Shoptalk 2024   //   March 19, 2024

‘Vision is irrelevant’: Casper’s new CEO Joe Megibow on its updated turnaround plan

In its attempt to become cash flow positive following its ill-fated attempt at going public, internet mattress pioneer Casper tapped a former competitor to be its new CEO.

Joe Megibow, who officially became CEO of Casper on March 1, took over from Emilie Arel and was appointed in late January. He previously held the top spot at the mattress brand Purple for seven years, as well as executive-level roles at Bright Cellars, American Eagle and Expedia.

Megibow is charged with turning Casper into a sustainable business model that spans its DTC stores, online sales, independent mattress showrooms and mass retail like Amazon and Costco. Megibow told Modern Retail this requires going back to basics, like improving customer service and showcasing its research-backed product development.

“[Casper] was always in growth mode, it always had a lot of investment. But it wasn’t a business that was producing cash,” Megibow told Modern Retail. “At the end of the day, the only way to have a long-term business is to have a business that’s right side up and is profitable. And that that had been something that had eluded Casper.”

Casper, which turns 10 later this year, came up as a DTC darling. It went public in 2020 with a $1.1 billion valuation, but even then showed signs of weakness, like having to slash its IPO price range upon its debut. In early 2022, private equity firm Durational Capital Management acquired Casper after the stock price fell below $7.

These days, Megibow said Casper aims to become cash flow positive by the second quarter. Sales are roughly split between its online and retail stores and its wholesale presence, which includes independent mattress companies and mass retailers like Amazon and Costco. In addition to improving day-to-day operations like customer service, logistics and wholesale strategies, Megibow said Casper’s latest product lines that boast new supportive and cooling technologies could help the company stand out in a crowded field.

“Casper has always been a big vision company. In the early days, they used lines, ‘We’re going to be the Nike of sleep.’ And I mean, I love that vision. and I think sleep warrants that kind of vision. But that’s earned. That’s not just spoken. And right now, in turning around the business, vision is irrelevant. We don’t need a vision right now. It’s all about execution, and aligning everyone in the same direction around really high-performance execution,” he said.

Modern Retail spoke with Megibow at Shoptalk, an event Megibow attended this year to promote the brand’s new product lineup and in-store experiences with retail partners.This conversation has been edited for length and clarity.

Why did you decide to get back into the mattress business and join Casper at this moment in the company’s history?
At Purple, I got warmed up. At Casper, I’m really looking to go the distance. I have enormous passion for sleep. Unlike many consumer categories, you can drive a lot of consumer satisfaction… There are very few categories that you can really make a claim that you can improve people’s lives.

At the end of the day, my observation is [that the mattress industry] became a commodity race for the bottom. Or, [it was] just capturing sales on fairly ordinary inexpensive mattresses, which is getting away from the mission of: ‘How do we actually have people sleeping better in meaningful, measurable ways?’

It also is getting away from what I think has been lacking, which is a true consumer-centric view on how we are really trying to build product around the customer and the customer’s needs.

What is the main strategy of Casper’s turnaround plan?
Right now, that is [being] laser-focused on the product we sell today and on our customer today, and making sure everything we are doing, every person in the company, is marching in the same direction around building a sustainable business.

As an example, we’ve had a bunch of customer feedback loops where customers send us feedback. And some of it’s great — genuinely, ‘This is the best product, you’ve changed my life,’ kind of commentary. And we live for those kinds of comments. But a lot of the comments are negative — somewhere, somehow something went wrong.

One change I’ve made is every member of the senior leadership team is getting summarization of these comments every single day… Every one of us needs to be close to our customer. Every one of us needs to feel every opportunity we have to continue to relentlessly improve.

It may sound silly, but we’ve had customers who maybe are in their 50s or 60s who didn’t even understand we were going to ship through a common carrier and assumed a truck was going to show up and set it up for them. Because that’s what a traditional retailer would do… It can be little things that can have huge impact for some of our customers.

How has the mattress market changed since Casper launched and your days at Purple?
When I joined Purple, about six years ago, [the mattress industry] was on the upswing. There was almost zero barrier to entry in the space, there was an endless supply of Chinese manufacturers who were willing to basically help prop up a business with almost no capital upfront and almost no requirement to run the business… We were tracking back then [that] over 300 players entered the space. It’s proved to not be sustainable, as often is the case and there’s been a lot of consolidation [like Tuft & Needle merging with Serra in 2018, then Tempur-Sealy’s deal with Mattress Firm].

The number of scale players left is dwindling. And you’re in the need to differentiate is higher.

What are some of the ways you are strategizing the wholesale operation given the competitive market?
We’ve built and just rolled out in the last few weeks an assortment [of mattresses] that go together and have clear step-up and stories and differentiation across them, which is part of what you need to have relevance in wholesale. How can I have 2, 3, 4, 5 mattresses on the floor and have it still tell a story as a brand?

Most of the major brands and most of the mattresses sold in the stores are exclusive to that retailer, which means it’s very hard to cross-shop because you’re not really comparing apples to apples. You’ll find two mattresses that seem awfully similar, but they’re slightly different names, very different price points. And you can’t really reconcile whether it’s because one of them’s actually that much better, or is it just that store? This is where the consumer isn’t at the center.

And there’s even gaming that can happen. Some retailers will do things like price match or price guarantee, where if you find this mattress anywhere else will match or give you 10% of the difference. Those kinds of common retail promises. But that only works if you’ll ever find the mattress anywhere else.

I just look at that and I’m like, ‘Where is the consumer in this equation?’ So we have fewer mattresses that are more consistent across all partners. It’s a balancing act. Our wholesale partners would love to have exclusives. It’s: how do we find a balance where we’re able to service wholesale partners enough to be relevant and successful for them but not lose sight of really doing the best we can for our customers?