(Transcribed From Podcast)
In 1981, Jim McIngvale spent $5000 on a used pickup truck, a large tent, and a load of new furniture. He soon went into the furniture business on the side of the road in Houston, Texas.
In the late eighties when business got slow, and the economy was struggling, Jim took his last $10,000 to buy TV ads. He hollowed out the inside of a mattress and climbed inside and made a bunch of successful ads. He was now known as ‘Mattress Mack”.
Forty seven years later he has three large furniture stores known as Gallery Furniture. The gentleman we’re talking about is now known as “Mattress Mack.”
Perhaps you heard of Mattress Mack back in 2005 after Hurricane Katrina flooded parts of Houston. Mattress Mack put a lot of people up inside his furniture stores to give them a safe and dry place to stay. And he’s done that numerous times and again in 2017 during Hurricane Harvey and consistently doing the right thing for his business, his customers, and the and the citizens of Texas.
In forty seven years he’s built a very successful business and you’ve probably seen him on the news lately. He’s a humanitarian, a philanthropist, and at 70 years old, his net worth somewhere around $300 million. And from what I’m reading, his furniture chain does somewhere around 300 million a year in sales.
I first reported about Mack in 2017 with a blog post and some social media posts about what I thought was all the great things he was doing for the people who were flooded out of their homes. He’s just does an amazing job and never worried about getting his furniture stained or unsellable, just because somebody put their wet feet on it. These were just terrible situations and Mattress Mack made the best of it for so many people in need.
So, let’s talk about my problem with Mattress Mack…
Mattress Mack made big news this past week about a large bet he placed with Caesars Sports Book in Las Vegas. He wagered 4.5 million dollars that the Cincinnati Bengals would win the Super Bowl. And that’s what I want to talk about is this promotion that Mack is doing, and I really don’t like it. I’m going to tell you why, because this gentleman that I really looked up to, and I just believed that everything that he’s doing is just fantastic. And, you know, I remember in one of my posts that I put out a few years ago that I thought the rest of the world could learn so much from Mattress Mack on what he’s doing with his business as he turned it into an empire as he helped so many people at the same time. But once again, four and a half million dollars bet on the Super Bowl. Let’s talk about this.
Why is he doing that?
He’s doing that to hedge a promotion that he’s having in his furniture store. And the way this works is that if you come in and buy $3,000 or more worth of furniture before the Super Bowl, If the Cincinnati Bengals win that Super Bowl, you do not have to pay for your furniture. Yes, you will get it free!
Mattress Mack will take the winning money from his 4.5 million dollar bet and pay off your furniture for you. If he has money left over that’s just more profit that goes to that promotion.
It’s a no lose gamble for Mattress Mack. It’s a little bit like a hole in one contest at a local golf tournament. If you get a hole in one on a certain par three, you will win a brand new car. Now the organization holding the golf tournament doesn’t pay for the car. They use a specialty insurance policy that might cost them $3,000-$5,000 but nowhere near the $50,000 price of the new car.
Previously, Mattress Mack used specialty insurance companies to back his promotions, but he’s into such big money, that they would want too much of his money for premiums, and he would not be able to have a profitable campaign using the insurance company model.
So here comes Las Vegas. So, we’re talking about Caesars Sportsbook now. So, here’s what Mattress Mack did last week. Since gambling online is illegal in Texas. I really don’t know what the laws are, but he had to drive to Louisiana and cross the state line. He pulled up the Caesars Sportsbook app on his phone and placed twenty five $200,000.00 bets from his front seat.
So that’s kind of a way Mattress Mack rolls right now. I think he lost a lot of money on the
Houston Astros when they didn’t win the World Series last year. If they would’ve won the World Series, a lot of people would have got free furniture. But that one didn’t pay off too well. So now if the Cincinnati Bengals do not win, Mack will of course lose the 4.5 million he wagered. But all the promotions, all the noise, all the commotion and publicity has driven so much business into his showrooms, there’s more than enough to make up for that 4.5 million dollar losing bet. Of course, the customers don’t get free furniture in this case.
So that’s the way the promotion works and here’s my problem. Really, I’ve got three problems with this type of promotion. Number one, how come everybody’s not doing this? How come I can’t go walk in and go look at a Corvette and say, look, I want to buy this Corvette for ninety thousand dollars. But if the Bengals win the Super Bowl, I want you to put me in some program where I don’t have to pay you.
