMAP or MSP constrained. Throwing an example of some of the major brands in the top 10 of sales, margins in stores for entry adult support in the 40-43% range completely normal. As you go up the line suggested/common selling prices 50%+ very common. 60% more common than you might think with some MSP items. Also, margin varies by store of course. Some stores, like a large NE sleep chain one of my reps visited, showed a $300 cost pillowtop at $999 - a 70% MU! It was that way with most beds. Idea is that salesperson negotiates with consumer and tries to keep as much profit as possible while consumer thinks they’re getting great discount. And hey, that’s retail and if you’re ill-informed you’ll never know if the price you’re paying is fair. Underscores the need for people to be informed.
Full faith disclosure - I’m not talking about brands I currently offer in my stores.
This, of course, isn’t by any means custom to the mattress (or even bedding) industry. Interesting for the business types out there, but some people get ‘upset’ when they see someone else making money. 50% gross profit (sell price - cost of goods sold) / sell price isn’t outrageous by any means, especially with brick and mortar stores that have rent and staff.
Some folks shopping here will pay more for an iPhone / iPad than a bed…Apple didn’t get a multimillion dollar war chest trying to sell for cheap. The iPad cover is my favorite, commanding hundreds of percentage points. So, if there are folks out there ‘upset’ at the margins in mattresses, check out your other household products before getting too upset
The mark up depends on the type of store and where it is in the country. The more expensive the product is, the more margin there is for the retailer. There are big retailers that sell things across the board for 30 margins but you will not find a lot of MAPP product in their stores. MAPP means they are price regulated. Tempurpedic have the highest margins (57 to 72)for the retailer and are highest margins for the manufacturer as well. Commissions range from 2% to 10% for the sales person. A high volume store pays 2-4% but the sales person writes 100-400K where sleep shops pay around 2K a month plus bonuses for meeting budget requirements.
You’ll be found thousands of good mattresses within your simple budget but I think though showroom mattresses are little high priced but that have good quality. I have bought a mattress from a nearest shop but few days later I threw it on garbage. Thant’s why telling so.
First off markup vs. margin. It surprises me that some here use these interchangeably. Not the same thing. 100% markup = 50% margin. Typical sleep shop store is likely working at 40-50% margin. When you factor in salary/commission, rent and overhead, they’re not making a killing I assure you. Big box stores frequently run sales of 50% off. That’s off MSRP, which as Phoenix mentioned, nobody ever sells for. That’s a joke because MSRP is usually double what everyone else sells for. So the 50% off sale gets you the same price you’d pay nearly everywhere. Depending on the price point of the mattress the margin could be significantly less. Cheaper (promotional) mattresses have very little margin. I’m not sure what the original poster meant by “showroom” mattress. Sounds like he had a bad experience. I would always advise buying your mattress from a specialty sleep shop, preferably a small business - not chain store. I would also say that generally you don’t want to pay extra for a big S brand when you can get better value from other manufacturers.
I know some people that are somewhat “math challenged” that read the word “percentage” and their eyes tend to glaze over as their brain turns to mush and they don’t stop and consider “percentage of what?” :unsure: .
The point you are making is certainly very valid (and important) and just to amplify it a little bit for the sake of others that read this … the margin is the percentage of a final sale price that represents the profit that is in the sale and the markup is the percentage of a wholesale price that is added to the wholesale cost of a mattress to arrive at the final selling price. Margin is a percentage profit calculated on the final selling price and markup is a percentage profit calculated on the wholesale cost of a mattress.
If as an example the wholesale cost of a mattress is $1000 and the final retail cost of a mattress is $1800 …
The margin would be the $800 profit divided by the $1800 final cost which would be 44.4%.
The markup would be the $800 profit divided by the $1000 wholesale cost of the mattress which would be 80%.
I have had many conversations with many good retailers I know that have very reasonable prices where we laughed (or cried) at some very misleading (and untrue) information that includes some very exaggerated claims of “huge” (many hundreds) percent markups in the industry that are so often mentioned in various online websites and joked that if they were really true then most of the retailers I know would have long ago retired independently wealthy and be spending most of their time on their luxury yachts in the Mediterranean … when they weren’t flying around in their private jets that is
