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Today’s show featured an interview with Bob McCarthy, Managing Director at the Resident mattress company.
Find Bob on LinkedIn.
BOB’S ADVICE: “Have a story about how your product that you’re selling positively impacts your customer’s P&L. Being able to articulate how your product impacts the P&L of your customer is extremely important. Have that story nailed when you’re talking to your customer.”
THE PODCAST BEGINS HERE
Fred Diamond: We’re talking today with Bob McCarthy. Bob is with Resident, and they’re also the owners of the Nectar and DreamCloud mattress brand. Bob, I’m really excited to have you on the show. We’ve never had anybody from the mattress industry. When a lot of people think about the Nectar brand and DreamCloud, they think of the online mattress space. They think about what you’re doing there, but interestingly, you’re the guy over at Resident who is in charge of the B2B, selling your brands into the brick-and-mortar channel. Give us a little bit of an introduction. I know you’ve had a very, very successful career in the mattress industry. Again, you’re the first sales leader we’ve had from that industry. Give us a little bit of your background so that people understand what a career in the mattress space might look like in the sales profession.
Bob McCarthy: Thanks, Fred. Happy to be here and thank you for inviting me. Yes, I am a mattress guy. I’ve been in the mattress business since the mid-‘90s. Really had no intention of joining the mattress business at the time, but I was presented an amazing opportunity with a company called Simmons back in the mid-‘90s, and took the ball and ran with it and learned pretty quickly that the mattress industry is filled with amazing people, amazing retailers, and it can be a lot of fun. A mattress is a product that everybody uses. I’m a big hit at cocktail parties. Everybody wants to know what kind of mattress they should sleep on. Very, very popular question. But it’s been a really fun ride.
For the last five years I’ve been here leading the team at Resident helping to grow that footprint in brick and mortar. But prior to that, I said I worked at Simmons, got recruited to this little upstart company in 2004 called Tempur-Pedic. Had a great career at Tempur-Pedic for over 12 years. At the same time, we had bought a company called Sealy, which became Tempur Sealy, which is now the largest mattress manufacturer in the world. Worked with them until 2016. Then I caught the startup bug, and I think you’ve had Boomer Muth on your podcast before. Boomer convinced me to join him at, at that time called West Creek Financial, now called Koalafi, not really in the mattress business, but we really built that company on the footprint of furniture mattress and appliance retailers.
I spent two years with Boomer, helped him scale that company, and as a mattress guy, I really missed the product side of the business. I really missed having that tangible physical mattress product that I had been selling for over 20 years. I had heard through the grapevine that this upstart brand called Nectar had grown. In the two years that I was out of the industry, they went from non-existence to being a $200 million brand because they had this amazing algorithm that attracted consumers that were in the market to buy a mattress to come to their website and learn more about the product. I heard they were interested in going into retail. I reached out to them and said, “If you’re interested in truly going into retail, I just helped scale a startup. I’ve got 20+ years of mattress experience. I might be a good guy to take you there”, they agreed, and the journey began in August of 2018. We shipped our first products on the B2B side in December of 2018. I’m proud to say five years later that we have over 4,000 stores selling our products, and we’re probably one of the top five brands in brick-and-mortar retail now.
Fred Diamond: Over 4,000 retail partners. Again, most of the people listening to the Sales Game Changers Podcast are in B2B or enterprise sales, complex sales. Talk a little bit about how do you manage relationships with 4,000 retail partner stores? Obviously, you’re not going to be going into 4,000 stores a day. Well, you explain it to us. Do you deal with corporate Mattress Warehouse, and just give us a little bit of insight into how you sell as much of your product through the retail stores?
Bob McCarthy: My strategy when I came in was first to build a team of really amazing industry professionals. Well, we have about 20 people on the team right now, but they probably average over 15 years of experience in the industry. They have a lot of connections. They have built a lot of trust with their retail partners. We bring a lot of knowledge to the table. Our value proposition, the Nectar and DreamCloud brands are brands that really give you more for less. They’re well spec’d products for great prices. It really attracts a lot of attention to that online consumer. But we wanted to create a great experience for that consumer that wants to purchase offline, because while you get lots of eyeballs on your site, you only convert a small percentage of those people into actual sales, and then the rest sit in your funnel. Being able to drive that traffic into a retailer store was a huge value proposition that I knew we would have with our retail partners.
