Like any other consumer goods sector, the mattress industry is also facing the rapidly shifting economic scenario in the recent years. Various factors like rise in inflation and interest rates and ever changing consumer behaviour are playing their role in changing the mattress market dynamics. However, the mattress market is adopting various strategies to keep up with these demand changes from both the customers as well as the broader economic environment.
In this article, we will throw light on the economic changes that has affected the global as well as Indian mattress industry and how the mattress industry is keeping abreast with these changes to ensure continued growth and profitability even in the highly unpredictable times.
Key economic changes
1. The lipstick effect of economic slowdown and its relevance to the mattress industry
The global economy is experiencing a slowdown since past few years. This is due to a number of factors like the inflation, trade wars, COVID-19 pandemic etc. In this scenario, there emerges a unique phenomenon in the consumer behaviour domain and it is known as the lipstick effect. Typically, the term lipstick effect is used to describe a situation where instead of cutting down on all higher expenses, customers often choose to treat themselves by engaging in smaller indulgences and postponing the larger purchases. So, instead of spending on luxury or premium cars or expensive gadgets, customers move towards smaller and affordable products such as beauty products, or, high-quality sleep solutions in case of the mattress industry. Given this, the global as well Indian mattress market may see some unexpected benefits from the lipstick effect.
Well, the idea of investing in good sleep quality which is an essential, yet indulgent area would become more attractive in the coming years. So, more and more customers looking for affordable ways to make their lives better even during the financial strain would buy new mattress which offers unique combination of necessity as well as luxury.
Simply put, the lipstick effect may lead to rise in interest for mid-range or slightly more expensive mattresses because customers would not be hesitant in investing in quality sleep even during stressful times like these. Despite the shrink in discretionary spending, customers would want to buy mattress products that enhance overall comfort and well-being.
2. Inflation and rising raw material costs to affect the mattress industry:
Inflation has become one of the most important economic factors influencing the overall mattress industry in the recent years. In fact, due to rise in prices for raw materials and even shipping, the mattress manufacturing production cost has drastically increased. Further, inflation has also affected the supply chain and hence, with no choice remaining, companies are forced to increase their retail prices to cover these costs. However, in a market where customers are already very conscious about the price due to the prevailing economic uncertainty, price hike remains a risky proposition. So, in order to mitigate this risk and maintain an edge in the competition, more and more mattress brands globally as well as nationally are directing their investments towards innovation, so as to focus more on products that deliver quality yet being affordable at the same time. What more? Many mattress manufacturers have also started opting for alternative materials to mitigate the cost and pass the savings to their customers.
3. Rising interest rates and its impact on the mattress industry:
Another factor that has hugely impacted the mattress industry is the rising interest rates which have modified the customer spending on the mattresses. With the increase in the borrowing costs, customers are opting for more affordable options and the mattress industry is also feeling this effect. In order to counter this issue, many mattress companies are now opting for financing solutions that are flexible. In the past year, many brands offered Buy Now, Pay Later (BNPL) solutions to their customers offering interest-free instalments or longer payment terms to encourage more purchases, so that the customer scan manage to buy the new mattress even when the interest rates are high. Srinivasan Sundaerasan, Secretary, ISPF, avers, “In India, like many other products, the mattresses are now increasingly being offered on an EMI basis. So, even the customers who could not afford a costly mattress earlier are now looking to buy a luxurious mattress.”
4. Supply chain disruptions’ impact:
Many far-reaching and long-term economic changes occurred due to the COVID-19 pandemic previously. In case of mattress industry, the global supply chain was majorly affected due to this and the effects can still be seen. Even today, mattress companies are feeling the residual effect of the logistical challenges. Issues such as delays in procuring raw materials to hurdles in transportation, manufacturers are finding it very difficult to keep up with the demand as well as maintaining profitability.
Here, it needs to be noted that the geopolitical uncertainty has also impacted the mattress industry and affected the supply chain, in particular. The war in Ukraine, the Israel-Hamas conflict, and attacks in Yemen has further intensified the global macro-economic conditions, thereby, impacting logistics and transportation issues. It has also increased the production costs due to difficulties in sourcing human labour.
However, now gradually the global mattress manufacturing companies are diversifying their supply chains and localising production to reduce the reliance on overseas manufacturing. Even advanced manufacturing techniques are employed by the companies to streamline production and reduce dependency on human labour.
