Product Enhancements Buoy Area Rugs
Cecile Corral -- Casual Living, January 15, 2007
Despite gloomy results in the home departments of many retailers, the rug category dominated the floor in 2006 with a healthy industry-wide sales growth of 5.6% to $4.75 billion.
Area and accent rug suppliers sharpened their survival skills over the year, having garnered experience from prior years in enduring a compromised economy that continued to be stressed by unrelenting raw material price increases and softer home sales in general, coupled with ongoing competition from retailers' direct-sourcing activity.
Early into the year they began healing their business battle scars and went back to the drawing board. Armed with resolve, these suppliers got smarter about manufacturing their products more efficiently, invested in production technologies that offered better design interpretations and a broader spectrum of colorways, became savvier importers, and worked more closely with retailers to respond to changing trends.
Rug category leader Mohawk Home in 2006 reported $342 million in rug sales — a 6% increase from the previous year, thanks in part to the Sugar Valley, Ga.-based company's investment in product development for improved color and design capabilities, Jim Quist, vp, sales, told HTT. "We've introduced complexity and capability in our woven plant to achieve better color and design," he explained. "We now have more colors, more colors per design, and more intricate designs."
An example is the Kaleidoscope collection, which was launched last spring. It boasts up to 29 colors per rug, representing Mohawk Home's most colorful woven product.
"This investment has paid off in new placements for woven, printed, and tufted constructions," Quist said.
On the same page is Maples Industries, the fourth largest rug supplier in the United States, posting $150 million in category sales for 2006. The manufacturer is "making a significant investment in automation and also new printing equipment," company owner and president Wade Maples said.
"We're installing it now and it will take another year to get it all completed," he said. "It will improve the quality of the product, and it will improve the printing, especially."
He added that he does not foresee a cost increases as a result. "It will be the same price but better quality," he continued. "We believe that prices will be steady."
This manufacturing enhancement comes at the heels of a 2006 that was "better than we expected it to be," he said. "And we expect this year to be a good year, too. We know nothing for sure, but all of our customers tell us they expect the next year to be strong."
Also using innovation to reach a new tier in quality is Saddle Brook, N.J.-based Nourison. Its recently introduced hand-made Nourison 3000 collection represents a new ultra-luxury tier for the company. Backed by an established production infrastructure, the company has created this silk-and-100% New Zealand wool collection at a relatively attractive cost value.
Alex Peykar, company principal and founder, said now that wool costs are more competitive than they have been in many years — compared to the soaring costs for oil-based synthetic fibers — his company has been able to create Nourison 3000 area rugs at very attractive retail price points.
"The 3000 series uses even more silk, and the finest wool, and yet instead of the $8,000 to $10,000 retail price of a comparable 9-by-12 rug, ours will retail at around $3,000," he said.
The improved product in the marketplace has demanded better placements and displays at retail, and has resulted in gains for some channels that can answer to the trend for better rugs.
Mid-tier department stores and home centers each grew 1%, moving up to 8% and 17% of total retail market share, respectively. Only discount department stores, which were off-trend with their more promotional offerings, lost market share, sliding down one point to 24% from 25% — or $1.14 billion — of total share.
Early in 2006 when Jacksonville, Fla.-based Stein Mart reinvented its home department to place more emphasis on fashion products, it restructured its rug assortment. The focus today is on accent sizes that coordinate to lifestyles in the line, novelty looks, and indoor/outdoor area rugs, explained Kassie Jones, vp, gmm.
"It's a small business for us, but one that we are absolutely keeping," she said. "I think it is an important component for us, and in general rugs are a growth opportunity."
Menomonee Falls, Wis.-based Kohl's answered the call for change as early as October 2005 when it saw the rug marketplace turning upward in quality and price.
"We changed our fixtures to hold more product in the same square footage," said Gary Nickolie, buyer.
The Kohl's presentation now accommodates three times as many rugs — up from 24 pieces to 72. "They are standing rolled rugs in a fixture with a divider to hold them in place — we no longer have them laid out on the floor," he said. As a result, the 817-unit mid-tier department store enjoyed a "very strong" 2006 for its rug department.
Kohl's also expanded its breadth of offerings to include better price points. "Our high is now $399 for a 5-by-8. Before it was $299," he said.
Nickolie added that better assortments of machine-made constructions in the marketplace have also been a reason to make more space for rugs at the chain. "There is definitely an improved quality of machine-mades lately," he said, citing million-point and space-dyed nylon woven styles as examples of this trend.
Macy's is shifting partially away from hand-knotted rugs to include more higher-end tufted rugs, particularly wool and silk blends, to its popular traditional style offerings, said Jerry Noack, regional vp, Macy's floor coverings. "And they are doing very well for us," he continued.
Taking into account the transfer of business as May Co. melded into the Macy's portfolio, the department store's rug business experienced a soft spring but rebounded in the fall, resulting in a better year in sales than 2005.
While e-commerce was not a channel of growth overall for the industry in 2006, some suppliers like Couristan see it as up and coming.
"The biggest growth for us has been e-commerce," said Larry Mahurter, director of advertising and sales promotion. "It has grown tremendously for us. We've seen a huge increase, and I think it has to do with people becoming accustomed to shopping online. They now feel comfortable with buying online, and some websites have great return and shipping policies."
Based on customers' response to its fledgling rug category, St. Petersburg, Fla.-based Home Shopping Network is also planning to grow its online assortment later this year, according to textiles buyer Kristi Ellis.
"In 2006 rugs were a fantastic business for HSN," she said. "We generated record-breaking sales results for the category. We focused primarily on traditional style Aubusson rugs." For this year, she continued, the TV and internet retailer is planning "a significant productivity increase, and we plan to introduce a larger variety of rugs on HSN.com."
2006 total retail sales: $4.75 billion
Up 5.6% from $4.50 billion in 2005
|Retail share of market by channel||2006||2005||2006||2005||change|
|Discount department stores include Kmart, Shopko Stores, Target and Wal-Mart.
Home improvement centers include Home Depot and Lowes as well as regional and local home improvement centers.
Mid-price chains include JCPenney, Kohl's, Mervyn's, Meijer, Fred Meyer, Sears, TJMaxx/Marshalls, Stein Mart and Ross Stores.
Direct-to-consumer includes television shopping channels, Internet and catalog sales.
Variety/Closeout includes stores such as Dollar General, Family Dollar, Freds, Value City, Tuesday Morning and Big Lots.
Other includes interior designers and military exchanges.
|Discount department stores||24%||25%||$1,140.0||$1,125.0||1.3%|
|Home improvement centers||17||16||807.5||720.0||12.2|
|Home textiles specialty chains||6||6||285.0||270.0||5.6|
|Single unit specialty stores||1||1||47.5||45.0||5.6|
|Gift/home accent stores||1||1||47.5||45.0||5.6|