Please note that whilst the campaign is labelled EIS eligible, the company has its SEIS allowance remaining. We will therefore be looking to seek SEIS relief on the first £150,000 invested into the campaign and EIS relief on the balance. Any tax relief is dependent on personal circumstances and may be subject to change in the future.
HÜGGE is a new mattress company influenced by Scandinavian design.
HÜGGE launched online at the end of 2016, selling direct to consumers through our website and this year via Harrods, with Harvey Norman about to become a stockist in Ireland.
Our founder, Paul Francis, worked as the UK managing director for a leading bed manufacturer in Europe. Paul was frustrated that when it came to choosing mattresses, people seemed overwhelmed by the amount of choice on the market.
Answering the question; ‘what’s the best mattress for me?’ was the inspiration for HÜGGE.
Supported by a small team, we set out to design and build a mattress that friends and family can trust. Our confidence in the product is supported by a ‘100 night sleep-well trial’, offering a full refund if the buyer isn’t satisfied.
Our aim is to become a name recognised across the British Isles as the leading lifestyle nighttime brand.
Given our industry experience, we recognised how slow & old fashioned the mattress industry seemed to be. It appeared that manufacturers had stopped investing in brands and were allowing retailers to control their destiny. Seemingly, the need for margin was winning over innovation and delighting the customer.
We identified that new market entrants were starting to challenge the status quo. We concluded that we had the vision, experience & capability to take a leadership role in reinventing the mattress industry.
HÜGGE aims to position at the forefront of mattress retail; simple choice, quick delivery, risk free sleep trial. And the promise of a good night’s sleep.
While the other disruptors compete to buy share we see there's an opportunity to differentiate ourselves. We want to go beyond answering the question; ‘is this the right mattress for me?’ We see the potential to develop into a first lifestyle nighttime brand and we'll use this funding to nurture that development.
Substantial accomplishments to date
After registering as HÜGGE in October 2016, we soft-launched our website on 18th November followed by our first Facebook ad on 24th November. We celebrated our first sale that evening.
Discussions with Harrods began in late 2016 and agreement was reached to launch HÜGGE on the shop-floor on 1st March 2017. Within three months of this launch, unit sales began delivering near to forecast levels.
Agreement was reached with Harvey Norman in Dublin in early May. Internal production requirements have been completed and the initial order is now imminent. The expectation is to roll out into all of their 8 stores across the North & South of Ireland with an initial stock package.
Revenues since launch are now close to £15k with minimal spend on advertising and samples. 38 mattresses and 63 pillows have been sold.
From soft launch until 15th May, there have been 3,597 visits to the website. With 22 mattress sales direct to consumer so far, this translates to a sales conversion of 0.6% of visitors. This tracks favourably to the business forecast assumption, which assumes a more prudent average conversion of 0.5% of traffic throughout the first year.
We have a pipeline of new products including mattress protectors and hand made bed linen. The business forecast reflects mainly existing products and therefore assumes a modest sell through of protectors (<20 in year 1) and hasn't assumed any sales of bed linen. This represents an opportunity to deliver sales value in excess of forecast.
Revenues are generated by selling mattresses and pillows through 2 channels - direct to consumer (B2C) & wholesale to retailers.
We plan for B2C sales to be predominantly driven through our ecommerce site as the result of direct marketing. Supplemented by sales referrals, attendance at trade shows, community involvement and pop-up shops. Looking to the future, we'll launch an influencer marketing strategy by seeking influencers to recommend our products.
Our strategy is to expand our network of retailers who are best positioned to support HÜGGE on the shop-floor. We will target retailers that have the capability of selling at the rate of 7 mattresses per month on average & will respect the price positioning of HÜGGE.
Although not modelled within the forecast, we aim to target the hospitality industry opportunistically as leads become available.
Manufacture and distribution are outsourced with design and marketing managed internally.
RRP of a King-sized mattress is £675 and £49 for a pillow.
Use of proceeds
Funding will be utilised across four main headings
- Salaries - 46%
- Advertising - 21%
- Other operating - 23%
- Creative - 10%
June to December 2017
- Build marketing team
- Recruit digital marketing executive
- Appoint creative agency
- Extend freelance social media efforts
- Secure work space
- Develop point of sale material and launch retail pop-up
- Expand direct advertising spend through social media
- Launch mattress protectors and bed linen
January to June 2018
- Expand shop-floor presence to 20 stores
- Develop content and build ‘the art of good sleep’ community
- Participate in national exhibitions
- Develop incremental lifestyle product lines
July 2018 - December 2018
- Space & operative as volume dictates
- Expand shop-floor presence to 40 stores
- Develop & close out Series A funding requirements
- Continue to build awareness
- Expand shop-floor presence to 50 stores
- Deliver exit through trade sale to retailer, manufacturer or private equity
HÜGGE’s target market can be split into two.
(1) End consumers who want a new mattress.
In regards to (1), we are targeting those UK consumers that have or will shop online and have buying power in line with the middle class.
