 Smart Report - January 2010  |
|
Business As Usual Though times may still be slow, slowing down is not an option for these rug vendors
To quote a motivational poster produced by the British government in 1939, although challenges may currently outweigh the excitement of conducting business in the rug sector, the majority of rug makers aim to “Keep calm and carry on.” As a gauge, by the expected turnout for the Atlanta Int’l Area Rug Market show at AmericasMart this month, though rug sales may be in flux, companies are doing what they can to plan growth. “Those that are buying area rugs will be here in January,” says Chas Sydney, senior vice-president of Area Rugs, AmericasMart. “Showrooms and major manufacturers are renewing their leases and expanding current locations here, investing in AmericasMart. Based on hotel reservations, phone calls and direct contact with buyers, we know that the major players will be here this January.” Current Challenges If rug vendors have learned anything from the recession, it’s to take advantage of periods of slower sales and use the time to re-evaluate and re-group. “We’re witnessing a period of ‘Creative Destruction,’ a term used both in economics and throughout nature to mean that damaging events often give birth to new systems and creations,” explains Dave Forman, marketing director, Nourison. “As a fully vertical manufacturer, Nourison has the ability to be innovative very quickly, allowing Nourison to create machine-made products with hand-crafted details and finishes that result in superior designs and constructions with excellent value.” According to Wendy Reiss, key account manager, KAS Rugs, she sees this temporary slump as an opportunity for any forward-thinking rug vendor to capitalize on strengths and strategize a growth plan in an ever-changing industry. “Recently, the biggest challenge has been to thrive in an industry that is based on home fashion and improvement, an industry that we all know has not fared well the past couple of years when the housing market started to collapse,” says Reiss. “Again, like anything else, it forces one to think outside the box and do things differently and creatively, so it’s not a bad thing.” “Though it is exciting to develop a product at a price point that can be affordable, it is definitely a challenge to get commitment to sell volume to justify the margins,” says Mike Shabtai, president and ceo, The Rug Market.
As disposable incomes have dwindled and sticking to budgets has become more of a necessity over the past year, Al Mortenson, creative director, Surya, has found that the end consumer has a hard time understanding the product and how special hand-crafted products are, now that eyes are always on the price. “Our rugs are created by time-honored methods and these methods create unique, beautifully crafted and time-consuming products, which most people in America have a hard time seeing and understanding,” Mortenson says. “This is why we challenge our sales representatives to educate all of our retailers on why our rugs are a perfect choice for their consumers.” Uncertainty can also be crippling, as Paul Sullivan, senior vice-president sales and marketing, Orian, explains. “It’s challenging to work in a sector where the last three years have seen a decline in sales, when it’s unsure if we are working in an increasing or decreasing business,” he says. “I’m also hearing that business will be down again next year 20 to 25 percent. So it’s tough to work in something not on the rise.” What Sells
But, despite uncertainty in the market, there are still sales to be had, as homeowners are still looking to change up room schemes. Priorities have just changed, and investment pieces have made room for value. Despite plugging value, Surya has not seen much of a change in what makes a product saleable in a recession. “We haven’t seen something that sold well change a great deal because of the recession or something that use to do ok get ‘hot’ either,” Mortenson says. “It comes down to giving customers a style that excites them, but in safe and comfortable ways that fit their lifestyles. As for particular best-selling products, Nourison finds that its home accents division posted gains of nearly 25 percent over last year, with sales driven by big box chains, and clubs and assortments, varieties and constructions and truly superior sales management and distribution, explains Forman. Woolrich finds that its best-selling rugs have not changed. “Our best-selling rug has always been Westland, before the recession and now,” says Sharon Kepley, licensing manager, Woolrich home division. “It’s a novelty rug that has a lodgy feel and incorporates all the icons that give Woolrich that authentic American lifestyle, such as bears, trees, moose and canoes. This style resonates with our consumer.” And, as always, education is the key to sales. As Larry Mahurter, director of merchandising and marketing, Couristan, explains, “It’s hard to establish brand identity in the floor market, and even though people know the quality of our brand, we still need to educate about our wool house to make sales.” New From The Loom From natural fibers to indoor/outdoor collections, rug companies are still seeking out new ideas to meet consumer demands. While Surya is using more natural fibers as a way to offer its customers an earth friendly choice, Nourison has also introduced some natural fiber combinations using its Luxcelle “art silk” to create