Wakefit gave legacy mattress players a back pain. But can it stay a disruptor?

A tech professional, Vinesh sat down multiple times on a king-size ‘orthopaedic’ memory foam mattress in the store that also stocked bed frames, coffee tables, dining tables and three-seater sofas.

He is a ‘repeat’ customer—previously, he bought a coffee table and two sleeping pillows from Wakefit, a mattress startup that also sells furniture now. Vinesh wanted to replace a five-year-old foam mattress made by Kurlon.

“I have tried multiple mattress brands before. I used Kurlon for the longest time. Recently, I bought one from Sleepyhead (another mattress company) for my 70-year-old mother. The new brands are good," Vinesh said. Wakefit’s products are good value for money, he added. “The coffee table is aesthetic, while the pillows have retained their original shape," he said, adding that he believes the mattress he tried out won’t disappoint.

In the last few years, young India’s shift to new mattress companies, fuelled by a steady stream of venture capital funding, has been nothing short of spectacular. Wakefit, particularly, has been a leader—the startup grew its revenue 12 times in the last five years, ending with nearly ₹1,000 crore in 2023-24. This fast rise has troubled legacy players.

Take Kurlon, for instance. The company is over six decades old, having started in 1962 as Karnataka Coir Products Pvt. Ltd in Arsikere, a town in Karnataka. In July 2023, Sheela Foam Ltd acquired Kurlon. In 2023-24, it generated consolidated revenue of ₹819 crore, lower than Wakefit, a company less than 10 years old.

Wakefit is giving a tough fight to Sheela Foam as well, a far larger and more diversified company—triple the size of Wakefit on a consolidated basis. More on this later.

How exactly did Wakefit do what it did?

Idea from a wedding

Wakefit started in 2016 when co-founder Ankit Garg was trying to set up his home as he was getting married.

A chemical engineer by qualification, Garg had a background in foaming, having worked at Bayer Material Sciences, a German multinational that is a key raw material supplier for foam making. While shopping for mattresses, he noticed a huge gap between the cost price and the retail price of foam.

Along with Chaitanya Ramalingegowda, Wakefit’s second founder, he started researching the market. The duo noticed that Casper, an American direct-to-consumer (D2C) mattress company, founded in 2014, had started to do well. The online channel, mostly known for smaller goods such as electronics, could also work in India for sleep products, they thought. But they grossly underestimated the market.

“We thought it would be a ₹20-30 crore business in five-six years," said Ramalingegowda, sitting at T’ART Cafe on Bengaluru’s Brigade Road.

The industry, similarly, didn’t think they could make it big. Once, the founders approached two legacy mattress players for investment. “They did not give us a meeting because they thought online was never going to become big," Ramalingegowda, a former computer science engineer and management consultant, said without naming the two companies.

Fast forward to 2024. The company has found backing from some of the top investors in the country including Peak XV Partners, Investcorp, and SIG Venture Capital.

Don’t overpay

The secret to Wakefit’s disruption was the channel they picked—D2C. This sales channel cut out the middle men, thus reducing prices for the consumer.

Here’s what legacy distribution looks like. In Bengaluru, there are at least two levels of middlemen between the brand and the customer—one major dealer and then individual retailers. In smaller cities, it gets more complicated with up to four levels of middlemen. “With the traditional products, customers were overpaying by between 20% and 45%, depending on the model, as everybody was adding their own 2%-8% margin," Ramalingegowda said.

Aggressive pricing from Wakefit and other D2C mattress companies forced down the industry’s average selling price, said an industry executive who didn’t want to be identified. “Older brands used to price mattresses starting at ₹20,000 and it went up to ₹50,000. Now, you can easily get a good quality mattress even for ₹10,000," the executive said.

The orthopaedic memory foam mattress Vinesh was testing out in the Ejipura store is currently available for ₹13,000 on Wakefit’s website, which is running a discount.

“When someone moves from unbranded to branded mattresses or is trying out a mattress for the first time on e-commerce, they tend to go for a lower pricing. This is what worked for Wakefit in the initial days," said an investor in the company who didn’t want to be identified.

Mattresses also have a ‘try for 100 days’ offer. According to some company employees Mint spoke to, this was the game changer. People can just return a mattress if they don’t feel comfortable sleeping on it and get their money back. This unlocked a bigger market.

For the spine

The investor quoted above also pointed to the startup’s uniqueness. What Wakefit has done isn’t innovative, but they have re-engineered the product. “They were able to manufacture a foam mattress at ₹4,000-5,000 and sell it at ₹7,000. Getting the foam with different chemicals etc is where the re-engineering happened," the investor said.

