An Autopsy on Casper: Lessons from a DTC Failure
Why Casper bleeds cash while Purple makes money
Failure is a great teacher. In late November, mattress-in-a-box firm Casper announced that it was being taken private at a valuation roughly 25% of its last private funding round. Some lessons from Casper’s failure.
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Casper’s gross margins are a few percentage points higher than Purple’s. Higher gross margins means more capacity to invest in customer acquisition, research and development (R&D), and other growth initiatives. Additionally, Casper and Purple spend a similar amount on sales and marketing (S&M), roughly $0.30 for every $1 in revenue. So far, so good.
General and administrative (G&A) expenses are where the wheels fall off. Casper jams a lot into this bucket, including retail employees, store leases and operating costs, corporate functions like finance, HR, and IT, credit card processing fees, professional services, and R&D. Casper’s G&A is 30–35% of revenue, three times higher than Purple’s. The company makes Peloton like the Bundesbank. This is why Casper bleeds cash while Purple makes money.
