175 Central Avenue South
Sleepy's Inc. is a mattress and bedding chain with more than 150 stores, mostly in the tri-state New York City metropolitan area. It carries ten major mattress brands in offering what the company calls the largest selection in the United States, all in stock for immediate delivery. In addition to mattresses and box springs, which make up almost 85 percent of company sales, Sleepy's offers a selection of brass and iron beds, platform beds, day beds, futons, headboards, and related bedroom items. Harry Acker, Sleepy's founder, also owns a share of the Kleinsleep bedding chain and serves as its chairman.
Sleepy's Before 1990
Harry Acker learned the bedding trade by hand-tying box spring mattresses in his father's Brooklyn store, Midwood Mattress. In 1957, two years after his father's death, Acker opened Bedding Discount Center, a 1,100-square-foot Brooklyn store. It was acquired in the early 1960s by another business, but Acker had seven stores in the mid-1970s. These stores had taken the Sleepy's name in 1972.
Sleepy's came close to foundering during this decade. A sour national economy, coupled with New York City's own fiscal woes and competition from department and furniture stores almost drove the enterprise into Chapter 11 bankruptcy. Instead, Acker told Michael D. McNamara of HFD in 1991, he 'went to every vendor and said I want to borrow the money I owe you. I'll pay you back in two years, and all I ask is that you don't stop shipping me. From then on, we started to take off.' By 1979 the chain had expanded to 12 stores and was doing more than $1 million in annual sales for the first time. A year earlier, Sleepy's had moved its headquarters from Brooklyn to a 20,000-square-foot facility in New Hyde Park, Long Island.
Sleepy's ranked 43rd in the United States among furniture and bedding retailers in 1985, with 32 stores and $38.1 million in sales. Its main rival was Klein Sleep Products Inc., with 19 stores and $39 million in sales that year. Founded in 1952 by Herbert and Gloria Klein with their life savings of $600 and $1,000 from relatives, Kleinsleep, known for its 'Have more fun in bed' jingle, was growing faster than Sleepy's. The company was also selling brass and white iron beds.
Surviving the Early 1990s
The economic downturn that began at the end of the 1980s took its toll on a number of New York-area bedding chains. In June 1991 Klein Sleep Products, which had filed for Chapter 11 bankruptcy in 1976, did so again. This time the company was unable to emerge from receivership under its existing owners, and in January 1993 K.S. Acquisitions Inc., whose principals included Acker, purchased the Kleinsleep name, trademark, and three of its remaining four stores, for $1.4 million. 'We hope to build a 20 to 30 store chain in the metro area to bring Kleinsleep back to where it was in the early '70s, which was the dominant sleep shop in New York,' Acker told Pam Schancupp of HFD. 'It will carry more upscale bedding and merchandise that you won't find in a normal sleep shop or furniture store.'
Acker had claimed, in 1991, that Sleepy's was riding out the recession in comfortable fashion, with sales having increased appreciably because of 11 new store openings. But the chain was not without its problems. Like other sleep shops, Sleepy's risked losing credibility because of questionable advertising cited by New York City's Department of Consumer Affairs. In 1990 the agency filed suit against Sleepy's in state court, charging that the firm advertised 'sales' that continued for months--meaning, in effect, according to the agency, that the sale price was the same as the regular price.
While defending his company against charges of deceptive advertising, Acker told McNamara that he was worried that some of his competitors were ruining the credibility of the industry by bait-and-switch tactics, phony model names, and outrageous product warranties. 'What happens when those less than honest practices occur in sleep shops,' he said, 'is that 70 percent of the people walk out of the store because they know they have been taken. What does that do to that store? It kills its credibility. What does it do to the sleep shop industry? It kills it.'
Another problem for Sleepy's and other traditional bedding shops was competition from Dial-A-Mattress Inc., a city-based telemarketing operation that combined low prices and quick delivery. Speaking to McNamara, Acker was scornful of the idea. 'Would you buy your car, or your home, or even pick your wife over the phone?' he asked rhetorically. 'If not, why should you choose your bed, something you spend eight hours a night on, over the phone?' Acker told Cynthia Rigg of Crain's New York Business, 'I think manufacturers are stupid to sell to any telemarketing people. They don't see that their better mattresses won't be sold anymore because shoppers won't be able to see the differences in their product.'
Acker voiced this warning about buying a mattress unseen not only to reporters but by means of radio commercials. 'We have to tell the story why sleep shops are important,' he conceded to McNamara, 'and why the consumer should come to a sleep shop. We avoided television and radio advertising because we were successful without it. 50 percent of our business comes from referrals, but we have found we have to get across to consumers what we are all about, and that means advertising.' The company was publicizing its wares in the major city newspapers and was considering television commercials for the first time.