“Our mattresses have had different combinations of layers at different points in time, and the innovation happens at a deeper material sciences level," Ramalingegowda said. “We have explored various materials based on consumer preferences and feedback and understood how different formulations, airflow, and densities create optimal comfort for Indian consumers."

The current version of the orthopaedic mattress is in its 22nd version. When the company started, its differentiation was in the top layer of the mattress, which used a proprietary foam that had large cells for better ventilation. The middle layer had the softer memory foam, which took on the body’s shape, while the third layer was made up of hard foam. The combination of the layers supported the spine better.

Mattress fights

How did all these disruptions impact rivals?

Here’s a peek. Sleepwell generated revenue of ₹874 crore in 2022-23, according to its annual report. The same year, Wakefit generated mattress revenue of about ₹618 crore, according to Mint’s calculation based on Tofler data and interaction with the company. The difference in revenue with its bigger rival was just ₹256 crore.

Sleepwell (Sheela Foam) then bulked up because of its acquisition of Kurlon. The combined entity totalled revenue of ₹1,053 crore in 2023-24. In comparison, Wakefit generated mattress sales of ₹690 crore.

While the revenue gap has widened, the threat is perceptible. In its annual report, Sheela Foam noted that the Indian mattress market is becoming increasingly competitive, with both established players and start-ups vying for market share. “This competition may trigger price wars and put pressure on profit margins," it warned.

Other D2C players think legacy players are burdened with complicated product portfolios. “The go-to-market is so reliant on retailers and distributors that there is no investment on consumer brands, educating consumers, importance of sleep, etc. None of the legacy players are able to grow," said Priyanka Salot, co-founder of The Sleep Company, the second largest player in the D2C mattress space. The company generated operating revenue of ₹127 crore in 2022-23 and claims to have clocked ₹335 crore last year.

A Sleepwell executive who didn’t want to be quoted said that the company is doubling down on offline sales while trying to expand its digital presence.

“We have launched new products quite quickly in the last few months. We are in the process of launching about 15 plus models in four-five ranges, which is a big thing in one single shot. We are upgrading our entire range as we feel the necessity to stay way ahead of the competition," the executive added.

Sleepwell did not respond to queries sent by Mint.

Promise and peril

Having disrupted the market, what challenges does Wakefit face? It is linked to its next phase of growth, both promising and perilous.

In 2022, the company forayed offline, setting up stores like the one in Ejipura, going head-on with the established players. But just selling mattresses won’t be enough to sustain a store. Wakefit ventured into the furniture market, which is a far bigger opportunity—according to data from Mordor Intelligence, the Indian furniture market is currently valued at $24 billion compared to just $2 billion the mattress market totals. Furniture has a higher average selling price (ASP) compared to mattress or cushion.

“In offline, with mattresses alone, you can’t maintain sales per square feet and if you just stay online, you won’t become more than a ₹1,000 crore brand," said the investor cited above.

But offline stores come with their own set of challenges—rentals being the biggest of them. “If you want an exclusive showroom today, the rental space is too costly. They will have to depend on investor money for short-term business. Unless they find a way to generate profit from each of these stores, they will not be able to sustain it," said the Sleepwell executive quoted above.

The foray into furniture has other bottlenecks, such as logistics and production. “Mattress production is easy because it’s automated. For furniture, depending on the design, you need minimum order quantities. Ramping up the production facility is a task and having a larger catalogue is also a task," said the investor.

Wakefit manufactures furniture from its factory at Hosur.

Analysts agree with the view. Expanding the home decor category would involve solving for and managing supply chain complexities besides ensuring consistent product quality across diverse categories, said Ashish Dhir, senior director, consumer and retail, 1Lattice, a research and advisory firm. “Wakefit has increased its offline retail presence from 10-15 stores to over 92 plus stores across 33 cities, which requires robust logistics and quality control systems. Additionally, maintaining customer trust and ensuring seamless transitions between categories are crucial," he said.

Wakefit’s struggle is visible when you scan customer reviews on e-commerce sites. A bed with storage made of engineered wood has nearly 19,000 ratings on Amazon. An overwhelming majority—nearly 90%— have rated it 4 star and above. Buyers who have rated the product 1 star have complained about “low-grade particle material", “poor installation in cities without a Wakefit store", and delayed deliveries, among others.

Ramalingegowda is aware of the challenges. He wants to steer the company differently in its next phase. “The way we built this ₹1000-crore company is not going to be the way we will build a ₹3,000 crore company," he stressed. Furniture and mattress categories behave like two different companies and a centralized decision-making structure can slow it down, he added.

“We have to innovate by employing more entrepreneurial people," he further said. “Just like we disrupted an older industry, somebody else can disrupt us."

With inputs from Sowmya R.