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Rug vendors make it happen in Atlanta

By Lissa Wyman -- Furniture Today, January 20, 2002

ATLANTA — ATLANTA — Instead of playing it safe in the backwash of the sluggish economy, many vendors at the big rug market here moved forward with major efforts in fashion, product assortment and licensing, and the show got off to a rip-roaring start last week.

Still, executives were reluctant to predict the double-digit sales increases they enjoyed in the '90s.

Alex Peykar, a principal of Nourison, reflected the views of many when he said, "We are increasingly aware that the nation's economy and our own businesses are extremely volatile. The future depends on factors beyond our control, which makes it difficult to make predictions."

It's no secret that 2001 was sluggish for rugs, but things began to pick up in the last quarter.

"Any retailer focused on turnover will do well," Peykar said. "These are our target customers. We bear the responsibility for carrying the inventory."

"Retailers put a lot of effort into bringing down inventory levels in the last half of 2001," said Ron Couri, president of Couristan. "Now, I think they are ready to start buying again."

Prices for entry-level, machine-made rugs have fallen, caught in mass-market price wars, said Paul D'huyvetter, senior vice president and general manager of Oriental Weavers of America.

"As an industry, we tend to be our own worst enemy, and quality suffers as the prices come down," he said.

D'huyvetter said OWA's aim is to bring high styling to medium price points, with $299 retail the sweet spot for most products. The Raymond Waites collection the company introduced last week targets that area.

The world political situation may have caused some price erosion in hand-made rugs. Distributors in Iran and Pakistan reportedly are dumping hand-made rugs in an effort to raise cash, but Reza Momeni, a principal of Momeni, doubts that will have long-term ill effects.

"There usually is a good reason for dumping merchandise: It doesn't sell," he said. "Smart retailers want to buy products that turn. If it doesn't turn, the price is never a bargain."

A major development is the expansion of product assortments. Large vendors want to be one-stop shops with a full spectrum of hand-made and machine-made rugs.

The Oasis hand-made division of Sphinx by Oriental Weavers made its official debut here. "This allows us greater access to the higher-end retailer and consumer," said John Graham, president of Sphinx. "Consumers want great colors and value. They don't care how a rug is made."

Shaw has emerged as one of the most aggressive rug makers in the licensing arena, linking up with decorating demigod Martha Stewart. The first Stewart rugs likely will debut to floor covering specialists in late March, with product aimed at furniture stores coming later in the year, said Jeff Meadows, vice president of Shaw Rugs

Shaw is using its Kathy Ireland and Tommy Bahama lines as entry vehicles into new markets. Tommy Bahama products have been expanded to include imported jute area rugs, Shaw's first venture into imports. Ireland's Tweener collection debuted last week, moving Shaw into the juvenile market.

High-end specialists also are branching out. Harounian Rugs International offered several lines of hand-tufted, hand-hooked and hand-loomed accent rugs at popular price points. "Our high-end antique reproductions are still the cornerstone, but popular-priced rugs represent a growing opportunity," said Lee Harounian, a company principal.

828 International Trading, a young importer, is expanding from machine-made to hand-made rugs, most in the hand-tufted category at retails in the $599 to $799 range.

KAS Oriental Rugs, a high-style importer of midpriced hand-made rugs, is becoming more involved with machine-made products. "We introduced a 1.5-million-point machine-made rug with exceptional clarity and detail at value pricing," said Joan Catello, vice president of sales and marketing.

Central Oriental, a division of Natco, is working with other divisions to develop coordinated products and marketing programs, said President Mark Ferullo, and will be part of Beverly Murphy Home.

"The current economy and the psychological state of the country have combined to give us more freedom to develop new ideas," said Bryan Cindell, sales and marketing director for Bon Motif. "I believe we are entering a tremendously fertile era of creativity."

But does the rug business need to change styling twice a year? Paul Kershaw, general manager of Carpet-Art-Deco's North American operations, says no.

"Consumers aren't in the market for rugs frequently enough to create a real fashion demand," he said. "The pressure to bring out new styles and colors every market has changed the rug industry into a closeout and drop business. The rugs aren't available long enough to establish sell-through on the retail floor."

This creates an off-price mentality for retailers, Kershaw said. "If I were a retailer, I wouldn't buy any new running line items. I'd just wait for it to be dumped," he said.

Meanwhile, large companies appear to be gaining market share, but there is still room for smaller vendors and newcomers.

One example: United Weavers of America, a division of a big Saudi Arabian carpet and rug maker, moved into a big distribution center in Dalton, Ga., about a year ago. It would surprise no one to see weaving equipment move in soon.

"We are definitely planning to make rugs in the United States," said Samir Abu Hadba, general manager. "It's a matter of when we get the go-ahead from corporate headquarters."

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