LEXINGTON, Ky. — As we enter the important Memorial Day weekend shopping period, when retailers are vying for consumer dollars often by topping each other’s deals, we thought it would be a good idea to take a look at what one supplier is doing to ensure everyone comes out ahead in the end.
Tempur Sealy International formed its Brand Protection team just shy of two years ago to do just that. While the execution continues to evolve, the thinking behind the effort is simple. Protect the brands — including Sealy, Tempur-Pedic and Stearns & Foster ― by monitoring how retailers price and advertise them online and in-store. It’s basically asking retailers to adhere to MAAP (Manufacturer’s Advertised Pricing Policy) and UPP (Unilateral Pricing Policy) for their own good and the good of the brands.
UPP is trickier to review as it has to do with actual transactions, not advertising, so there’s a limit on what a producer can demand of its sellers. But the results of Tempur Sealy’s efforts, even as it walks the tightrope of what it can require dealers to do, are undeniable.
Earlier this month, TSI sent a letter to all of its retail partners, thanking them for their commitment to the Tempur Sealy family of brands and showing the great progress they’ve made together. For the six-month period from October 2019 to March 2020, TSI recorded 533 “brand policy departures.” For the same period through March of this year, recorded departures were down to 295 — a year-over-year reduction of 45%. (A “departure” is essentially a violation of its pricing policies, though the company doesn’t use the latter term.)
“Your training and education of your associates has paid off and is working to keep the marketplace on a level playing field, protecting your margins and promoting our brands,” Steve Rusing, TSI’s executive vice president and president of U.S. sales, said in the letter.
TSI has just deployed a new form of monitoring that will do even more to ensure everyone is playing by the same rules, but first, a quick story on how the Brand Protection team came about in the first place.
What happened with Mattress Firm
Back in 2017, Tempur Sealy separated from retail bedding behemoth Mattress Firm, which was operating back then under a different management team. The break in business lasted a couple of years. Then, in mid-2019, when news came out that TSI and Mattress Firm were getting back together, retailers were justifiably concerned. Mattress Firm’s history of discounting had been the topic of countless conversations between retailers and TSI for a few years before the separation. Oddly, many retailers were guilty of the same or similar issues, but for whatever reason — maybe because of its sheer size and market dominance — Mattress Firm was overwhelmingly the target of their complaints.
With that in mind, when TSI began rebuilding the relationship with Mattress Firm, “one of the things we talked a lot about was our MAPP and UPP policies and how important it is to us,” Rusing told Home News Nows. The retailer, in turn, told TSI it was more than willing to support the program, but just as other retailers had concerns about Mattress Firm playing by all the rules, Mattress Firm was likewise adamant that the go-forward plan would truly mean a level playing field.
And it was a fair concern. Even though the complaints had dropped off to next to nothing after the TSI-Mattress Firm split, when TSI began digging into the issue, it discovered plenty of issues with other parties. If it was going to do a better job, it needed to do so across the board.
A Brand Protection team emerges
“So we worked with outside legal counsel that specializes in MAPP and UPP brand policies and set up a pretty robust system in terms of monitoring the marketplace,” Rusing said. That led to the establishment of the six-member Brand Protection team, pulling from various departments, including legal, retail activation, marketing and planning.
TSI established a brand protection portal, and the team meets every Friday to go over suspected departures reported by retailers about retailers, by reps and by members of TSI corporate.
“It’s sort of self-policing, and it’s a priority for me,” said Rusing, who is on the team and attends every meeting. They look at every departure submitted and based on that information and any additional research, the team determines if it’s truly a departure. If it’s not, the team responds back to whoever submitted the charge and explains why it’s not.
And if it is a departure, it moves through a process that can vary depending on the nature and severity of the issue. But generally, it starts with a letter informing the retailer, making it aware of the departure and giving it an opportunity to correct the problem. Maybe that correction includes some retraining of the sales or marketing teams.
“Sometimes mistakes happen,” Rusing said. “We understand that. But what we’re most focused on is consistent systemic departures, which lead us to take certain actions, which can lead up to the termination of the retailer.”
