More on the mattress racket MAR 19 2014
I wrote a post the other day about how name-brand mattresses are a scam and lower-cost alternatives. In a 2009 interview with Terry Gross on Fresh Air, Josh Kosman provided one reason why mattresses are so expensive: private equity firms.
In the mattress industry, private equity firms bought Sealy and Simmons, the number one and number two brands by a mile. They stopped really competing against each other. They cut costs, and they raised the prices of the mattresses. They started focusing only on the top end and stopped even making mattresses really for middle-income people that cost less than $1,000. So basically simplifying this over time, as they bought Simmons and sold it to another PE firm three or four years later, and same with Sealy, the buyers -- the sellers would make a lot of money, and the buyers felt, well, we can keep raising prices because there's no competition. We own Sealy, and we own Simmons. It's different firms, but they both have the same aim: to make a short-term profit, not to beat each other up on price. What happened over time was they couldn't raise the prices anymore, and the prices were raised double the price of inflation, double the rate of inflation. They cut the beds in half, so you came up with no-flip mattresses. That cut their manufacturing costs, but it also...
...it also sent their earnings soaring, even though the beds don't last as long. (thx, @gokari)