In India too, the mattress manufacturers are increasingly relying on locally sourced materials in line with the broader trend of supporting domestic products. Even the Indian government’s novel initiative of ‘Make in India’ has furthermotivated the mattress industry to emphasize on local manufacturing which is helping the industry as a whole.Basically, mattress manufacturing companies in India are taking all the efforts to produce the mattress completely locally.
5. Changing global trade landscape’s effect:
The trade landscape has changed essentially on the global front. Particularly, US trade tensions and anti-dumping policies, particularly against China and other export-oriented countries have heavily affected the mattress industry. In fact, these issues have disrupted trade flows and influenced mattress companies’ decisions on inventories and supply chains.
Some other global trends include the decline of China’s dominance in US mattress imports, leading to Chinese mattress exports directed to the Asian markets such as Japan, South Korea, and Australia. This globally changing trade landscape is bringing about a lot of changes in the mattress market and the leading mattress manufacturers are trying to adopt a diversified manufacturing strategy to navigate these challenges.
6. Global market consolidation and innovation in mattress segment:
Given the current economic changes, increased consolidations in the mattress manufacturing segment would be the new trend. Essentially, the large and well-established companies would acquire the smaller as well as niche players to expand their product offering and market presence. This would allow the bigger brands to introduce new innovations quickly, lead to better access to wider distribution channels and strengthen their supply chains.
The idea of investing in good sleep quality which is an essential, yet indulgent area would become more attractive in the coming years.
A word on indian mattress industry
While the global economic changes have affected the Indian mattress industry, the economic changes in the country itself have also created a huge impact. Let’s take a look at them.
With the government taking many steps to give a boost to the residential housing segment in the country, the demand for mattress is bound to increase in the Indian market scenario. Sundaerasan, notes, “With more and more people moving out of small cities to bigger cities and buying new homes, there has been a surge in deman for mattresses. Even in small towns and villages, people are revamping their homes and looking for more comfort, thus, old mattresses are being replaced by new and better ones and thus, the mattress industry segment is rising at a fast pace in the country. In fact, many prominent brands have entered the tier-3 and tier-4 cities.”
With various economic reforms and increase in salaries, particularly in the urban areas and metros of the country, Indian customers are now equipped with a higher purchasing power. So, mattresses which were earlier seen as merely a basic necessity are now being seen as something essential for promoting overall well-being. This is leading to an increase in demand for premium and luxury mattresses in India.
After the Covid-19 pandemic and due to other economic changes, there has been a shift in the consumer preferences. “Customers are now looking for mattresses that promote good health. So, in India, demand is increasing for orthopedic and memory foam mattresses. In addition, economic prosperity in the country is only propelling this growth further and customers are willing to pay a premium for health-oriented products,” Sundaerasan clearly points out.
The online shopping trend which gained momentum after the Covid-19 pandemic has only increased further and as a result, mattress industry is also growing fast in the online space. Mattress customers these days prefer to browse and purchase the mattress online and now many mattress brands are offering Direct-to-Consumer models that bypass traditional brick-and-mortar stores. In fact, all the premium brands have their online presence now and they are looking to address all the concerns of their customers through online assistance and other virtual programs. Almost all the mattress varieties offered by the mattress brands are available online.
In a nutshell
Economic changes on global as well as national levels are undeniably affecting the mattress industry in multiple ways. As the mattress industry sales went through the various economic changes in the recent years, it is bound to face various challenges in terms of inflation, rising interest rates, supply chain hassles and evolving customer preferences. In such times, only the industry’s adaptability, coupled with a focus on value-driven as well as sustainable products and innovation will help them pass the test of time. Further, by focussing more on the flexible financing options and eco-friendly products and online marketing, the mattress industry brands would be able to thrive successfully even in the uncertain times.
If we talk about India particularly, then the Indian mattress segment is poised for a continued growth despite the global economic factors negatively impacting the mattress segment. The rise in disposable incomes, urbanisation, growth of the residential housing sector and increasing focus on health and environment-friendly products, the mattress segment will only see a rise in the coming years. In fact, by clearly understanding the ever-changing economic dynamics and consumer behaviours, Indian mattress manufacturing market can prosper much better as against the world mattress market.