Tuft & Needle
Writer Shannon Severson
Young, successful innovators use their software development backgrounds to take a startup from problem-solving idea to multimillion dollar industry breakthrough. It sounds like a Silicon Valley Cinderella story, but it’s happening right here in Phoenix at online mattress retailer Tuft & Needle.
John-Thomas “JT” Marino and Daehee Park were longtime friends who met at Penn State University and were burning the candle at both ends at an early stage, heavily financed Palo Alto, California software company. They had tossed around the idea of starting their own company for a long time, but didn’t want to follow the same old formula: become a founder, then find an idea to build a company around, followed by collecting massive amounts of investors’ cash to get things going, all while working endless hours until a buyout makes everyone involved massively wealthy.
“We wanted to do it differently,” says Marino. “We wanted to look at our own lives and find a problem we had that we could solve. We didn’t want to limit ourselves to software, but we knew we could use our software knowledge to our advantage.”
Soon, the problem that would launch a $100 million-plus business presented itself in the form of a poor night’s sleep on an overpriced mattress. Newly married, Marino researched, shopped for (an experience he describes as “a nightmare”) and spent $3,300 on a top manufacturer’s mattress that he ended up hating. Despite claims that dissatisfied customers could return the mattress, it soon became clear that there were too many hoops to jump through to make such a thing feasible.
“We kept it and every night, I was reminded of my mistake,” says Marino. “Here was a problem that we might be able to solve. Daehee had experienced similar problems with mattresses. Maybe other people had, too. To understand what we could solve, we made a list of everything we hated about shopping for mattresses: the mattresses themselves, the return process, poor customer service. The list was so long it was unbelievable. It was clear there was room here for innovation.”
The two figured that if they could alleviate even half of their gripes, there might be enough to start a business. They dismantled that expensive mattress and did some wily investigation and reverse engineering to learn about materials and actual manufacturing cost. The answer was shocking: $300. A 1,000 percent markup. Offering an alternative was starting to feel like a moral obligation.
In June 2012, a basic website they set up to test the waters generated a sale within the first 15 minutes of launch. This idea clearly had legs.
“It’s an entirely different mattress concept: simplicity, transparency and stripping away all the gimmicks,” says Park. “When we went shopping for a mattress, that is the type of company we were looking for. This validated that almost everyone else also hates shopping for a mattress the traditional way.”
With $6,000 between them, they quit their jobs and launched Tuft & Needle in October 2012, with only themselves and their brothers as employees for the next year and a half.
Not having outside investors raised a lot of eyebrows, but it meant passing on the savings to both customers and employees. The goal was to build the best mattress in the industry, charge a fair price and create a company that is 100 percent employee-owned.
“At the start, even our friends and family thought what we were doing was crazy,” says Park.
Why leave promising tech jobs in the fast-paced, big money tech capital of the world to launch what, on its face, seemed a stodgy, entrenched, traditional business? An idea so decidedly un-sexy couldn’t recruit solid talent in the astronomically-priced Silicon Valley.
That was tough for any entrepreneur, unless you had a company that was seen as the next superstar — the next Uber, Facebook or Instagram. So, they left all that naysaying, prevailing wisdom stuff behind and moved to Arizona in 2012, drawn to the low cost of doing business, ease of incorporating (no need for expensive attorneys) and reasonable cost of living. They relished the opportunity to blaze their own trail outside of the Bay Area bubble and set up in an old transmission shop on Apache Boulevard in Tempe — nothing fancy, just the bare necessities.
“We created a mattress that appeals to those who like a firm mattress and those who want a softer mattress,” says Marino. “It sounds crazy, but we have proven that it is possible.”
What makes these “well-crafted mattresses at a fair price” revolutionary is a breakthrough in foam. Tuft & Needle invented a brand new proprietary material — T&N Adaptive Foam, a top layer that eliminates the need for multiple materials, with a support base of high-density polyurethane foam that is also exclusive to the company and was created to be comfortable, cool, durable and responsive.
The price? From $350 for a twin mattress to $750 for a California King.
“The way we price is to charge what we need, not what we can,” says Marino. “We could price these mattresses at several thousand dollars, but we don’t need that. We view our pricing as very fair.”
Marino and Park, at 30 and 27 years old, respectively, are earnest in their philosophy of fairness: the price is the price. They never go on sale, and shipping is free. They’re passionate about setting the gold standard for customer experience. They don’t hire individuals who have previously worked in the mattress industry, and no one works on commission. Employees are paid well, empowered and educated to be familiar with all aspects of the company: supply chain, social media and problem-solving. That education starts with making a mattress themselves at a Tuft & Needle factory (all mattresses are American-made). The confidence they have in their product is evidenced in the 100-night money-back trial and 10-year warranty, both free of fine print. As part of the company’s dedication to giving back to the community, returns are donated to charity, but those returns have helped them constantly refine and improve their product. They’ve seen returns rapidly diminish with each iteration.
The pair’s automated engineering skills contribute to efficiency at every point of production, marketing, packaging and delivery. Overhead is low, very little is outsourced and middlemen are cut out of the process. The mattresses ship in compact boxes, can be unrolled at home and, once the wrapping is snipped, quickly puff up to full size and are immediately ready to be slept on.
Marino and Park were rewarded with strong sales from the start, with year-over-year sales growing astronomically (from $1 million in 2013 to $42 million in 2015).
They now employ more than 100 workers and have purchased the historic Stapley building on Grand Avenue in downtown Phoenix, which they now own. The 36,000-square-foot building now serves as both corporate headquarters and a sleek retail sales lab, with just one other showroom in San Francisco that displays their design aesthetic and offers a customer experience that is more Apple Genius Bar than mattress showroom.
“We chose downtown because we are big proponents of sustainability,” says Marino. “There’s lots of activity. Resources are all right here within walking distance. Phoenix is a young city, but it has so much potential. We wanted to plant our flag where we believed there could be a hub, and that was in downtown Phoenix. We like all of Arizona, but this was a big draw. Our hypothesis about how the area would support us proved true.”
With all sales occurring through their website, Marino and Park are experimenting with the showrooms, mostly operating on the notion that retail is dead, but willing to test it out to be sure. The top-notch product has done much to educate consumers who might have had initial hesitation about purchasing a mattress online. Customers now come from every age range and city across the country. Business is booming.
“Our success is a testament to the service and quality of the product,” says Marino. “We set out to solve our own problem, one that we had an emotional attachment to. We are literally fixing an industry.”
Tuft & Needle
735 Grand Ave.