Rug execs look to re-energize business
After quiet year, emerging innovations aim to spur sales
By Lissa Wyman -- Furniture Today, December 24, 2006
High Point — This has been a quiet year for the rug business. Retail sales have been flat, at best. Innovative products have not been abundant. Prices and profits keep drifting downward. Even the best-selling brown and neutral color palettes reflect the subdued mood of the rug industry.
This quiet period also reflects a time of introspection for rug executives as they figure out what they can do to re-energize the business with new products and marketing tactics.
As 2006 draws to an end, there are already some early indications of new strategies for pumping up sales and profitability in 2007.
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New products. Decorative indoor-outdoor rugs are becoming one of the hottest categories in the business. For the past two years, this type of all-synthetic rug has generally been utilitarian and inexpensive. (The words "ugly" and "cheap" are frowned upon in polite company.) Retailing for under $100 in a 5 by 8 size, many of these beige-bound rugs are sold out of dump cartons in discount stores and home centers.
The new breed of decorative indoor-outdoor rugs, however, covers a much broader range of styles, including classical Oriental styling and decorative florals. They are intended for use in kitchens, bathrooms and garden rooms. While inexpensive (under $150 for a 5 by 8 size) these new indoor-outdoor products offer retailers better profit margins as well as a category that is well differentiated from the mass market. -
Soft home. Some large vendors are venturing beyond their core products and into the larger world known as "soft home." For rug vendors, this is usually interpreted as small kitchen and bathroom rugs. But for some, the door may now be opening for further expansion into areas such as throws, tabletop items and related textile products. For importers who source in India and China, it is not a major stretch to extend the line. Some vendors, such as Nourison, also are adding sales and marketing executives with expertise in the mass-market channel where many of these products are sold.
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Product synergy. While the growth of hard surface floors has helped the rug business in the past decade, some vendors also are eyeing the profitable high-end patterned broadloom business as a natural partnership. Major vendors such as Couristan, Karastan, Nourison, Stanton and Kane are expanding their marketing programs to include fully coordinated programs of soft floor coverings. For the most part, carpeting, runners and rugs are made on the same machinery, so color matches and patterning are a cinch. The combined presentation of broadloom, runners and rugs helps vendors open new retail doors. It allows rug and furniture stores to enter the high-end patterned broadloom business. For floor covering specialists, it's a way to expand the rug business.
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Furniture partnerships. For several years, rug designers have been informally involved with furniture producers, creating new styles and colors that are in tune with furniture trends. Now those relationships are becoming formalized in various ways. For example, Klaussner recently introduced its first full rug program under its own corporate umbrella. Designed and sourced by industry veterans Steve Roan and Mike Shupp, the rugs are part of Klaussner's "whole room" concept.
In addition, Drexel Heritage has a long-term relationship with Miresco, which designs and colors rugs that coordinate with Drexel collections. Miresco also helps set up Drexel dealers in the rug business.
Surya, another importer, has expanded its relationship with Rowe and is now in its second season as the exclusive supplier of rug collections for Studiorowe gallery dealers.
As rug suppliers increase their efforts to strengthen their position in the furniture store channel, it's not surprising that some also have entered the furniture business. Both Safavieh and Abbyson now have full lines of medium to high-end furniture. Due Process Stable Trading Co. also has expanded far beyond its original rug and accessories offerings with the acquisition of luxury home furnishings vendor Arthur Brett. -
The profit challenge. Prices on all types of rugs, machine made and hand knotted, continue to drift downward. As a result, everyone along the distribution chain must sell more units in order to merely keep even with last year's volume.
As is the case in many product categories, the large middle segment market seems to be eroding. There is a small but lucrative market for luxury goods, and a large but highly competitive market for value-oriented merchandise. The middle price range is becoming a much smaller part of the pie.
While there seems to be no graceful way to solve this dilemma, many vendors are now choosing to deal with it in practical ways.
The very large manufacturers and importers, such as Nourison, Shaw and Mohawk, can be soup-to-nuts suppliers for every type of retailer. But many rug vendors don't have the resources to be all things to all retailers.
Some small and medium-sized suppliers, such as Jaipur and Delos, are choosing to take a more specialized approach to the business by developing stronger relationships with their retail customers. By inviting customers to participate in the creative process, these sources develop dealer loyalty that goes beyond the typical dollars-and-cents relationships between large stores and large vendors. -
The sourcing challenge. One of the big challenges facing the rug industry is the growing phenomenon of retailers going directly to sources in India and Asia, thus breaking the traditional flow of goods to consumers. Importers are frustrated by this trend, but they are developing creative ways to circumvent and even profit from it.
Some medium-sized sources actually are helping their retail customers as the latter venture into the realm of overseas sourcing. Some vendors have set up container programs for large retailers in which they offer low prices for big purchases that are sent directly from the source to the store.
Other vendors offer to accompany retailers on their overseas buying trips, acting as agents for offshore manufacturers. -
Licensing programs. While licensing programs for rugs are not thriving across the board, the success of a few big names, such as Kathy Ireland for Shaw Living and the Andy Warhol-inspired designs for Oriental Weavers, have kept the rug industry interested in this form of marketing.
After a quiet year for the rug industry, a big dose of celebrity glamour is planned for the Atlanta International Rug Market in January.
Safavieh will introduce its first Martha Stewart rugs, covering a broad range of price points and constructions. The hoopla surrounding the event will include a personal appearance by Stewart and a gala party at the posh Capital City Club in Atlanta.
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