It doesn’t happen often, but it does happen — so far, less than five times since the Brand Protection program has been in place. There’s an escalation of steps taken before TSI gets to that termination stage. It starts with the letter and retraining but can move to, perhaps, stopping shipments to the retailer until there’s movement, and removing it from Google Search and TSI’s dealer locator.
“The reality is we didn’t have a robust process in place like the one we put in place,” Rusing said. “I think retailers felt we somewhat ignored the situation.’
When TSI made clear it was not going to ignore departures going forward, that it was taking this very seriously, and once retailers began seeing these formal letters arrive that purposefully came from TSI’s legal department, “it certainly got everyone’s attention and even ruffled some feathers,” he said.
“But at the same time, the majority of retailers, even if they received a letter themselves, felt very positive about it, that we were taking it seriously and holding everyone accountable.”
One of the big questions for the publicly-held TSI when it first headed down this path was: is this going to cost us business? “Because we had retailers say, ‘OK, if you’re really going to enforce this, we may not sell as much of your product,’” Rusing said.
“But our position is, if you don’t enforce your brand policies, you’re going to lose business for a different reason. They’ll avoid your product, and it’s not going to deliver the business retailers expect. So we accepted the risk.”
And how’s that working out? TSI may have lost a handful of former retailers, but its sales are exploding. For the first quarter ended March 31, total net sales increased 27% to a record $1.04 billion. On Thursday, it updated sales trends guidance and is now targeting net sales growth in the second quarter of about 60% over the second quarter of 2019, noting that the second quarter of 2019 was unaffected by Covid-19-related shutdowns and provides a more meaningful comparison than the second quarter of 2020.
(Separately, the company also announced Thursday it will be acquiring U.K. sleep retailer Dreams, a move that’s expected to nearly double its international sales and push direct-to-consumer business past the $1 billion mark.)
The latest iteration
Now, TSI’s brand protection effort is entering a new frontier. Up until recently, the work has been pretty much a manual process — weekly meetings to review submissions to the portal. That effectively can delay a response to an online MAPP departure by a week or longer, said Julie Carlisle, TSI retail activation manager and a member of the Brand Protection team. But beginning early this month, the company onboarded a new partner capable of monitoring every active SKU for all TSI brands multiple times a day. And that has enabled the company to respond more quickly and consistently.
Tempur Sealy declined to name the vendor it’s using, but Carlisle said it “scrapes every seller online with our URLs eight times a day, seven days a week,” and provides daily reports, so now TSI can respond daily, Monday through Friday.
“Within this tool, we can contact the retailers with the departures immediately to resolve rather than wait (on the weekly meetings),” she said. It also enables TSI to quickly identify any unauthorized sellers, who might be listing products on Amazon or other online marketplaces, for instance.
But perhaps one of the biggest benefits is it’s allowing TSI to see who steps out of line first by producing time-stamped screenshots. This has become increasingly important in an era of dynamic pricing models deployed by sophisticated e-commerce players and others, who crawl the internet and respond to lower prices by lowering their own.
“If one steps out of bounds, it can start a little fire,” Rusing said. But with the new tool, Carlisle added, TSI is able to catch up to the problem quickly and get it corrected, often within 24 hours, heading off that fire that just ends up eating into retailer margins.
“Our whole thought process with brand protection is it’s one thing to have retailers report on other retailers, but to the degree that we get out there, become aware and address it, it just elevates the brand,” Rusing said.
And among the side benefits to the effort has been an increase in the number of retailers actually collaborating with TSI before they put together their advertising campaigns to make sure they’re not set for departure.
“We’ve seen a huge spike in that,” he said. “Retailers really take it to heart and want to do it the right way. So we’ve been very encouraged by that.”
Another side benefit: TSI was just listed in analytics firm Clarivate’s Top 100 Best Protected Global Brands 2021 report. It’s the only home-furnishings-related name on the list and is in the company of other top brands such as Apple, BMW and Coca-Cola.
TSI didn’t even know it was up for the recognition.