A crummy mattress-buying experience for Tuft & Needle cofounder John-Thomas (JT) Marino and his new wife, Sarah, was the catalyst for him to leave his Silicon Valley tech job and move into the world of mattress manufacturing. With degrees in computer science and cyber security and a working background in marketing, analytics and software engineering, you wouldn’t expect Marino and cofounder Daehee Park to build a bootstrap startup here in Phoenix, especially one with a disruptive and revolutionary business model. But stranger things have happened, and the bottom line is that Tuft & Needle (T&N) makes an impressive product for the right price.
Speaking with suppliers of mattresses and finding out how shockingly high the markup is on the retail end (six to 12 times the cost of manufacture) helped fuel the dynamic duo, who met in college at Penn State, where they often brainstormed business ideas. In 2012, Marino and Park took the entrepreneurial plunge, leaving their day jobs to pursue the research and development of the proprietary foam that is the foundation of their product line. A layer of this unique foam is laminated to a denser foam material to form the finished mattress.
One of the hurdles the company faced with selling mattresses online was the cost of shipping such bulky items. Marino and Park developed a method to extract all the air out of the cells of the foam, thus greatly reducing the footprint for shipping. Even a California King comes in a relatively small, albeit heavy, box. Upon arrival at its final destination, when removed from its packaging, the foam will gradually refill itself with air. The process takes a few hours and then the mattress is ready for use. In the very rare instance that a buyer is unsatisfied, rather than ship the item back, T&N donates it to a local homeless shelter.
We believe that consumers should pay a fair markup, nothing more.
Tuft and Needle’s against-the-grain approach of honesty and direct communication with the customer is one example of how the company aims to demystify the mattress-buying experience. They aim to create a clear understanding of exactly what should be expected in a transaction and a product. Seeking more clarity, T&N opted to discontinue a referral program because of the confusion it created with varying costs for the same item. The broadcast of that decision was made clear by T&N, in a very public manner. Their current billboard campaign plastered around the Valley takes direct aim at competitors with a punchy message. A wake-up call, if you will.
Tuft & Needle has become very successful in a short time. The number of full-time employees was only about 10 a year ago, but now approaches 100. And that number will probably double in the next several months. In order to accommodate this rapid growth, the company is moving its headquarters and showroom from the second floor of the Levine Machine building to the massive 36,000-square-foot historic 1917 OS Stapley Buildings on Grand Ave., which will certainly be a boon to the burgeoning arts district in the area.
Most of us are striving to streamline our everyday lives on some level. T&N responds to this by stripping the frills and fluff out of an antiquated business model and eliminating a countless list of features that ultimately mean very little and end up driving up costs. This kind of critical thinking has allowed JT and Daehee to build a business now doing tens of millions in annual sales from an original investment of only $6,000, without bringing in outside capital.
Tuft & Needle has become very successful in a short time.
Why did T&N choose to call Phoenix home? There are a number of reasons, but mainly for its great resources, an emerging talent pool via the universities and the lower cost of real estate. Their previously discussed discovery of what it actually costs to manufacture led them to implement a vertical supply chain, thus not comingling marketing and overhead budgets into consumer purchases. For the purpose of maintaining quality control, Tuft & Needle mattresses are manufactured in the United States, specifically in Los Angeles. This allows T&N to provide a truly dynamic response to customer feedback, while maintaining the strengths of the classic business model.
“We believe that consumers should pay a fair markup, nothing more, and that profit should be enough so we at Tuft & Needle can pay our employees a healthy wage, grow over time and, most importantly, reinvest that money into product innovations that benefit our customers. We’ve made over 30 changes to our mattress in the last year alone. Most of which a customer wouldn’t notice during a side-by-side comparison. But over time, these changes add up to a far superior product.”
Additionally, Tuft & Needle has taken a 180-degree turn on how to approach corporate policies that affect their customers. No more gooey terms of service and confusingly written guarantees with regard to refunds. They have clearly laid out who they are, what they stand for, what they do as a business and what you get out of it all. Even the internal management of the operation is fair, equal and innovative in style.
I was able to join the T&N team for their Monday afternoon tea, a weekly gathering where all the employees enjoy a range of top-notch teas, a spread of various meats and cheeses and a little time to ease into the work week. This team is a family, and together they’ve built a very innovative operation created on the foundation of honesty and spread by way of recommendations from truly happy customers.
JT’s bad mattress-buying experience motivated the creation of Tuft & Needle, but was this concept already in the cards, or was it a completely new direction?
Daehee Park: Tuft & Needle was founded in June 2012, and our e-commerce store (www.tn.com) officially launched to the public in the fall of 2012. The inspiration for the brand and our product development was JT’s terrible mattress-shopping experience and his ranting about it to me. What we found out was that this experience was a common, shared problem among everyone who has shopped for a mattress. The hypothesis we wanted to test was creating a high-quality mattress, selling it at a fair price and removing the gimmicks that we all hate as customers. Tuft & Needle is the industry pioneer of developing a single universal mattress that is comfortable for all body types and sleeping positions. We started with a $6,000 investment between JT and me. Since then Tuft & Needle has grown to tens of millions in sales without raising any outside capital.
Your supply chain is unique, honest and direct. Please explain more about how this is achieved. How is marketing cut out of the manufacturing budget?
DP: Traditional mattress companies are marketing-driven rather than focused on product and experience. By concentrating our efforts on product development and continuously iterating on improvements to the mattress, we’ve developed a mattress and a brand that has a high viral factor, where customers are spreading most of the word on our behalf. Also, we don’t have commissioned salespeople and don’t do any discounts or seasonal promotions. We take pride in offering a great mattress at a fair price 365 days a year. As a result, our marketing budget is a very small percentage of our total revenue.
Describe a unique characteristic of your product line.
JT Marino: The biggest evolution from a product standpoint has been the development of our in-house-made foam. It’s unlike anything available on the market and is proprietary to Tuft & Needle. The foam we invented is more comfortable to sleep on than traditional foams used by other mattress companies. It is more supportive, cooler sleeping and provides pressure relief to a wider variety of body types.
We know about your move to Grand Ave. What else can we expect from you in the future?
DP: Since the very beginning of Tuft & Needle, we’ve always believed in giving back to our community and helping those in need. We now donate hundreds of mattresses. As we continue building and growing our company we’re excited to keep expanding the resources, time and product we donate to making Phoenix a better place to live for everyone.