Two experienced e-commerce entrepreneurs have just launched Vancouver’s newest online store – one that they hope will disrupt the traditional bedding retail sector.
Industry analysts, however, are skeptical.
Brad Westerop and Fraser Hall know that their new company, Bedface, faces competition from the likes of established e-commerce players Brooklinen and Parachute Home. They also have to compete against bricks-and-mortar behemoths, such as Bed, Bath & Beyond (Nasdaq:BBBY), which also have online stores.
They believe, however, that they can compete, in part, because of some innovative aspects to their business strategy.
For example, they guarantee customers the ability to return their sheets, duvet covers, pillow cases and other items for up to 100 nights even if the products have been used and washed.
“Every month we’ll wash those returned sheets and then donate them to local homeless shelters,” Westerop told Business in Vancouver January 7. “That’s the plan. We’re trying to make sure the safety and cleanliness is there.”
He and Hall are both serial entrepreneurs who have each put about $100,000 into Bedface. They have so far spent about half of that on things such as their website, warehouse and on product development.
Westerop, who is 30 years old, generated much of that investment from his adult sweatshirt company Thuggies.
Hall, 36, operates the furniture e-commerce venture Bryght.com and was a co-founder of the heads-up display company Recon Instruments, which was sold last summer for an undisclosed sum to Intel Corp. (Nasdaq:INTC) .
The duo are using a warehouse in East Vancouver’s Railtown neighbourhood to store product that they contracted a Chinese manufacturer to make.
“We had a fabric in mind,” Westerop said. “We told them the technical details and then they wove it, dyed it and sewed it.”
All orders that are more than $50 include free shipping as well as free shipping on returns.
Challenges remain, however.
Other entrepreneurs who have entered the online bedding space have pitched their ventures on TV shows in attempts to get capital.
Brooklinen co-founder Rich Fulop, for example, faced venture capitalists on FoxBusiness’ Risk & Reward in late 2014.
One of the concerns that Catalyst Investors managing partner Brian Rich had for Fulop was that Brooklinen was in a sector that had a low-cost barrier for entry. That means that competitors, such as Bedface, were predictable.
Rich was also concerned that Brooklinen customers would not need to buy bedding very frequently. As a result, the company’s cost to acquire each new customer would be comparatively high.
Fulop responded that his expected cost to acquire each new customer would be about $30 – a price that Westerop believes is quite low.
“We have a budget of up to $50 for each new online customer,” Westerop told BIV.
To encourage repeat business, there are incentives to refer friends.
For each referral, Bedface gives a $15 credit both to the friend and to the person doing the referring.
Retail analyst and DIG360 Consulting principal David Gray told BIV that he is not that familiar with Bedface but he thinks that succeeding will be a challenge because customers have plenty of options to buy sheets.
“They’re in an incredibly tough situation,” he said. “You could go to Ed’s Linens and get stuff cheaper than [Bedface]. I don’t know what problem they’re solving.”
One niche that Gray thinks would be smart to target is the burgeoning industry of Airbnb operators. For that sector, he said, any upstart linen-seller would have to provide volume discounts.
“We will have volume discounts,” Westerop said.
“We’re looking into starting with boutique hotels in Vancouver and the Pacific Northwest. Obviously, we won’t supply the Sheraton but for boutique hotels, we’ll be a great fit.”