Share this on

Big boxes pull rug from under tradition

Distribution changes send prices, profits plunging; old-line stores fight to survive

By Lissa Wyman -- Furniture Today, December 25, 2005

High Point — Changes in retail distribution and erosion of prices and profit margins are challenging the rug industry's traditional business models. The issues aren't new, but they now are consuming the core of the industry rather than nibbling at the periphery.

Big-box stores, home centers and other mass-market retailers are now dominating a business that once was the domain of independent specialty shops and department stores.

Because hard numbers are hard to come by in the rug industry, it is impossible to determine precisely how much rug business is done by mass-market merchants. However, many observers say it is now 50% or more of the entire industry in dollars.

The impact of the mass-market juggernaut on the traditional rug business was dramatically demonstrated this year when two major, longtime rug and carpet retailers closed their doors. Pedian Rug in Chicago, once the most respected floor covering business in the Midwest, closed this year. Able Rug, once the largest rug retailer in New England, shuttered all its stores this fall.

Meanwhile, Noonoo Rugs, an importer known for its high-quality hand-knotted products, is currently liquidating.

As the mass-market channel continues to gain momentum, prices continue to drop. The "sweet spot" for machine-made rugs is now $199 to $399, compared with $299 to $799 five years ago. Hand-tufted rugs, introduced about nine years ago to bridge the price gap between machine-made and hand-knotted rugs, are now offered in a full price assortment from $199 to $999.

Coarsely woven Tibetan-knot constructions retailing at less than $1,000 in a 5 by 8 size are bringing down prices in the hand-knotted business. Fine hand-knotted rugs now exist almost solely at the stratospheric levels of the to-the-trade designer niche.

In order to stay competitive, traditional specialty stores and department stores have jumped into the low-price rug business. "The result is, we're selling more units than ever before, but the profits just aren't there anymore," said one major rug retailer.

The trickling down of styles from the high end to the mass market is now proceeding at warp speed. For example, two years ago, hand-knotted imported "Peshawar" rugs appeared on the market in the $1,500 to $2,000 retail range. In High Point this fall, these relaxed traditional designs were shown in machine-made and hand-tufted constructions at $199 to $799 retail.

It's not just the mass market. Internet and catalog retailers also are making deep penetrations into the rug market. In fact, vendors have embraced these channels in recent years, with some resources working closely with Internet stores to develop exclusive products for Web sales.

Is there hope for traditional stores? There are glimmers.

Some vendors are turning their attention back to the medium-high end of the market with the development of new hand-knotted lines that bridge the price gap between tufted constructions and the to-the-trade business. Companies such as Momeni, Feizy, Shalom and Harounian Rugs report increased interest in these medium-high priced products from retailers who want greater differentiation from the mass market.

Vendors also are turning to furniture stores as a channel for high-fashion, higher-priced merchandise that coordinates specifically with furniture. Surya and Hellenic are two major suppliers who work closely with furniture makers to develop exclusive lines available only through furniture stores.

Surya works closely with Rowe Furniture to develop a growing rug collection that coordinates with Rowe upholstery colors and designs. These rugs are signature pieces in Rowe's in-store shop concept, known as studiorowe. The hand-tufted rugs retail at approximately $399 for a 5 by 8.

Traditional rug importers such as Jaunty also are teaming up with furniture stores to develop full rug departments on a concession basis. Working closely with several Top 100 stores, the Jaunty concessions include a broad range of rugs from several vendors. Developed over the past six years, Jaunty now has concession operations in nearly 70 furniture stores, a channel that accounts for about 60% of corporate sales.

While Jaunty also has a wholesale business that runs parallel to the concession program, other concessionaires do not sell to outside stores. For example, The Mink Cos., which operates rug departments in Macy's Stores, has specialized in department and furniture store leased rug departments for nearly 100 years.

Some rug resources even are broadening their product mix in order to gain further penetration in the furniture channel. This year, Abbyson and Safavieh have introduced furniture and home accents collections to complement their rug offerings.

The changes pummeling the rug business reflect the same forces affecting other product categories, from home furnishings to apparel. In many industries, consolidation has been the ultimate result of the power-price-profit squeeze. That doesn't appear to be happening in the rug industry — yet. With nearly 300 vendors in the business, the industry still offers a wide range of design choices, constructions and pricing.

Share this on

Rugs regain momentum

Jan 9, 2005

Opportunity always there, but market has changed

Apr 8, 2007

Also by this author

Also by Lissa Wyman

Featured Company

Brandwise Inc.

Brandwise serves a model - not just an industry - by integrating, automating, and optimizing the entire sales channel, from wholesale Suppliers to their Reps and the Retailers they service. In short, our software helps Reps and Suppliers sell more and create... more