SCHERERVILLE | If you're looking for a new place to rest your head, you’ll get whiplash driving down Indianapolis Boulevard between Main Street and U.S. 30.
Mattress stores have been piling up faster in Northwest Indiana than mattresses in "The Princess and the Pea." There's Sleepy's Schererville, Mattress World, Mattress Firm, American Mattress, Lynn's Bedroom City, Bedzzz Direct, another Mattress Firm, Ashley Furniture HomeStore and Bed, Bath and Beyond.
Many have sprung up in the last few years. Right now, mattress stores are one of the hottest retail categories in the region, said Aaron McDermott, president of Latitude Commercial, a real estate agency.
"With one particular user, Sleepy's, they leased a 300,000-square-foot distribution center space in Romeoville, Ill.," McDermott said. "Once they leased that space, the plan was to come out to the Chicago market and Northwest Indiana Indiana with the retail stores. The national brands may make a certain number of brands, but they then give each store like Sleepy’s or Mattress Firm their own unique name for the same or very similar mattress. If you think about it, since all you have to do is change the tag and send it off, you can have five different name brands with only one true model you are producing."
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The mattress stores are visible because so many people drive by them every day, McDermott said.
"I think retail is noticed by people because they tend to be the highest visible locations," he said. "There are plenty of smaller industrial buildings popping up around the area, but people really notice the retail buildings being built, but not necessarily the distribution warehouse that supports it."
Mattress stores tend to be even more visible because they tend to cluster in groups. A half dozen agglomerate along prime retail stretches like U.S. 30 in Matteson, Halsted Street in Glenwood, U.S. 6 in Portage, Lincolnway in Valparaiso, Franklin Street in Michigan City and U.S. 30 in Merrillville and Hobart.
They deliberately locate next to each other, like CVS and Walgreens or Menards and Lowe's, McDermott said.
"They tend to locate where the consumer is already shopping," he said. "Since the consumer is probably already going to shop at an anchor tenant like Walmart, Home Depot, Kohl's, they just want to have their brand seen like a billboard near there so they know when they go to shop for a mattress they will remember where they are located."
If it seems like mattress stores are popping up everywhere, that's because it’s a national trend, said Micah Pollak, Indiana University Northwest assistant professor of economics. Mattress Firm, the largest U.S. retailer of mattresses, reported opening 78 new locations nationwide in the first quarter. Sleepy's expanded from the Eastern Seaboard to the greater Chicago market only two years ago, and it's already opened 20 stores.
"First, storefronts may be as much about advertising and creating brand awareness as about selling mattresses. Even if an individual store is not performing well, it may be worth keeping it open just for the brand advertising," he said.
"Second, mattresses are generally high-margin products, with markups ranging from 40 to 60 percent . With the average mattress costing around $1,000, you often don't need a high volume of sales to remain profitable."
Mattress stores also have low overhead, often operating factory-direct so they don't have to maintain warehouses, Pollak said. They require fewer employees than other retail stores, and those employees are often paid on commission.
They are likely cropping up everywhere now because real estate prices are relatively low and mattresses are durable goods that are only replaced once every decade, giving people some flexibility when they buy new ones, Pollak said. Consumers probably weren't buying too many mattresses during the economic downturn, but may now be considering purchases they put off since the economy is faring better and disposable income is on the upswing.
Improved economic conditions also mean that retailers are looking to grow. They may have had locations in Merrillville's massive retail trade area for years, but have lately been looking at where they can fill gaps in their territory, McDermott said.
They end up seeking out places like Schererville, Valparaiso and Portage.
"The demographics have changed a little such as population increases, but I think the real trend is that retailers specifically are looking at "infill' locations instead of speculative areas," McDermott said. "Schererville specifically has always had strong sales for the retailers that located there. They just do not have the volume of square footage that Merrillville has."
But the expansion can’t go on forever, Pollak said. Mattress Firm reported a 36 percent decline in first quarter profits, suggesting a slowdown in the overall mattress category.
"We will eventually reach a saturation point in mattress stores," Pollak said. "Market conditions may change quickly once pent-up demand from the great recession is met and real estate prices continue to recover. While mattress store expansion continues, there are some signs that the market might be more 'soft' than 'firm.'"
In fact, a correction is probably coming, McDermott said. Not all of the new mattress stores that have been opening up will have staying power.
"I can't imagine how all the mattress stores survive," he said. "You look at the established brands that have been in our market for years and are paying far less for their real estate then the newcomers. I think the consumer is becoming aware of the markups and how these larger chains operate. I think it is just another fad that will go away and the cream will rise to the top."