Maggie – this was a really great post! I was always curious to learn how Spirit was able to operate (and quite profitably!) while garnering such low consumer satisfaction. I understand their target consumers are price sensitive, but do you think they could offer more services to attract the higher-end consumer as well? For example, perhaps they could charge more for seats that recline and have more leg room. Given that I am 6’4″, I would pay a premium for additional space and thus prefer to fly other commercial airlines.
Finally, why aren’t there other airlines adopting a similar strategy? Does Southwest run a similar operating model?
Great post, “Sleepy”. This past August, I was in the market for a new mattress and spent a significant time learning about each of these companies and their product offerings. This was my first exposure to this new online mattress start-up concept. During my search process, I focused on three things: trialability, price, and delivery time.
Given that people spend ~30% of their days sleeping, mattress quality and comfort are critical. Therefore, I think the #1 concern for consumers is trialability. To this point, do you think setting up small showrooms in urban areas would be helpful? I understand there is a comprehensive return policy, but is that enough for consumers to trust online mattress companies?
I think the single price strategy is great. Although some companies offer discounts, I think the consistency really does give consumers “piece of mind”. Furthermore, consumers are generally looking for a mattress in short order, so discounts will unlikely encourage faster decision making anyway.
I also noticed that most of the companies sold their mattresses for roughly the same price. Do you think either of them have any manufacturing advantage or is it scale that will drive margins?
Finally, delivery time is also very important. I ultimately went with Brooklyn Bedding because they were able to guarantee delivery within 2-4 business days. Retail stores are able to deliver even faster which is why I don’t think they will ever be completely disintermediated. However, what do you think will happen to the Sleepy’s of the world? How will they compete of even stay in business?
Great post, Ni – you have clearly laid out the business and operating models as well as captured the context of the 3-tiered system. I think it is interesting how the company has been able to operate in such a regulated environment. While they have discover a workaround, it would obviously be optimal for them to dominate the entire transaction ecosystem, owning the payment and data. Do you think that this will ever be possible? It seems like this is a regulatory issue so will laws evolve?
Also, I really like the subscription service nature of the business. Drizzly is essentially acting as a broker, but not dependent on transaction volume, right? This steady, recurring revenue stream and low working capital requirements (since they don’t hold inventory) certainly will make this business more attractive from a private equity perspective, further pushing up valuations.