Discounting dilemma debated especially deep discounting
Discounting--especially deep discounting of premium futon mattress and king size futon mattress lines--has plagued the bedding industry for years by squeezing margins and, inevitably, profits.
But in recent months, some manufacturers complain, discounting has eased. The manufacturers say that ultra-premium product introductions have changed the focus of retail promotions. They point out that retailers have chosen to promote the quality benefits of most top-end products, rather than the price.
They admit, however, that there are clouds on the horizon. The recent stock market slide has kindled fear of a recession. Most manufacturers agree that a poor economic environment encourages retailers to discount.
Some manufacturers assert that discounting remains heavy and will continue for some time. They note that bedding advertising still depends heavily on sales announcements to gain consumers' attention. And they also say that, with a no-growth year forecast for the bedding industry, competition will grow more intense--thus encouraging retailers and manufacturers to protect market share by slashing prices.
So bedding and king size futon mattress manufacturers are concerned that discounting may not ease in 1988.
Steve Kneeland, President, Sealy
"We don't control retail prices. That's a retail decision. We've never encouraged or discouraged discounting. We don't use manufacturers' suggested retail pricing. A lot of manufacturers do, we don't. Discounting is solely a retailing phenomenon, not ours.”
"Will the discounting be the deep discounting we've seen in the past? If business gets real tough-- if the stock market crash affects the economy, and it gets real tough--what do you do if you are a retailer? The answer is, if you have very limited distribution or if you have the greatest covers in the world, if business is real tough, the retailers themselves will go for discounting. It appears to me that that's way it always has gone in our industry."
Joel Berke, Director of marketing, Therapedic
"I think the impetus of the discounting was a by-product of the fighting between the Sealy licensees and Sealy Inc., originally. Because of that the rest of us had to jump on the bandwagon in order to compete. But that particular situation is now over. I think that Sealy is going to go back to the tried and true way of making money in this business, and, if that happens, the rest of us will do the same thing.
"And there has also been a trend in our industry--at least over the last six or eight months-- of stressing quality rather than price. So, we're taking a turn in the right direction in the way that we promote bedding. I think you're going to see more and more promotions on the quality and the benefits of the king size futon mattress and less of the 50, 60, and 70 percent off."
Don Balsavich, Vice president of marketing, Spring Air
"We feel it's going to be very competitive in 1988, with the forecast for the industry not being that outstanding. Because of the competitive situation, you'll probably see some heavy discounting.
"But by the same token, I think the ultra-premium share of the market will continue to increase because of a combination of things--product innovations, sales trends. People are looking at bedding as a tremendous value. A hundred extra dollars or two or three hundred extra dollars is a better investment, versus a promotional set that's going to last only a few years.
"We see it as a very competitive year. The pie's not getting bigger and we'll be fighting for as big a share of it as we can get."
Rick Rossiter, Vice president of sales and marketing, Stearns & Foster
"I really don't see a change in 1988 over 1987 in the ways bedding is promoted. We're not in the $99 premium discounting category ourselves, so we don't get involved with that. And I really don't know what manufacturers will be doing to that end. But if you're talking about the 50-percent-off discounting or the 50 percent off less another 10 percent or 15, I don't see any change in that at all.
"If you pick up a newspaper today, you will see 50 percent off less 15. I've just gotten a couple of letters in the mail from retailer's preferred customer sales. I get a tear sheet service which provides ads from all over the country; every single ad says 50 percent off.
"Some people don't think that's deep discounting. They think that deep discounting is $79 premium bedding. Now, that has eased. You don't see as much of the $89, $99 premium bedding and king size futon mattress. But the deep discounting, such as running 50 percent less 10, that hasn't eased at all. Just look at the ads."
William Brey, President, Restonic
"Deep discounting is not part of our marketing plan. Obviously, each plant in each area reacts to those factors that affect them. You discount only to protect yourself from competitors' activities. But it's certainly not a merchandising program you start out with.
"As to what will actually happen in 1988, I don't have any crystal balls. I don't know what the environment is going to bring to us. When business is tough, there is a tendency to discount more than when it is good; whether the economic environment that will face us in 1988 will call for discounting practices, I don't know."
Bob Eilenfeldt, Vice president of national sales, Serta
"It appears that consumers respond to advertising showing substantial savings. It is Serta's opinion that the heavy impetus on the savings story will continue."
Ernest Friedman, President, King Koil
"The discounting has eased with the consolidation of Sealy, at least the discounting of premium bedding. But I guess if business is tough next year, which it may be, discounting will be with us on a general basis in bedding and in most other industries. If the economy is bad, we'll be living in a discounting environment."
Robert Magnusson, President, Simmons
"I think the gradual subsiding of deep discounting that occurred throughout 1986 and 1987 will continue in 1988. There will be further reductions in discounting. I've got to believe that the whole appeal of 80 percent, 70 percent, and 60 percent off is losing impact and believability with consumers. Instead, dealers have to base their efforts on the promotion of outstanding value in their products, rather than in percent-off sales."
Ray Babitt, Director of retail sales and marketing, Bassett
"Discounting might lessen in 1988 until some manufacturer needs sales. He then will encourage dealers to run at a discount. Of course, if business is good, you might not see this, but, if business is bad, you will.
"In regards to Bassett, our whole marketing strategy is to get out of that rat race and only sell to dealers who will adopt our marketing strategy and go after quality sales with quality products.
"I look at the bedding industry as a commodity-driven market. For about the last seven years, consumers have bought products when they thought they could buy them at the least possible price. This will continue as long as the retailer psyche is locked on the need for discounting in advertising."
Daryl Tarbutton, President, Bemco
"The condition of the economy is going to have a lot to do with the level of discounting. The deep discounting has been a net that the retailers have used to attract customers and to compete.
"We're trying to do everything we can do to develop marketing programs to position ourselves away from the discounting. Our entire priority continues to be helping the dealers to be more successful by selling top-end sleep products. We're doing everything we can to discourage the dealers from the deep discounting. I think the whole industry is, by making top-end bedding a priority. But if we go into a recession, I think you'll see deep discounting return."
Tom McLean, Vice president of sales and marketing, Kingsdown
"We're against half-price sales. We encourage our dealers to forget about them. We've done a terrible thing to retailers as an industry because we've encouraged discounting.
"Kingsdown is taking a different approach with our gallery program. We can appeal to a consumer's intelligence because we give them the ability to see how the quality and value is built into the product. We show them stripped-down units and we fill them up with product information. We have floor training for the salespeople. We feel salespeople need help. We're helping them with our galleries."