As a demographic, this typically means consumers aged between 25 and 55, which we split further into young professionals aged 25-34 and middle class working professionals aged 35+.
From our experience within the industry, we identified that it was normally a female shopper, that it was a distressed purchase (normally for health reasons or because of a broken existing bed) and that, on average, the mattress being replaced was older than 10 years old. HÜGGE will continue to focus on the female as the lead purchaser but will regularly test this assumption.
In regards to (2), we are targeting retailers that will have the capacity to achieve average unit sales of 7 per month per shop-floor. Further, the retailer will need to have experience of selling branded product and will need to be sympathetic to our stance that HÜGGE is not a discounting brand. Ideally, the retailer will have multi locations.
Although margin to HÜGGE is lower when sold through retailers it helps build awareness of the brand in general terms and allows HÜGGE to reach that section of the buying population who will still not buy such a product online.
For the retailer, it allows them to show a contemporary side to their offer as well as improving their own customer service via speedy delivery and the risk free trial.
Characteristics of target market
The UK mattress industry is valued at circa £1bn. Online penetration for mattresses has historically been low but is now rapidly increasing as disruptors such as HÜGGE have introduced 100 day trials to offset the perceived risk of buying online. Our forecasts indicate that the online segment of the mattress industry will account for some 21% of the total mattress market over the next 3 to 5 years. This translates to a potential market size for HÜGGE of £210m.
In addition, where HÜGGE has had success in selling through retailers, such as Harrods and Harvey Norman, there is opportunity to take a slice of the larger more traditional mattress industry. This has been recognised by Simba (selling through John Lewis) and Eve Mattress (selling at Debenhams, Oxford Street and Fenwick, Newcastle) too.
The common characteristics that we believe our target market to hold in common include:
- pride in the appearance of their home (in so far as it indicates social status).
- appreciation of the importance of health and wellness.
- limited free time such that they highly value convenience.
- enjoy time socialising with friends and family and often in their own home.
- conscious of and sensitive to the importance of environmental conservation.
There are two aspects to the marketing strategy. One to cover the direct to consumer channel and one for the sales to retailers.
Direct to consumer.
Our route to raising awareness with the direct consumer will be primarily secured by extensive social media activity, posts and adverts. For the immediate future, we will be most active on Facebook, Instagram and Twitter, with Pinterest, Google +, YouTube and LinkedIn used more sparingly. We will continue to review strategy and tactics to ensure that we react as new channels emerge and existing ones decline.
We will develop ‘the art of good sleep’ as a central theme and will develop collateral together with our creative agency to support this.
Our plan includes the use of monthly pop-up stores, to build awareness in targeted areas. Each pop-up will be preceded by heavy social media advertising to make consumers in the locality aware that we will be there. The awareness should translate into leads that in time will convert to customers. We will also use on-vehicle advertising extensively to support this strategy.
In addition, we will identify and participate in consumer and trade shows to build awareness. We will also place more traditional adverts in targeted media opportunistically.
Sales via retailers.
Roll out to retailers will be based on identifying targets using our extensive knowledge and contacts within the UK bed and mattress industry. Such targets will be approached and national account management disciplines deployed to secure shop-floor space.
The financial forecast provides for point of sale support for these retailers, point of sale similar to that already in place at Harrods, so as to convey the brand image and story in a consistent manner. We will partner to raise awareness of HÜGGE within their customer base.
Analysis by Statista in 2016 listed Ikea, Bensons, Dreams and Argos as the 4 biggest UK bed and bedroom furniture retailers by market share with a combined share of just under 33% of the market in 2015. 56% of the market share was held by companies with less than 1% market share each.
But there's a shift taking place in the £1bn mattress sub-section of this market, with a handful of online disruptors grabbing share, of which, HÜGGE is one.
HUGGE’s most prominent online UK competitors include Casper (UK launch 2016), Eve Sleep (2015) and Simba (2015).
Casper was founded in the US in 2014 & has raised $70m in equity investment and achieved worldwide sales of $200m in 2016, while Simba (British) has raised £17m in equity investment.
Eve undertook an IPO in May on AIM with an offer price of 101p per share, which values the business at £140m.
All of the online disruptors offer similar propositions at this point: simple product offer, conveniently delivered with a 100 night sleep well trial.
Analysis by Wedbush reproduced in bedtimesmagazine.com in August 2016 reported that the introduction of the sleep well trial dramatically increased willingness of consumers to purchase online; from 7% willing to buy online without the trial to 30% with it.
We believe HÜGGE is well placed to capitalise on this increasing appetite to buy online & our products are competitively priced relative to the other disruptors, to help us do that.
Further, the HÜGGE mattress is uniquely made for us by one of only 4 foam manufacturers operating in the British Isles. We have drawn on Scandinavian influences to make our product recognisable & we've developed a 5-zoned 3-layered product to make the mattress extremely comfortable, supportive & hard wearing.
We'll test a distinctive aqua border on the mattresses that we supply Harvey Norman to make them stand out on the Irish marketplace & watch its success closely to see if we should adopt the colour scheme in the UK.
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