Then having an amazing team that can really get that engagement in the store, because it’s great to get that door to swing, but then you have to educate the salespeople on your product and make sure they understand what it is that they’re selling. We have to do that very creatively with a relatively small team. Other companies with 4,000 stores have hundreds of people in the field. We have 20. We have to do a lot remotely. We have to do a lot over Zoom or Google Meet. We do a lot of large in-person meetings. Very rarely do we just randomly walk into a store and say, “Hey, I was in the area.” We have to be very calculated, very planned, and really make the most of our time when we’re out on the field.
Fred Diamond: Let’s talk about your customer. Just to remind people who are listening to today’s show, who are some of the major retailers? Just give us the top two or three random ones that you focus on. Then I want to know what is the value prop for you to the corporate and then the value prop for the guy or lady who works at the retail store?
Bob McCarthy: We work from the largest retailers like Mattress Firm, or Raymour & Flanigan, or Rooms To Go, down to some really small mom and pop retailers. We’re a partner with Nationwide Marketing Group, where a lot of the smaller retailers pool their resources under the Nationwide umbrella. Nationwide’s been a great partner for us and that helps us really partner with some of the smaller retailers in the country too. But when you look at our mix, the 4,000 stores consist about 350 to 400 customers. There’s 350 to 400 customer relationships at the buying level. The 4,000 stores would equate to 15,000 to 20,000 people selling our products on a daily basis that we need to engage with.
That’s the really challenging part, managing the 300 to 400 buying relationships. It’s still not easy, but it’s easier. We have a pretty tight product line. We’re not like a Tempur Sealy, or Simmons, or Serta that has 50 or 60 different beds that they need to pick from. Our product lines are pretty tight. The value prop that you had asked about for the person on the floor, the value of us sending in that customer to swing that door, that’s a huge value that really nobody does better than the Resident brands. We will have more than 10% of the US population will visit our website annually. Almost all of those are in the market for a mattress.
When you can look at how often people replace their mattress, about 10% of the consumers every year will replace their mattress. If we’re getting 10% of the US population to view our site, we’re really talking to almost every in-market customer. What does that mean for a retail sales associate? When that door swings, they’re ready to buy, they’ve done their research, they’ve been visiting our site as well as others, they know what they want, they just want to validate it, and they want to hear from that retail sales associate that they’re making a good decision.
Fred Diamond: I’ll give you a second here. Give us the value prop of your product, of the Nectar product and of the DreamCloud product. You mentioned that you spend a lot of time at parties and people come up to you and ask you about mattresses, if you will. If someone said to you, “Why should I buy a Nectar product in a store?” What would you tell them?
Bob McCarthy: First and foremost, you have to go in and try it and make sure you like it. Comfort is a personal preference. I can’t say that this is going to be the most comfortable mattress you’ve ever slept on. That’s really up to the individual. But what I can say is for the price that we charge for our products, so on a side-by-side basis with other brands, we give you way more for your dollar. We use very similar products to everybody else that are going to help. When you look at the issues that people have, whether it’s a support issue, or a tossing and turning issue, or a temperature issue, we use virtually the same types of products that everybody else does. We’re just really efficient on the marketing side of our business, and we’re able to offer these products at a much lower price than everybody else. From a value standpoint, you really can’t beat the products that we offer. They do provide the same benefits that the other big national brands provide at much higher prices.
Fred Diamond: Again, your company has been very successful in the online space. You mentioned the numbers of people that have accessed your website, if you will. Talk about why you’re just not 100% online. You’re competing for some of this space. You talked about some of the challenges there. Do you feel that you’re under pressure to justify being in retail as you’re talking to corporate? Or is that something that comes up frequently, or not really?
