Emilie Arel, President and CEO, Casper Sleep (joining virtually)
Interviewer: Emma HInchliffe, FORTUNE

MPW Next Gen 2022 - Forcing Ahead

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the last few years have been difficult for many companies. We saw a change in consumer spending and engagement and Emily RL is no stranger to this. She's now at the helm of Casper once darling direct to consumer mattress startup that has gone from public to private in the last three years. Emily now faces her biggest challenge yet turning a profit. But how is she going to get there to profitability by selling mattresses to midwestern moms And I'm sure there's a lot more to her strategy. Of course. So we will hear all about it, joining us virtually today to discuss this turnaround plan. Please welcome Casper's president and Ceo Emily, R. L. And M. P. W. Next gen coach er Emma Hinchliffe. Hey good morning Emily and hi everyone. Good morning, how are you? Um Emily thank you so much for being with us. Um Yeah so I can be there in person but happy to be here. Yeah, so you've been navigating a lot at Casper and it's not necessarily been an easy time. You know, a mattress is a big ticket purchase that can be cut during a recession. So what's the state of the Casper business? Yeah. Look the last month, are we in November year has been pretty difficult in our business. Uh the mattress business and other big durable goods are good signal to upcoming recession or economic difficulty in consumer spending and so we really started to feel the pain in our business in Q4 last year. Um and it's been a tough tough year from a consumer spend standpoint. You don't need, everyone needs a mattress of course, but most of you in the room probably don't know how old your mattresses or when you bought it, you don't know when the seven or eight or nine years is up for the replacement cycle. And so those are the purchases that we see push off. And so it has been a tough year demand wise. Um, and we just announced that we want private last november. So the company has gone through a lot of change both in leadership and an ownership structure and with the consumer spending, but we are chugging along. Yeah. You know, you bring up a great point. You took over from Casper's founders after an unsuccessful I. P. O. Followed by that deal to go private. You know, how do you approach leading through so much turmoil in those challenges? Yeah. Look, I've been very lucky in my career to work for a lot of amazing people and side by side with amazing people throughout my time at Target at gap, old navy and private equity at amazon. And when I started at Casper almost three years ago, there were five pounders, all men, um, all in their twenties and thirties. And that was a very different leadership environment for me to learn to navigate through. We went public, we faced the supply chain crisis like everybody else and the founders began to leave the business and then phillips who was our ceo left in november when we announced we were going private. And so that's a, that's a lot of change internally for for a company, particularly when a lot of people who had been at the business a long time. The focus was not on profitability, it was on building a great sleep brand and that's what the founders did so brilliantly. Um, and there's also, and we need those people to found new amazing companies and pick new amazing ideas to really scale. And so I'm very happy with the team we have here now who are really operationalize, operationalize in the business in a different way. Yeah. You know, a focus for you is really motivating teams through that transition. So you've touched on this a little, but how do you motivate those teams when the goal shifts so drastically? Yeah, I mean look, I want my team to have fun at work, but I'm also like realistic, we're not going to be sort of hugging in the hallways every day and like high fiving, especially in the middle of what is a very tough economic environment. And so what I want for my team is that most days they're happy to get up and get on zoom or come into the office um that they understand what we're working towards. And I think for many of us women, we believe that our past, the ceo is to being a founder and there are many other past the ceo, I was never gonna be a founder, I'm too risk averse, I like somebody else saying my health insurance, but I'm good at operating a business and I think it's important that we all remember those are those two paths and so I think what I have is a great group of mostly women, I will say running a business and learning how to continue to fight every single day for market share. Yeah, I'd love to talk a little more about that. You know, you came up through Target and Gap inc and you know through those jobs you really kind of came to this conclusion that you were ready to be a Ceo, you've been a Ceo three times, but you were not interested in founding a business and we often hear from founders on this stage. So how did you kind of realize that about yourself and pursue that goal through that path? Yeah. You know I grew up in a family, we had a family business, I was working the minute I could count change and see above the counter at my dad's store and I'm very tall, so I was very young and I grew up in an entrepreneurial environment that it would have made sense for me to want to, you know figure something out on my own, just not my gig. I like big companies, I loved, I loved working at Target, I loved working at the gap, I mostly liked working at amazon and so through all these different places, I had to get to a point where I said, I'm gonna stop chasing the stories are here or maybe what feels shinier and do what I'm good at um and I think what I'm good at is helping people find their potential and helping teams work together towards a common goal. Yeah, I'll come to the audience for questions in a moment, so if you have any start thinking, Emily is kind of a straight shooter and tell it like it is, so take advantage of the opportunity, um but you know, you mentioned amazon uh specifically you were the Ceo of Quidsi, the former diapers dot com, so what did you learn from the ultimate failure of that business that you're applying to this moment? Yeah, I mean, look, I