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Here a rug, there a rug...

Rug vendors step up efforts to gain floor space in chains

By Lissa Wyman -- Furniture Today, December 29, 2002

Picking winners
Display challenges

Mass market retail channels are rapidly becoming the place where America shops for rugs. That trend will snowball in 2003 as big vendors such as Shaw, Mohawk, Nourison, Oriental Weavers and Trans Ocean tailor products and price points to chains such as Wal-Mart, Target, Kohls, Kmart, Linens N Things, Bed, Bath & Beyond, Home Depot and Lowe's.

It is estimated that those national chains currently sell approximately $1.3 billion in rugs at retail, or about one-third of total U.S. rug sales. Department stores such as Federated, May's, Sears and J.C. Penney have rug sales estimated at approximately $325 million.

The rug category reaches a much wider audience in heavily trafficked chain stores, so getting product established in that channel is a priority for many vendors.

Recently, Shaw Rugs began an aggressive push into the mass market category, and this will be a high priority in 2003, according to Jeff Meadows, vice president of the division.

Exploring new products and channels is one way to fight the recession, which many executives predict will linger at least through the first half of 2003.

"There is a great deal of uncertainty in the market, based on long-range economic cycles and worldwide politics," said Joan Catello, vice president of sales and marketing for Kas Oriental Rugs. "It's difficult to predict what will happen, but I don't see significant improvement at retail until the third quarter of 2003.

"The best we can do is learn from the experience. The economy is teaching us how to work smarter and harder."

Picking winners

Kea Capel Meachem, director of creative marketing for Capel, noted that part of working smarter is concentrating on products that will be sure-fire winners. "We aren't cluttering up the line with marginal items. As a result, our pre-testing and research are more important than ever."

A decade ago, consumers tended to purchase small "scatter" and "throw" rugs in department stores' linen departments or at mass merchants. Room-size area rugs were the domain of traditional department, furniture and specialty stores. But all that is changing.

Room-size rug vendors now are introducing smartly styled smaller rugs targeted for the large retail chains. These "accent rugs" have become a new product category that is no longer locked in to bathroom and kitchen trends. In fact, these rugs are by no means relegated to those rooms.

Last year, Nourison established an accent rug division that features under-$100 washable rugs in the hand-hooked and hand-tufted constructions normally associated with room-size rugs.

The marriage between traditional area rug vendors and mass market retailers is changing attitudes on both sides. First, vendors wooed retailers with small rugs. Now, the chains are embracing the idea of larger rugs. Many are stocking rugs up to 4by6 feet, and some vendors predict stores will soon be carrying room-size rugs.

Companies such as Shaw and Nourison recently introduced woven 5by8-foot rugs geared to the under-$150 price points. They are aimed at mass market stores as well as major furniture chains.

Display challenges

"The challenge is to find the proper way to display large sizes," said Jim Thompson, national accounts manager for Shaw Rugs. "Some stores are putting in swinging arm racks. Others are developing their own merchandising systems for larger rugs. There is still a lot of work to be done."

Harounian Rugs International, known for its hand-knotted antique reproductions, is also making an effort to penetrate the mass market channel with handmade products, said Lee Harounian, a principal of HRI.

Noonoo, best known for fine hand-knotted rugs, is planning a major entry into popular price ranges in 2003.

"It is no secret that the high end of the market has been seriously affected by the slowing economy, stock market decline and general cautious consumer attitude," said Gene Newman, chairman. "As a result of these factors, we are placing a new emphasis on lower or popular price points for which we have not been historically known."

Karastan, with its strong image as a high-end rug maker, also may be exploring new product categories and channels of distribution. Under the new name of Karastan Home, the rug segment of Karastan's business recently became part of Mohawk Home, the rug and textile division of parent company Mohawk Inds.

"We have tremendous opportunities to expand the brand using the resources of Mohawk Home," said Bill Storey, executive vice president of the new Karastan entity. Mohawk Home, with sales over $500 million, is the industry's sales leader in rugs and textile products geared to mass market channels.

The recent economic sluggishness has been a factor in a general erosion of prices and increased emphasis on mass market channels. But the rug industry is not about to give up on its traditional customers, such as specialty stores, furniture stores and department stores. Instead, many are choosing to cover all the bases in terms of price points and retail channels.

For companies such as Nourison, HRI and Noonoo, the mass market is an expansion, not an about-face.

"Our core business will remain with high-quality, hand-knotted rugs," said HRI's Harounian.

Newman also stressed that the new direction is a complement to existing business, not a substitute. "Our future efforts will continue to be directed toward the high end, especially as the economy improves," he said.

After two years of stop-and-go sales, rug execs are expecting business to pick up again sometime in 2003. "On a color scale of white to fire engine red, I think 2003 will be hot pink," said Capel's Meachem.

Nourison's ValueWeave collection is machinemade of polyacrylic with hand-carved detailing. Suggested retail price is $130 in a 5by7-foot size.

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