Bob McCarthy: No, I don’t feel we’re under pressure. Selling at retail is very different than selling online. Selling online, in a lot of cases, it’s very binary. It’s a lot of ones and zeros. It either works or it didn’t work. When you have 400 different retail partners, everybody does it a little bit different, so there’s a lot of shades of gray, which as a data-driven company makes it a little bit harder for us to close that attribution loop. We want to know that the marketing dollars we’re spending are converting into sales either online or offline. When a customer visits our site and then they’re on that purchase journey online, when they go away to offline, we wanted to find out what happened. We were able to do that with some of our retail partners through sharing of data so we can see what happened to that person after they stopped looking at our site. But we don’t have it from everybody.
I think the pressure is to really be able to capture more data to make our algorithm smarter, to make us become even more efficient. But when you look at why be in retail, if you truly want to grow to be one of the top brands, you have to be in retail stores. Still, even today with the explosion of online retail, the mattress business is still about 65% to 70% is done in brick-and-mortar stores. I think a consumer really wants to meet their mattress before they take it home, as opposed to having it show up and then try it. Even though a lot of those objections are taken away with our 365-night comfort trial and our forever warranty, there’s really no risk for the consumer to buy it online, but I still think people want to make that last test drive before they take it home.
Fred Diamond: This might be probably the most ignorant question I’ve ever asked, and probably the most basic question you’ve ever been asked, but mattress stores seem to be ubiquitous. Wherever you drive, there seems to be three or four mattress stores, and then two miles down the road, there’s the same three or four mattress stores. Is that an illusion? B, is that just because everybody needs a mattress, or is there another reason why we keep seeing mattress stores all over the place?
Bob McCarthy: It is not an illusion. I think a lot of it has come from consolidation in the industry. When you look at 15 or 20 years ago, there was a lot more sleep shops. Primarily what you’re talking about is the sleep shop arena. When you look at the brick-and-mortar channels, you have mattress stores or what we call sleep shops, you have furniture stores that tend to also sell mattresses. Some of them do it extremely well. Then the third bucket would be your big box Costco, Sam’s Club, or other large retailers like Walmart or Target, which really aren’t as big of players in the mattress space. Costco and Sam’s Club are huge players in the mattress space.
On the sleep shop side, there’s been a lot of consolidation over the years. People have started chains that have been absorbed into other large chains. That’s really how Mattress Firm grew their footprint from being a strong regional player in the southeast when they started, to now they’re the largest retailer in the country, by quite a bit, with 2,500+ stores covering the entire United States.
Fred Diamond: If the sleep shops are, in most cases, carrying most of the major brands, how do they distinguish themselves? Is it purely location, where they are real estate wise, or is there something that we don’t know as the consumer? You don’t need to mention them by name, but do the sleep shop brands try to distinguish themselves? Is there a way they’re able to do that?
Bob McCarthy: I think they try. As an independent store owner, sometimes it’s hard to get the best brands. Sometimes they don’t want to compete with the large national brands, which means you’re not going to sell the traditional brands that you’re seeing advertised all the time, and they’ll move to more of a private label or a lesser known branded strategy where they’re able to do that more for less offering. Where if you’re comparing them side by side, they’re giving a really, really big value, a lot of mattress for less money, but they have to sell a little bit more to explain who’s manufacturing it and then what they’re all about. But those are also, in a lot of cases, still very good products. They’re just lesser known by the consumer.
Fred Diamond: I want to ask you two other questions. One is, I want to know what the future holds. By the way, for the people listening, you’re listening probably in 2024. We’re doing this interview in early 2024. I’m just curious about what the future might hold for your company in the B2B space. I’m going to ask you about the word that everybody, obviously in sales, is thinking about, which is AI. I’m not sure if you have a great answer for that, but I’m interested in some of your thoughts on how AI might play into some of the work you do. Let’s start off with the future. Again, we’re doing today’s interview in January of 2024. If you’re listening or reading the transcript, thanks. Bob McCarthy, give us a little bit of an insight and where do you think Resident will be going in the B2B space?
Bob McCarthy: I think we’re going to continue to grow. I think we’ll continue to launch new brands. I think we’ll continue to partner with more retailers. Right now, if you look at the top 25 retailers selling mattresses across the country, we partner with about half of them. There’s still a pretty sizable amount of that pond that we’re not in. We’re still a relatively small fish in a very, very large pond. On the direct-to-consumer side, we are the 800-pound gorilla on the direct-to-consumer side, and number one in the space. In order to become that bigger fish in the brick-and-mortar pond, we need to partner with some more retailers to do that.