wouldn't call that business of failure, I think what we did, um I'm very proud of, I came in right after amazon acquired the business, the business was losing a lot of money and I had never been in a business before that was losing money. I'm coming from Target and the gap, like I didn't really understand what that meant. And so that was really a real life training and how to run a business and get a business too cash flow positive and that's important. I'm using those skills here now, but I think also that was like my training of what I'm doing at Casper is to take what was a founder led business that had a very different focus and transitioning into keeping some of that culture alive, but also building a business that can sustain itself. And ultimately we folded that business into amazon and that was the right decision for amazon proper. Um and I moved down from there. Yeah. Do we have any questions for Emily? No, okay, we'll come back. Um You know, so your strategy at Casper moving forward, we've talked about how originally Casper was kind of selling mattresses to this consumer. It was a new york city brand new Yorkers in the room. Probably remember when Casper advertising was all over the subways and you're really targeting kind of this male consumer often in the, often in their twenties, usually buying kind of like one mattress for their apartment. And now you've really shifted that strategy. Um talk about that, What is the new strategy for Casper that differs from that original model? Yeah. When I started almost two years ago and looked at what was happening in our consumer, over 70% of our sales were coming from men in their twenties and I don't, you know, I started to know there's lots of different ages here, but men in their twenties don't really have that much money and the families live in the summer. And so this market was not going to get us to where we needed to get to. And so we really started focusing on who actually makes the purchasing decisions in the family. We know it's mostly women and particularly as they're thinking about beds for their Children that for a second home, but for their primary bedroom et cetera. And so we made a big shift at that time to really, this was a very masculine brand, which is great. It was five men who started it um, to really start thinking more about lifestyle, to start thinking about what soft touches and we put around the mattress, how do we make the mattress aesthetically pleasing? Um, and we've shifted that dramatically. Majority of our purchasers are now women, we sell a lot more beds to women for their Children and for their primary home, we're a lot more focused in the suburbs. I'm from Minnesota originally and although I've lived in san Francisco and now live in new york. There are, there is lots of people in the middle and we were really ignoring all those people and so we're very focused on how do we grow our brand awareness where there are a lot of people with a lot of money to spend on mattresses. Yeah. You know, do you think that was a missed opportunity originally for Casper's original model that, you know, you mentioned it was a company founded by five men, they were marketing to people who they knew and understood was that a missed opportunity or was this just a transition that had to happen later. Look, I think it was the transmission. I mean I admired so much that the founders did. It's incredible to invent a new way, for example, the shop, but this does not happen very often. And now when hopefully you're all playing Casper, when the Casper arrives at your door, when you carry the box up your stairs or into the room, you don't even think twice about it. That was revolutionary eight years ago. So I think every business has to start somewhere and continue to evolve and that's what we're doing is continuing to evolve definitely. Okay. Anything for Emily. Oh, we have one over here. Please wait for the microphone and introduce yourself. Hi Emily. I'm the chief legal and compliance officer calm vault, which is a publicly traded data protection company. Um, as the market is starting to create a momentum to demand responsible and sustainable growth instead of growth at all costs. And while we all wait to see how long the market will demand that for whether it's a year or three or five years, how are you, how are you think About how your culture has to change to retain and motivate your talent because tech companies of, you know, two years ago, five years ago, 10 years ago in the culture is dramatically different when you have to be on a sustainable growth path. Thank you. Yes. This is a question. And a lot of what we have dealt with over the past year. It is very sexy and cool to grow 50% a year, but it's not that cool to lose like a ton of money while you're doing it anymore. That used to be fine. Not okay anymore. And what my team is focused on is how do we exactly like you said sustainably grow and right now with a very, we're in the worst mattress market in 26 years. So that was really super fun to take over in that market. But that's what we're dealing with. So right now, what we, we're up against us, how do we take market share and sometimes market share in an environment like this means we're not actually growing the top line, but we are outpacing our competitors. And I think for me as a leader, what we really have to do is put all this in context for our team because when you are used to see the line going like this, like that and it starts to go the other way, it's scary. And if you think about the majority of the people, you are leading on your team, the majority of people, I'm leading candidly, probably a lot of your financial backers that you're in a public company, if you're in a private company have never seen an economic environment like this And that can cause a lot of people nervous. A lot of people making irrational decisions, maybe doing something that for the short term are good for the long term by long term right now. I mean 12, 18 months are not good. I think you have to have a very steadfast constitution, um, stay calm and make sure you can keep the people around you calm because it is a very different environment to lead through anything else. Oh, I think we have one up here. We have to be popular. Oh