Sleepy's had 53 stores in 1991 and was looking to New Jersey for further expansion. Showrooms, chosen by the company on the basis, Acker said, of 'location, location, location,' on major roads, were averaging about 3,000 square feet. The stores were carrying the Eclipse, Englander, Kingsdown, Sealy, Serta, Simmons, and Spring Air brands, with each brand selling equally, according to Acker. Queen-sized mattresses averaged a little more than $600 in price. A telephone intercom system was allowing Sleepy's store managers not only to talk to their counterparts and to headquarters but also to obtain information on inventory levels and advertisements, to receive product and sales tips, and even to obtain industrywide news. A rigorous three-week sales training program--four weeks by 1998--was in place for new hires.
Sleepy's had moved its headquarters from New Hyde Park to Port Washington by 1994, when it announced it would move again, to a newly purchased facility in Bethpage, another Long Island community. The 135,000-square-foot building on 13 acres, acquired from General Motors Corporation, was three times the capacity of its previous space and included 100,000 square feet for warehousing. Sleepy's was planning to add a 15,000-square-foot training and telemarketing center to the facility. In early 1998, the company completed an 80,000-square-foot addition to the warehouse, thereby adding storage space for more than 15,000 items. Nineteen shipping bays and ten receiving docks were constructed, bringing the total to 37 and 18, respectively.
To better compete with Dial-A-Mattress, which Acker tried but failed to purchase, Sleepy's added an 800 number in 1995 and, mimicking this competitor, offered two-hour delivery in the New York metropolitan area for Sealy, Serta, and Simmons bedding. To fight the ever-growing rival, Sleepy's offered, in 1999, a 'price challenge' of 25 percent off Dial-A-Mattress's best price or the mattress free.
Major Expansion in 1998-99
In 1998 the company opened a Sleepy's Kids chain for five-year-olds and up as an outgrowth of its earlier store-within-a-store for children's mattresses, furniture, and accessories. The selection of products included comforter sets and bean bag chairs. The display was in room vignettes showing everything from bunk beds to sleep, study, and storage centers. A Sleepy's executive told Nina Farrell of HFN/Home Furnishing News, 'What we do differently than some of the other traditional youth furniture stores, as far as presentation and motif, is that our colors are incredibly bright. We're using a lot of Crayola colors, so it's bright and cheery when customers come in. This makes a huge difference in overall store presentation and the impact it has on customers.'
Sleepy's had more than 150 locations in 1999. There were more than 100 in the New York metropolitan area alone, including about 30 on Long Island and others in New Jersey and Connecticut, besides those in New York City and suburban parts of the state other than Long Island. Sleepy's also had entered the Philadelphia area, with as many as 30 stores opened there in 1998. There was also a Sleepy's in Springfield, Massachusetts. Aside from its giant Bethpage distribution center, Sleepy's continued to operate a 20,000-square-foot warehouse in New Hyde Park and it opened another one in central New Jersey.
On its web site, Sleepy's was offering the following models as exclusives in late 1999: Simmons Beautyrest with Lumbar Support; Sealy Posturepedics with Mid-Zone Support; Sera Perfect Sleeper with Comfort Tech 250; Kingsdown Sleeping Beauty Coil with up to 1,320 coils; and Spring Air Spine Saver with up to 2,000 coils.
In late 1999 Sleepy's was offering prospective customers a free mattress and $500 in cash if they could find the same mattress for less at any furniture, department store, or telemarketer. (The offer, however, was not good on all models.) A 60-day trial also was offered, with an exchange if not completely satisfied. Sleepy's carried ten major brands, all in stock for immediate delivery morning, afternoon, or night. The stores were open seven days a week.
Kleinsleep had the same corporate headquarters and central warehouse as Sleepy's. Acker was chief executive officer of both companies and his son David was second in command of both. The chain's 21 stores in 1999 were located mainly on Long Island but also included five in New York City, three in New Jersey, and one in Connecticut. Aireloom, Kingsdown, Sealy, and Serta were the brands displayed. The company served all of New York City and Long Island and, within a 75-mile radius of midtown Manhattan, offered to deliver any in-stock set of bedding on the same day in the evening if ordered before 3:00 p.m. Kleinsleep guaranteed to beat any department store's best sales price on Sealy Posturepedics, Simmons Beautyrests, or Kingsdown Sleeping Beauties or the mattress would be free. Kleinsleep also was selling hi-risers and brass, iron, electric, and day beds. Its revenue was about one-fifth that of Sleepy's in the late 1990s.
Principal Competitors: Dial-A-Mattress Inc.; Seaman Furniture Co., Inc.
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