unique designs when it is combined with pure wool. Luxcelle is made from the cellulose of the cotton plant and will be used for area rugs made on new Axminster looms, some with more than 60 shades of color yarns. Nourison will also work to launch an indoor/outdoor collection, and Shaw Living is also introducing Garden Party, its own indoor/outdoor product made from an innovative PET, an inherently stain-and-fade resistant fiber containing an average of 50 percent post-consumer content across the line. Each Garden Party rug contains the equivalent of 98 plastic bottles. Reiss at KAS Rugs finds that polyacrylic constructions seem to be a hot item in tufted and in machine made, since it takes color well, is very soft and is not as pricey as a wool counterpart. Mortenson from Surya explains that since people want more for their money, Surya ensures each new design has the most it can offer the consumer by manipulating techniques like loop, high/low piles, cut and carve, and hard-twist yarns, among others. “Paired with design elements such as great color, putting several of these techniques into one design creates a unique and extra special product consumers see as worth every penny,” Mortenson says. Design Speaking of matching technique with design elements, rug vendors have found transitional and contemporary design schemes to be selling well. “Despite our best sellers being traditional Persian designs, there has been an unquestionable shift toward transitional and contemporary designs in consumer taste,” says Forman. For companies that offer regional style, Kim Barta, brand manager, Shaw Living, finds its silhouetted botanicals and organic motifs carry on as popular patterns with a growing interest in flora and fauna designs. For its contemporary floor coverings, styles are trending towards more abstract pattern direction, in which even kaleidoscope-inspired prints in vivid color schemes are popular. As for color, Barta sees designs remaining in the earth tone palette. “Taupe is a key neutral and serves as an update to brown,” she says. “Gray displays subtle tints of lilac, blue, and green for added interest.” JC Lehnen, creative director, Rizzy Rugs, also says transitional and organic designs that are soft to the eye meet consumer demands. Fresh bursts of color, soft geometric shapes and natural, earth inspired elements. “The consumer is still very price conscious and looking for a great design at a great price point,” says Lehnen. “However, that being said, there is still a demand for the more expensive knotted goods with designers and their clientele. I sincerely feel the most important thing in this industry is all about color and design.” Jaipur finds that animal prints and other boldly scaled patterns are growing in popularity with consumers seeking to make a statement with their floor covering. Expansion
No matter what the plans for expansion are, it’s clear across the board that slowing down is not an option, as Forman asserts. “The most important thing is that we are not slowing down because of the recession,” he says. “We keep planning our growth to piggy back on the things we have always done well. Our broadloom division represents about 20 percent of the business. We hope to grow it to about 40 percent of our business in the next five years.” But not all initiatives are a few years down the road. Currently, some vendors are experimenting with e-commerce. Matthew Rouhanian, president, Dynamic Rugs, believes it’s still crucial to try and get some new business to replace what has been lost. “For us, we are a mid-size company, so we seek to replace lost revenue and are expanding to Canada, U.K. and South America to make this happen,” says Rouhanian. “We think business will level off next year, and while we wait, we plan to offer more broadloom styles in 2010, and more custom opportunities that will relate back and coordinate with our standing collection.” Woolrich launched a new consumer-facing website last November, woolrichhome.com, that provides consumers with a comprehensive look at all the home products the company offers as well as answers design and decorating questions and furnishes retail location information. Capel Rugs has also recently added an e-commerce section to their website. In March 2009, Capel decided to launch an e-commerce page that essentially allows consumers to look at product and then links back to smaller retailers that carry Capel rugs. “For most of our dealers, launching an e-commerce site from the get-go can be expensive to do,” says Bud Young, vice-president of marketing, Capel. “Our site links to their own sites, so for a low fee, we manage the inventory and our retailers are able to compete with other online sellers.” As Ariel Kalaty, vice-president marketing, Kalaty Rugs, explains, it’s important to remember that there is still business to be had out there. “Maybe the pie is a little smaller now, but there are still people looking for rugs and home furnishings,” she says. “The problem is that retailers over-compensate for the drop in business by reducing inventory too much, and then when consumers shop at their stores, they don’t have the proper merchandise to sell merchandise. This is what we now have to overcome.” As long as sights are already set on how to bounce back from the recession, the rug sector, along with the rest of the home fashions industry, will be ready when the recession breaks, prepared to pounce with innovative initiatives. Resources
|