wow. That was not the kid in high school. Hi, this is on a slim oval with insignia. Um, and in my experience, working with the companies who are turning around uh, to profitability, there is a momentum for also for you as a CEO or um, also for the team where you get tired, you burn out. How do you personally deal with that? How do you keep yourself inspired for the company and what do you do for your team because you alluded to that a little bit? Yeah, that's a fantastic question. Do I look tired? I uh, um, so I, somebody told me once that a Ceo is not a chief executive officer is the chief emotional officer. And I think about that every day and it is very true. And I think what all of us have to remember and what I try and do is, you know the on the airplane when they say put the mask on yourself before you put on your kids or someone sitting next to you? I think about that a lot because, and it's not selfish. And as women, we have a tendency to take it. I have two little kids. I'm raising them by myself as a tendency. We have, we think about what we have to take care of everyone else first. I have to make sure everybody else gets fed and I'll eat dinner at 9 30 while I'm watching White Lotus or whatever it is, it is important that every day you take a second, five minutes. That's why I'm happy to be back in the office most days, some time on the train sometime in your car to think about something else to Tiktok for 10 minutes and watch people stuck in their pantry, whatever it is that gets your mind out of things for a second and give you the space to sort of re engage and then honestly, why don't we say this all the time? But sometimes you just have to say no. And particularly with the reemergence after Covid it has been, I feel like there's been so much going on and we have private equity partners who want us at things all the time. And I've had to learn sometimes even though that dinner sounds really cool or I do want to meet that person for breakfast or I promise that person that would help them with whatever it is. Sometimes you just have to say no. And I think it's important that your team sees that from you. I think it's important when I had Covid the first time, it was important that my team. So I took a couple of days off and that I was respecting sort of the sickness. The team takes really big cues from you and it's important that we understand that. Yeah, I think we have one more question. We have a lot Sure, right, right there in the back. Hi, I'm Jamie Rooney, I'm also minnesotan and target alone. Um, so, you know, Casper's had this very public challenge, but a lot of direct to consumer companies are probably headed toward the same challenges a little later. What advice do you have for other director? Consumer companies that maybe aren't struggling quite yet, but are starting to see those signals to think about the next 12 months. Yeah. Uh, great question one, we have to start being more realistic, it is very easy to put a bunch of numbers in a model and be like, oh, well we're up 30% we get 50% more customers and the CPM on instagram go down by 40%. Yeah, that is easy, but it never actually happened. So I think, I think One is a leader, you have to be realistic and you have to be prepared for the downturn. So we're in the middle of budget season right now and my direction to my team is great. Okay, now show me down 20 down 30 down 40. And in these times we have to be prepared for what that looks like. I think the other thing is, and this goes to the question asked earlier, this is a big change in what makes a good company right now right? Like it used to be, who cares about how much money you made. Let's just look at the top of the P and L. And that's just not what makes a great company anymore. I tell my team all the time, we're not a nonprofit, that is not what we are doing here. This is a business where we need to make money. And I think it's important that you are clear with your team about what that means and are clear about that. It's going to be hard work and that you have the right people and the right lieutenants on your team who want to dig in and find the solution and and we had a lot of turn on my team um for that very reason because it's not easy and it is like the most also. So I think it's important, you just have the right team and they know what they're signing up for Emily. Um a lot of the women in this room are at the VP level which is a role you held for a very long time. A lot of businesses as well. What advice do you have for these executives, especially at this economic moment? Yeah, I think the VP level is the hardest level was the hardest level until I got the ceo because it's the level where now you're sort of on the other side of the line, you're on the leadership team now whatever that means that your company still that title is very meaningful and it means maybe people don't want you to stay at happy hour all night anymore. Big realization for me like oh they want me to leave, it's in a different place than you were before and I think in VP is where you really start learning, how do I connect with my team in a different way. How do I delegate smartly, how do I learn to audit, how do I set up mechanisms so that I can audit without micromanaging. And I think at the VP level it's a very important time and in this economic environment in your team is going to need a lot of support. And I think particularly if you're working virtually, you've got to find a way to check in with people because people are nervous. I mean if you're in new york like people are getting, you know 10,000 layoffs, we're learning about a week. People are nervous, they're anxious and maybe not about covid anymore, but now about other things and so I think it's important to just have these check ins, find ways to connect with your team, find ways to make sure that the leaders underneath you are doing that and communication is getting cascaded because communication even though you get sick of saying it over and over. I mean I get so sick of hearing my own voice like it's nauseating, but your team wants to hear from you and they want to know everything's gonna be okay and I think it's important to take the time to do that work. Thank you so much Emily for an amazing conversation.