Overlooking the Obvious No Longer
After nearly a decade of double-digit sales increases, the recession of 2001 caught the rug business by surprise. Industrywide, sales advanced only an estimated 3% to 4% for the year. But instead of running scared, rug people got even more aggressive.
"The rug business had a great run of double-digit increases in the '90s, but we've barely scratched the surface in terms of the market's potential," says Alex Peykar, a Nourison principal. "The industry could easily double in the next five years."
"Retailers put a lot of effort into bringing down inventory levels in the last half of 2001," notes Couristan President Ron Couri. "Now I think they are ready to start buying again.
"People are traveling less and staying home more," he adds. "That looks good for the home furnishings business."
From product mix, channels of distribution and licensing alliances to color and design, the rug industry is being altered at every level. One of the most dramatic recent events was the purchase of the Beaulieu rug division by home textiles producer Springs Industries. Over the past two years, the Beaulieu rug division had pulled away from the furniture and specialty store market in favor of home textile and discount store channels of distribution. To underscore the point, the company has closed its showrooms in Atlanta and High Point, N.C.
The segment's increased emphasis on mass-market channels has also changed the look of Mohawk Rug & Textile. With annual sales estimated at more than $400 million, the Mohawk division today is both a leading floor covering producer and a home textiles giant. Mohawk Rug & Textile is now adding blankets to a product mix that also includes throws, pillows and tabletop items as well as mats and rugs.
But Mohawk is not abandoning the traditional rug business. According to Pat Moyer, vice president of marketing, the division in January began beefing up its higher-end Goodwin Weavers brand and adding hand-tufted and hand-hooked imported rug collections aimed at home furnishings specialists.
Meanwhile, Mohawk's Custom Weave division has recently added a full-blown collection of customized rugs developed to bridge the spheres of rugs and carpet. The line is aimed primarily at floor covering retailers, says President David Hardy.
Retail distribution channels for the rug business have broadened over the past 10 years, but perhaps the next "hot" store category for rug sales is one that has been around for more than half a century: the specialty floor covering store.
"I think the traditional floor covering specialty store has tremendous potential," notes Jeff Meadows, vice president of the Shaw Rugs division. "Those stores are selling a lot of hard-surface flooring and consumers want rugs to cover those floors. It seems like a natural thing for the floor covering store to carry rugs but, so far, not many have entered the business in a big way. Once they do, it could be a major channel for the rug industry."
"A few years ago, everyone was predicting the demise of the independent floor covering specialty store. But obviously, that is not true," adds Paul Kershaw, vice president of marketing for Carpet-Art-Deco. "Consumers still want the service and expertise that only a specialist can offer. That's why it is also a perfect venue for rug sales."
Feizy President Amir Loloi agrees. "We believe the floor covering specialist offers a new and virtually untapped channel for rugs. We are aggressively pursuing this area of distribution," he says.
The world of rugs is no longer easily divided between handmade and machine-made producers. In today's market, every vendor is striving to become a "one-stop shop" where retailers can buy products of every construction and price point.
In January, the Sphinx division of Oriental Weavers introduced its first handmade line. Called Oasis, it was developed under the direction of Linda Harlow, formerly rug buyer for Macy's West. The result was a trip to the winner's circle for "most innovative product" in this year's Most Magnificent Carpets Awards competition in Atlanta.
828 International Trading has also developed a handmade division, and Moren has entered the handmade business through its acquisition of the assets of Corinthian Rug.
Meanwhile, handmade specialist Nejad is branching out to hand-tufted and machine-made lines. High-end Noonoo is now bringing in moderately priced hand-tufted products and has entered into a design and marketing relationship with Radici, the Italian carpet and rug manufacturer.
Name-brand licensing has become a battlefield for major rug vendors. Oriental Weavers USA made its first introduction of Raymond Waites designs in January, a license that was formerly held by Beaulieu. Nourison, which made its name as an importer of traditional handmade rugs, has made a major commitment to the cool elegance of contemporary styling in the new Calvin Klein rug collections.
Shaw has been making headlines through major partnerships with Kathy Ireland and Tommy Bahama. Later this year, the company will introduce its first rugs produced under the Martha Stewart Home licensing program. Karastan, which kicked off its Ralph Lauren line in 2001, is making its first addition to the collections this spring.
"Ten to 15 years ago, rugs were like fine wine. The longer you had them, the more valuable they got," says Paul D'huyvetter, senior vice president and general manager of Oriental Weavers USA. "Today, they go sour quickly because this is now a fashion industry.
"The fashion turnover used to take two years. Now it takes two to three months," he explains. "In the old days, a carpet line could run for 10 years. Now retailers want to see a whole new product line twice a year. We're always striving for innovation and fresh looks."
Three years ago, the tea stained look was hot. Today, it's dead. Instead of murky tones, today's colors are clear and defined. There is even a renewed interest in jewel tones of cobalt blue, turquoise, aquamarine, emerald, topaz - and red, red, red.
Value has also become a mantra for the rug business. It's especially significant in the under-$1,000 price category as vendors continue to develop new ways to interpret upper-end looks at popular price points.
"If a design can be executed in a hand-tufted construction, there is no reason to make it in hand knotted. The consumer gets the same look with great value," notes Liora Manne, the creative force behind Trans-Ocean's Design Rhythms collections.
The reopening of trade with Iran opened up the floodgates for inexpensive tribal rugs that came pouring into the United States in 2001. They initially met with some skepticism from the self-styled industry experts. There were some misgivings about the "old-fashioned" colors - typically bright oranges and reds - but some retailers decided to try a few pieces.
Surprise! Many of the "old" colors looked fresh and new to American eyes. Customers also liked the handmade quality, and tribal look and texture.
"It took a few months for the sell-through, but now retailers are coming back for more," says Reza Momeni, president of Momeni. "It's a very hot category. Very unique. Because these rugs are largely one-of-a-kind items, they are not shoppable, so retailers can get full margins. They allow smaller retailers to compete more effectively with the big-box stores."