Fred Diamond: How does AI play into what you’re doing?
Bob McCarthy: For me, when I look at it, it’s keeping those 20,000+ people selling our product on a daily basis engaged. How can we utilize AI to gamify, to make selling our product fun, but also educate that retail sales associate to make them excited about selling our brand? Because we have less boots on the ground. We have an amazing product. We send customers through their store. We’re checking a lot of the boxes, but there’s still a big relationship piece to this business. People who’ve been in this business for a long time, change is difficult. I think change is difficult in any industry. We came with a new concept five years ago with a smaller team, a pretty easy value prop for the associate to comprehend and to be able to articulate to a consumer. But still, at the end of the day, they’re going to sell to people that they see, and build those relationships with, and that puts us at a little bit of a disadvantage.
How do I use AI to help get that message out and make it more fun, I think is key for my side of the business. On the direct-to-consumer side of the business, the possibilities are endless of what we could do with AI on the direct-to-consumer side, but I’m really focused on getting that engagement from those 15,000 or 20,000 people in the field every day.
Fred Diamond: Bob, before I ask you for your final action step, we need to cover something else. People may not know this, but you are a very highly ranked amateur pickleball player.
Bob McCarthy: I am, yes.
Fred Diamond: Pickleball is ubiquitous now. Of course, it’s all over the place. Would you mind talking about pickleball for a little bit?
Bob McCarthy: I’m happy to.
Fred Diamond: Give us some insights on two things. One is, how has pickleball made you a better sales professional? Again, you talked about relationships before. One thing we talk a lot about is the elite sales professionals, your mind’s got to be sharp, your body’s got to be sharp, you got to eat right, et cetera. I had some major league baseball players on the podcast. I’ve had some high-performance basketball coaches. Talk a little bit about pickleball and how that plays in your excellence as a sales leader and sales professional.
Bob McCarthy: For me, it’s done a couple of things. I don’t want to sound overly dramatic, but pickleball might have saved my life, to be honest with you. When I started playing, I was ahead of the curve playing pickleball. My wife actually introduced me to it, and at the time when she started playing, I was about 350 pounds, was still active, but I wasn’t taking care of myself. I was in my mid-40, 350 pounds. I was on cholesterol, I was on high blood pressure medication. If I was going down that path that I was on, I don’t know that I would’ve made 55. It’s quite possible that I would’ve had a heart attack or diabetes, something was going to catch up with me. I love food, I love to eat, love to have a few beers, so making a lifestyle change was hard.
I started playing pickleball one day and quickly found out that I might be good at it. I had never played a racket sport in my life. Then I started to meet really amazing people playing the game, and made truly lifelong friends playing the game. It became my release, when you have a bad day at work, to be able to go out and do it. But then I noticed every time I’m doing it, I’m getting a ton of exercise. I’m playing for two hours, getting 8,000 to 10,000 steps, burning 1,200, 1,500 calories, like, “This is a good workout.” Then I started playing competitively in 2018 and started to win some tournaments and have two amazing partners, one male, one female, that we travel around the country for tournaments and we just have a great time. We’ve become best friends and it’s really been a life-changing activity for me.
Fred Diamond: I always ask this question of athletes who are very good at something. When you’re on the pickleball court, what do you look at? What are you thinking about? Are you thinking about two plays down the road? Are you thinking about hitting it as hard as you can? If you don’t mind my asking, what is your mindset when you’re on the court, in a competitive match? Not when you’re just putzing around with a neighbor or something, but when you travel to wherever and you’re playing with one of your partners and you’re playing at a high level, what is some of the mindset out there?
Bob McCarthy: I’m the analytical guy and it’s made me very successful on sales. It’s made me very successful in pickleball. When you look at the art of war, you want to take away what your opponent wants to do and take that. The one thing they want to do, take that away from them. I’ll try to do as much research on our opponents as I can, find out, do they want to play fast? Do they want to play slow? Whatever it may be, we want to tailor our strategy to make sure that we make them uncomfortable, whatever it may be. I’m fortunate that both of my partners, we can play any game we want to play. If we want to play a fast game, we can play a fast game. If we want to try and slow things down and wait for them to make a mistake, we can do that too.
