Are Furniture Stores Money Laundering – Why Are There So Many Mattress Stores? : The Indicator from Planet Money There are so many mattress stores in America, and they always seem empty. So how can they afford real estate? And how do they stay in business?

VANEK SMITH: So we’re in New York, Midtown New York. It is a very cold evening. And we are in front of a store.

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BOBKOFF: They’re standing in front of a mattress store. And this is some of the most expensive real estate in New York. This is prime Manhattan real estate.

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VANEK SMITH: And we’ve been sitting here, and no one has come in or out of this mattress store. There is no one in it.

BOBKOFF: And I’m Dan Bobkoff. I’m from the “Household Name” podcast. We tell surprising stories about how brands affect our lives. And today, we are talking about a brand that has become everywhere recently, Mattress Firm. There are many of them. And it actually launched popular conspiracy theories, many asking, if there is hardly anyone in these shops, how can they possibly make any money?

VANEK SMITH: I mean, it actually turns out that there are legitimate reasons that there are so many Mattress Firm stores and that the Mattress Firms are sometimes even across the street from each other. But then some of the reasons are perhaps not so legitimate.

VANEK SMITH: I think he’s bringing it to the guy who works there. I don’t think he’s actually buying a mattress. Maybe he’s shopping – no, he’s asking for direction. No, he’s asking if he can use…

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BOBKOFF: So Stacey, these conspiracy theories seem to have started on Reddit, as all great conspiracy theories do. And so we went to a Reddit expert.

AMORY SIVERTSON: Hey, I’m Amory Sivertson. And I’m a co-host of the podcast “Endless Thread.” And we only feature amazing stories on Reddit.

SIVERTSON: So there was a post in the AskReddit community that asked which conspiracy theory you buy 100 percent and why.

SIVERTSON: OK, because there was one response to that post made by someone who goes by the username Crazy Potatoes.

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The Mattress Firm Money Laundering Conspiracy Theory

SIVERTSON: …Mattress Firm is some kind of giant money laundering scheme. They are sitting everywhere and always empty. There is no way there is such a demand for mattresses.

SIVERTSON: I don’t know if I’d go full conspiracy theory, but there’s definitely more to look at with Mattress Firm. There is reason to be suspicious of their business.

BOBKOFF: It’s all right. So first of all, it is true that there are many Mattress Firm stores in the United States. Five years ago, the chain had 700 stores. Earlier this year, there were 3, 300. This is about a third of the 10, 000 mattress stores in this country.

VANEK SMITH: Just to put that in perspective, I mean almost as many mattress stores as there are Starbucks. There are 14,000 Starbucks, 10,000 mattress stores. And, you know, I imagine people buy a lot more coffee than they do mattresses.

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BOBKOFF: Right. I mean, how often do you buy coffee, and how often do you buy a mattress?

VANEK SMITH: I don’t even know how old my mattress is, to be honest. And today I already got three coffees (laughter).

BOBKOFF: And so this is the big one. Michael Magnuson runs a website called goodbed.com. It’s a mattress buyers guide. And he says mattresses are not like any other purchase. He calls them grudge purchases.

MICHAEL MAGNUSON: I mean you can really speed up your mattress purchase. You should pay attention to it. But, like, if you do well, it’s not like, oh, my gosh. Like, my social status goes up. Like, I just – you know, all these, like – you don’t get, like, that great Instagram moment (laughter) from buying the perfect mattress. (Laughter) Like, people know they can’t cut it. They know they spend a lot of money on it, but they don’t want to. It’s not fun.

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BOBKOFF: So a lot of people hate buying mattresses. And besides, the stores are empty most of the time, which makes sense if you think about it because most of us only buy a mattress every decade or so, although the industry…

BOBKOFF: Exactly. But that explains why, when you walk by, you can just see a whole bunch of vendors sitting around.

VANEK SMITH: Which seems to beg the question, how is it possible to make money selling mattresses in all these thousands of stores?

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BOBKOFF: Well, first of all, it depends on what price you sell them at. The markup on the typical mattress is often around 100 percent. So…

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VANEK SMITH: So in that way, mattress stores are like any other retail establishment, even like McDonald’s. They pay a certain amount for something. They mark it up, and sell it. And for a mattress store, that could mean making something like a million or maybe a million and a half dollars a year.

BOBKOFF: And so whether it’s a McDonald’s or a mattress store, Magnuson says they still have to pay the same rent.

MAGNUSON: The thing is, though, they’re selling not $1, $5 hamburgers. They’re selling 1,000, $2,000 mattresses. And that’s how they get to that million, million and a half dollars with basically 100 mattresses a month, it’s kind of (laughter) how the math works. So – and a lot of this is weighted towards the weekends. So the typical week is that they can be open for 12 hours a day. And those days of the week, they can only sell a few mattresses.

MAGNUSON: Just enough. Just enough. The economy is actually not that great for the store in that situation, but it is enough.

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BOBKOFF: Apparently not for Mattress Firm because despite the conspiracy theories, the company filed for bankruptcy protection in October.

BOBKOFF: Well, they came out of bankruptcy. But they’ve actually closed more than 600 stores in the past few weeks, so there are fewer now than there were when we started reporting this.

VANEK SMITH: And, you know, Dan, I can’t say I’m surprised to hear that, just because of the sheer number of Mattress Firm stores that are out there.

BOBKOFF: Yes. And the problems for Mattress Firm really started back in 2014. That’s when the company decided it basically wanted to corner the mattress market.

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BOBKOFF: Or at least become the biggest one on the block. And so Mattress Firm as a company wanted to be everywhere. It started buying up a lot of its competitors, like Sleepy’s and Sleep Train and Mattress Giant – great branding going on here. And she did it so quickly that the company took on a lot of debt. Its debt load has increased sixfold in just a few years.

And she doesn’t really care where all these new stores are. So in many cases, they would end up with stores across the street from each other. So the conspiracy theorists on Reddit weren’t imagining something was going on. There were too many mattress stores there. And then another thing happens in 2014. That’s the year the online mattress business started to explode, which added a lot of competition.

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VANEK SMITH: So OK, Dan, it seems a little bit like we’re just talking about an industry that’s evolved on the internet, kind of coupled with a business that’s not so well managed. Are they not a conspiracy at all? This is making me very sad.

BOBKOFF: It’s all right. Number one, last year, Mattress Firm alleged that two of its own employees were receiving kickbacks for signing posts that were more expensive than necessary.

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VANEK SMITH: There are a lot of Mattress Firms in Manhattan, and that’s as expensive as real estate.

BOBKOFF: That’s right. And then the executives filed a countersuit saying Mattress Firm knew about it all along. So that’s still pending, but that’s something we have our eyes on.

VANEK SMITH: So somebody was taking money from Mattress Firm that maybe has more real estate and more expensive real estate than it needed to.

BOBKOFF: Exactly. So here’s the other thing. In 2016, a company called Steinhoff – it’s this huge retail company from South Africa, almost as big as Ikea. And it bought Mattress Firm right as Mattress Firm was loading up on all this debt by buying all those competitors. And the first thing that confuses experts in this space is that Steinhoff paid $ 3.8 billion for Mattress Firm.

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BOBKOFF: It was a lot. In fact, it was more than double the market price for Mattress Firm at the time.

BOBKOFF: Back then, it looked like Steinhoff had just made a bad deal, and overpaid because it wanted to get into the US market really badly. But…

BOBKOFF: We don’t know if it’s money laundering. So far there is no evidence of this. But it seems that the company has hidden a lot of debt from its balance sheet.

VANEK SMITH: We have reached out to Mattress Firm for comment. And the company responded saying it was

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