A car dealership would look at you like you’re crazy if you requested this, right? Or if you go to buy a vacation or a new house or any big ticket item, you say, if the Bengals win the Super Bowl, I want this free, right? No, it doesn’t work that way because it’s a bad business model. Other companies don’t do this for a reason. Other industries don’t do it because it’s not a good business model.
And I know what you’re asking how is not a good business model? Does everybody know everybody doesn’t win Mattress Mack? Yeah, he’s going to win. He’s been at this game for forty seven years. He’s not going to lose on a promotion. Either will the sportsbooks in Las Vegas. They’re not going to lose. They’re not in the business of losing.
You know who’s going to lose? The customer is going to lose. And this is exactly why the customer is going to lose. So, if a customer walks into a Mattress Mack store today to buy a dining room table and they have a $1000 budget.
They pick out the dining room table they want and set it up for delivery. Next, the salesperson tells the customer about the new promotion that if they just spend another $2,000 dollars. They would have a good chance of getting their furniture completely free. Well, you know, the customer thinks they can get a couple of thousand dollars’ worth of stuff free. Yeah, they pick out a new sofa, love seat, and recliner.
But since we got a shot of getting it free, let’s go ahead and go for this promotion. And maybe Mattress Mack will pay off our furniture force if the Bengals win. Of course, you will.
But what happens here? You know, yeah, the Bengals win the other customers really happy. But here’s the problem the Bengals lose. The costumers got a $3000 bill that they owe, right? Whether they financed it or paid for it. They didn’t budget for it.
I think the customer has taken a hit there. You might not agree, you might think it’s just clever advertising and marketing tools. Or, it’s just a promotion.
Yeah. Under normal marketing. I mean, if you tried to read the fine print of any mattress company or furniture companies, television advertisements on their payments and no interest and da da da da da da you can’t, there’s not enough time to read all that fine print. I was in the mattress business for seven years and I was a territory manager. I had up to 18 stores at one time with a $20 million annual budget. I know it takes a lot to get people in the store to make these stores profitable. I know them. And like I say, his 3 stores are doing $300 million a year in revenue.
So, if you’ve got three stores each store doing 100 million, that’s some that’s some real money, right? And the promotion, it works, it gives him a lot of press. But Mattress Mack doesn’t really need this type of press. I don’t think. I don’t think he needs the image of a gambler right now; I think his legacy is better than that!
What he’s been doing for years as far as helping people out and helping the people when they were down on their luck, and maybe they’re even homeless and this is his brand.
I’m all for a fancy promotion to draw people into the store. But I think this one is in poor taste. Why doesn’t he lower the minimum ticket price to $500 instead of $3,000?
This way any furniture over $500 would be free. I could live with something like that, that where the person comes, who wants is a table or a desk or something that they can afford. Maybe they get that free. That’s a good deal. But making him take that ticket, that sales ticket up to $3000. That’s the problem. The promotion just won’t work with the lower $500 ticket.
Las Vegas, they’re going to they’re going to get their money. They always get their money, but the customer’s going to lose. Mattress Mack will get a lot of promotional value from it, right?
So, that’s just one of the problems I have. The second problem is that no other industries are doing this. Where’s my new house, or car for free?
I understand that Mack has a net worth of three hundred million. And his three stores are doing $300 million a year. The company is probably talking in a net end of the year profit of 15-20 million. I could be off a little bit, probably not off too much.
So,15-20 million sounds like a lot of money, but it’s big family operation, you’ve got to have money back for bad times. You got to have money saved for emergencies. You need money for growth and need planning for the next generation to run the business.
A business always needs plenty of cash on hand and gamblers sometimes run out of cash. I don’t want to see that happen to Mattress Mack. Even though you’re netting 15- 20 million a year, if you’re dropping $3 million this week and a couple million next week, that’s some real money and it quickly adds up.
Mattress Mack is my hero and I love what he’s doing. Mack has a stellar reputation and is a guy I would love to work with for a day then have a cold beer. I hate to see him tarnish his reputation because I just smell something bad happening.
So anyway, that’s my thought. Love to hear your thoughts with me. If you don’t agree whatever, let me know and be sure to check out the show notes, and we’ll talk to you real soon. This is Dennis. I’m out.