Rugs regain momentum
By Lissa Wyman -- Furniture Today, December 26, 2004
High Point — The rug category is regaining momentum after three years of sluggish sales.
Rug sales in 2004 will probably be ahead approximately 5% to 6% in terms of dollars, but over 12% in terms of units.
However, the emerging rug business is far different from the pre-recessionary industry of the late 1990s.
The current average price for a 5 by 8 machine-made rug is approximately $199, while a handmade 5 by 8 rug can be purchased for $500 or less. This pricing is considerably lower than four years ago, when machine-made rugs were averaging $700 and handmade rugs were going for $1,500. Price isn't the only thing that has come down. The "lead" size for area rugs is now 5 by 8, compared to 6 by 9 a few years ago.
The new rug business is driven by price and retail channel.
Mass-market stores are quickly dominating the category and are now estimated to account for more than one-half of the industry's retail sales.
To compete, traditional retailers such as furniture, department and rug specialty stores also must play the price game. To offset the high traffic levels of the mass-market stores, traditional retailers also are developing new ways promote personal service.
The price game also has affected rug styling. As rug producers have adopted mass-market manufacturing techniques, they can move quickly to develop high-styled rugs that are concurrent with furniture and home textiles fashions.
"The days when ugly styling went together with inexpensive products are over," said Merle Johnson, vice president of marketing of Mohawk Home. "Our goal is to offer value with a lot of style."
Today, contemporary styling is growing significantly, and traditional Oriental rug patterns are available in color palettes that coordinate with upholstery fabrics. Because the average price of a room-size rug is now less than $1,000, rugs can be switched out of a room when a color or design trend passes.
In the days when hand-knotted Oriental rugs dominated the business, fashion was a non-issue, as time lags on production could run up to two years. And who could imagine throwing out a $5,000 rug just because the colors were no longer in fashion?
The bottom line is that the "Oriental Rug Mystique" is no more.
A dozen years ago, department and furniture stores were the rug industry's primary customers in terms of volume. Now the volume dealers are Home Depot, Bed, Bath & Beyond, Linens 'N Things, Kmart, Wal-Mart, Target and other big-box stores.
The emergence of the mass market has profoundly altered the rug industry's long-established vendor structure. For nearly a century, the rug industry has been highly fragmented, with hundreds of privately owned small and medium-size manufacturers supplying an equally diverse mix of retail stores — primarily furniture stores, Oriental rug specialists and department stores.
Now it's a matter of mega vendors serving mega-retailers. Only a few rug suppliers have the resources needed to deliver huge volumes of re-orderable, consistent products to the large chains. Manufacturers and importers such as Mohawk Home, Oriental Weavers of America and Shaw Living, Nourison, Trans-Ocean and Capel are becoming the dominant suppliers for mass-market stores.
In the near future, these big vendors will probably get even bigger.
Mega-vendors also are developing marketing and product strategies that will give them an entrée into all of the other retail channels, too: Traditional specialty stores, furniture and department stores, gift stores, catalogs and the Internet.
When textiles tariffs come off in 2005, both U.S. manufacturers and importers will probably turn their attention to countries such as China, India and Turkey for sourcing low-cost rugs for mass market stores.
Furniture and department stores always have provided the rug industry with a prestigious customer base for high-end, hand-knotted rugs. But that channel is changing radically. As low-cost imports and big-chain competition pull down furniture prices, rug vendors must reconsider their own price structures.
"A rule of thumb is that a rug should be 40% of the cost of the sofa. In today's market, that means the tonnage is in the $299 to $699 range for a 6 by 9," said Joan Catello, vice president of sales for Kas Oriental Rugs.
Added Steve Mazarakis, president of Hellenic Rug Imports, "It's ridiculous to think you can sell a rug for more than the price of a sofa."
Yet some high-end rug specialists say that the downward trend in rug prices is helping to protect the niche specialists at the luxury end of the market.
"While many large vendors are chasing the mass market, our focus is on high-end, designer-driven sales with products that are clearly differentiated from the mainstream," said Joel Karimzadeh, president of M & M Design. "They want something that is clearly set apart from mass market styling."
Beginning in the late 1980s and '90s, floor fashion experienced a paradigm shift. Wall-to-wall carpeting continues to lose favor with consumers, and hard-surface materials such as wood and ceramic tile have become de rigeur. Rugs make a warm and fashionable accent on top of hard-surface floors.
In the late '90s, the shift in consumer flooring preferences caused a boom in a rug business still run along traditional lines. Most room-size rugs were still sold in traditional furniture, department and specialty stores. Then the mass-market channel discovered room-size rugs.
Certainly many traditional vendors and retailers long for the "good old days" when exquisite hand-knotted rugs costing thousands of dollars were the norm. However, the shift to lower-priced merchandise has had one big winner: the consumer.
Today, every person at every income level has the opportunity to own a good-looking decorative rug.
-
Big boxes pull rug from under tradition
Jan 8, 2006 -
Rug vendors aim to sustain momentum
May 7, 2006 -
Rug lines expand range to offer one-stop choice
Oct 12, 2003
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