Beds for Backs operations manager Evan Drakos is unfazed by the current economic climate, and he says people are in fact choosing to spend more money on a bed that will last the test of time.
Drakos attributes this to the simple fact that people cannot survive if they do not have a bed that affords them the ability to enjoy a good nights sleep.
“Beds are a necessity – they are like food and water, and if a customer is in pain they can’t really put off buying a new bed,” he says.
While other bricks-and-mortar retailers may be struggling as consumers choose to shop online, Drakos explains mattresses are one of those things that must be purchased in-store, particularly as people like to test them out for comfort.
“We are pretty much recession proof, and more importantly beds are not a product that you can buy off the internet.”
Drakos says Beds for Backs continues to flourish in the market because there are many things that set it apart from its competitors, the benefits of which flow back to franchisees.
He says the company’s beds are classified as an essential medical aid because they fulfill a strict set of criteria outlined by the government.
“Our beds provide a medical benefit so our customers don’t pay GST on them, which means our franchisees are able to offer customers a 10 percent discount but it isn’t out of their pocket; it is the 10 percent that we don’t give the government.
“Our products also qualify for a government initiative where if you spend more than $2,060 in any financial year on out of pocket medical expenses you are entitled to a 20 percent rebate,” he adds.
This means franchisees are able to offer customers a 30 percent discount on bedding products, yet it doesn’t affect their bottom line.
“Any business can run a 30 percent stocktake sale; however that 30 percent is going to hurt the business because traditionally it would cover their running costs.
“The 30 percent that we offer 365 days a year is not 30 percent from our margin; it is from the government’s margin,” explains Drakos.
These concessions apply to the company’s ERGO-posture health bed range, which includes three products: the ERGO-line, ERGO-shape and ERGO-slat.
Beds for Backs does not deal with bedding manufacturers, rather Mario Piraino, the company’s managing director, owns the patented health bed range, which means franchisees are not required to pay a license fee every time they sell a bed.
“For every Sealy bed that is sold, bedding retailers must pay Sealy a licence fee. We don’t have that because we have our own brand, which is why our prices are very competitive,” Drakos says.
In Australia the range is exclusive to Beds for Backs. “There is an agreement that Mario can’t sell the products to any other Australian bedding company,” he says.
This helps franchisees get sales over the line as customers cannot purchase products in the range anywhere else.
Drakos explains Beds for Backs has a high stock turnover because it manufactures beds on a made to order basis.
“Having made to order, we don’t hold excess stock. This means our franchisees money is not tied up in stock and our beds have a stock turn of about 20, so we will sell 20 of those before we sell the floor stock model.”
In contrast, bedding retailers who pre-purchase stock and hold it in their warehouses typically have a much lower stock turnover.
He says the company’s Back Care Program drives business because it aligns each store with local health professionals.
“We encourage the customer to go for a couple of visits before they start to use the bed. When the bed arrives they are advised take another one or two visits, and we will pay them up to $150 in out of pocket expenses.
“This does two things – it improves our customers’ health and the health professional will start to encourage their clients to come and see us because they are going to get three or four more appointments out of that bed sale,” he adds.
Approximately three weeks after the customer has started using their new bed a technically trained staff member will pay a visit to the customer’s home to ensure they are using the product correctly.
“This helps the franchisee build a great relationship with the customer and they can seek out other customers from that one bed sale,” says Drakos.
So have customers’ buying habits changed in the face of the struggling economy? No. In fact, Drakos is noticing the same trend as Culmsee – the consumer is choosing to spend more because they want a high quality product that is built to last.
“Our customers average dollar spend is increasing because they see the benefits and value in
our products.”
While all retailers flourish during times of prosperity, many tend to struggle when times get tough. However a bedding franchisee may experience a constant flow of business as customers at different stages of their lives seek to upgrade their beds.
Rather ironically, the flow on effect of economic uncertainty can in fact benefit franchisees, as both Culmsee and Drakos attest consumers tend to spend more, rather than less, on bedding products as they seek to make well-informed decisions and invest in something that is built to last.