Using whatever data I can find, and as the game gets more and more popular, you can see recent tournaments that your opponents have played in, who have they played against, have I played against those other people? What were those results? I can put together as much of a strategy as you can. When you’re playing doubles, you also have to find out who are we targeting? You want to figure out who the weaker player is and go after that person. If you can control the ball, you can make sure that the best player doesn’t get as many shots.
Just being strategic I think has made us successful. I’m not the greatest athlete in the world. In my mid-50s I’m a pretty good athlete, but compared to some of the people out there, and when you play at a high level, sometime we’re playing people in their 30s. There’s just not enough high-level players to fill out an age bracket over 50. Sometimes we’re playing people 20s, 30s, 40 years old that are significantly more athletic. We have to figure out a way to make one plus one equal three, and just work as a cohesive unit. So much translates into sales or business. It’s the same thing, like how do I make the sum of my team be greater than 20 people? It’s the same strategy.
Fred Diamond: Obviously, golf is something that has always been big in sales. You want to bring your customer out to the golf course and all those kinds of things, so you need to play good at golf. Is pickleball becoming that? Is pickleball becoming something where you can invite a customer out to? It’s interesting. You’re obviously a competitive player. You’ve won a number of tournaments, you don’t want to beat your customers butt on the court if you will, but you could probably make it social. Is pickleball becoming that? Have you seen that with pickleball?
Bob McCarthy: It’s very social. When I look at it, there’s the social part and just going out and playing and having fun and getting some exercise, and then there’s the competitive part where you just want to get better. When you’re in that get-better mode, you want to play against people that are better than you and try to rise to their level. But in the social side, just to go out and have a good time and really introduce more people to the game is equally as rewarding. When you’ve been playing for a while and you start playing with some new people that maybe aren’t as good as you, and then all of a sudden, two or three years later, they’re better than you, that’s rewarding in a way, too.
I think there’s both, and I have not gone out and played pickleball with customers at this point, but I know there’s some talks about some upcoming conferences about in addition to a golf event, having a pickleball type event where it’s just fun and social and learn the game in an environment where we’re just out to have fun. I think that those days are coming, but still roughly I think the latest stat was about 30 million people picked up a pickleball paddle last year, which is a lot of people. It’s up from when I started playing there was less than two million people playing.
Fred Diamond: 30 million is one-tenth of the country. My health club just tore out the basketball courts and they’re converting 100% to pickleball at the Lifetime Fitness. It’s definitely taken over. Once again, I want to thank Bob McCarthy with Resident. Thank you so much for the great insights into the mattress industry. Again, you’re the first person in close to 700 shows that we’ve talked about this with. Also, thanks for giving us some insights into pickleball, which comes up more and more in conversation as well. I just want to acknowledge you for the insights. Again, you worked with West Creek with our good friend, Boomer, who’s been on a couple of shows. I’ll put the link to his shows in there as well.
Give us a final action step, something specific. You’ve given us a lot of great ideas, but give us something specific that the sales professionals and sales leaders listening to today’s show or reading the transcript can do right now to take their sales career to the next level.
Bob McCarthy: I think the thing that’s made me the most successful is having a story about how your product that you’re selling positively impacts your customer’s P&L. Because that’s, at the end of the day, whatever the KPIs that they’re measured on, your product has an impact on those KPIs, and it could be in a different way. When I was at Tempur-Pedic, it was all about average ticket. Their average sales are $3,000, $4,000, or $5,000. While it may not be the highest margin product on the floor, it was delivering a ton of gross margin dollars. Then when I moved to Resident, now we’re talking about a product that delivers customers through the door. If you’re a sleep shop, that’s very, very valuable. If you’re a furniture store, it’s even more valuable, because that consumer is going to buy a dining room set, a living room set. The lifetime value of that product on the furniture store side is very strong. Being able to articulate how your product impacts the P&L of your customer is extremely, extremely important. I would spend a lot of time having that story nailed when you’re talking to your customer.
Transcribed by Mariana Badillo