Product Innovations Drive Strong Bath Market
March 28, 2005,
New York — The bath category proved to be a hot place in home last year, earning a 2.8 percent gain in sales to $3.7 billion, according to HTT's annual bath report.
“Future growth areas I can see are new lifestyle and product innovation niches,” said Reinaldo Chaves, U.S. sales representative for Felpinter Sofil USA, who singled out zero-twist, bamboo and Lyocell as some of the best examples of recent high-tech fiber innovations.
“Whether it is with a super-soft, anti-bacterial, scented or anti-allergenic (technology), our market has become somewhat like the apparel industry with new technology and new fibers being used to create a buzz,” Chaves continued. “This is what we are focusing on because there is no future for us in just Egyptian cotton or Supima towels.”
In agreement is Salo Grosfeld, president, Miami-based J.R. United — the third largest importer of bath towels with $69.5 million in sales last year. Grosfeld noted that the solid color towel market, which he estimated as comprising 85 percent of total towel sales, “is saturated and there needs to be a reason to buy towels besides price.”
Dan Harris, vice president, sales and product development at Des Plaines, Ill.-based Revere Mills, said these “better goods from offshore, with new constructions and fibers, are having an impact.” His company — the fifth largest U.S. importer/supplier of bath towels with $45.8 million in sales — last year added to its offerings an India-made tri-blend bamboo, silk and cotton bath ensemble collection.
That impact is hitting several sides of the industry — and at its core, sourcing.
In preparation of a post-quota marketplace, bath category players — suppliers and retailers alike — spent much of 2004 scrambling. Quotas for goods like terry towels ran out early, leaving some overseas suppliers forced to shut down and much product left by the wayside, unable to enter the country.
Some U.S. suppliers could not fulfill orders, and retailers took the product they could get.
While this kept demand high, it didn't help the trend in price deflation, which suppliers said hurt the bath industry last year — somewhat stunting it from greater growth.
Dalton, Ga.-based Shaw Living, which has been in the bath rug business for the past two years since acquiring Georgia Tufters, said the category suffered “enormous” price deflation in 2003 and 2004.
“For bath rugs, I would say sales dollars are off 4 to 5 percent and up on unit growth 7 to 10 percent for the industry,” said Jeff Meadows, division vice president. Shaw Living is the fourth largest U.S. supplier of bath rugs with $50 million of sales in 2004.
“The price deflation in the bath rug area over the past two years has been enormous,” Meadows continued. “Price deflation is primarily due to competition and reverse-auction type formats. In general, there were dollar declines in wholesale shipments as imports increased market share for bath products, especially towels.”
And this year, U.S. bath rug suppliers will have even more to worry about, noted Ajay Anand, managing director and CEO of Faze 3 — an India-based supplier that recently expanded its capacity to produce bath rugs in response to quota elimination.
“This year will see a shift in the importation on latex-back-coated bath rugs, where this business used to be supplied by the four domestic U.S.-based mills,” Anand said. “And imported nylon rugs will begin to arrive in retail outlets during the year. It is simply a matter of time — the yarn, expertise, coating, tufting machines are in place and soon the product will follow. It may take 12 to 18 months, but the trend will be certain.”
With these capabilities in place overseas, retailers are continuing to cut out the middleman, going the direct importing route instead.
“Sourcing from offshore is becoming dominant in home textiles, especially with the major U.S. mills closing factories and importing themselves, as well as many major retailers,” Harris said.
Akhil Jindal, president of Welspun India, has noticed “a marked change in the sourcing patterns of the bed and bath categories.” He said that post quota, all the major retail chains have resorted to direct importing and have also set up sourcing offices/warehouses in India, China and elsewhere.
“Direct imports will also see an increase from the discount department stores, home textiles specialty chains and mid-price chains,” he said.
Central Islip, N.Y.-based Creative Bath Products imports a major portion of its bath goods — accessories and shower curtains — and said many of its retail customers are doing the same.
“We are all conscious of price, and we are all under the preconceived notion that quality standards will be maintained (with imports),” said Rick Lipton, national sales manager.
In 2004, Creative Bath was the third largest U.S. supplier of bath accessories with $49 million in sales and the fifth largest supplier of shower curtain with $31 million in sales.
“In the end, for all parties concerned, to continue to grow and remain vital we all must maintain margin equity,” he continued. “It is the general perception that we all must import in order to achieve this. If and when pricing pressures abate, at that point we may possibly see the reemergence of a domestic industry re-growing.”
Saturday Knight Ltd., based in Cincinnati, describes itself as one of the first U.S. companies to begin importing bath accessories.
“I think that (retailers who are direct importing) will find out soon what we have known for a long time — there are many downsides to direct importing,” said Dianne Weidman, vice president, sales and design. “You just have to figure out if the good outweighs the bad in the end, and if that initial markup can carry to the bottom line.”
Other factors, she noted, include warehousing inventory for retailers to prevent being penalized with charge-backs and lack of vendor support.
“It is very expensive to carry that inventory, especially when an item doesn't perform, and you have two months of inventory in the warehouse and two months on the water or in production, or you forecast incorrectly and have six months worth of inventory,” Weidman said.
“I would also assume that (retailers) need warehouse space to house the containers full of goods and people to handle them. They also need trend and design people and people to communicate all of the development aspects. In the end, that initial markup needs to be high enough to compensate for all of the issues to make sure that the bottom line is profitable. Only time will tell,” she added.
Grosfeld is optimistic that time is on the side of U.S. suppliers.
“I think direct importing will level off by the end of the year and retailers will go back to being retailers, worrying more about what their stores look like and how to get customer into their stores,” he said. “If they only focus on price, they will be eaten up by themselves.”
Merchandise Mix (in $millions)
|% OF TOTAL||2004 SALES|
Distribution Channels (in $millions)
2004 Total: $3.7 billion, up 2.8%
|% OF TOTAL||2004 SALES|
|Discount department stores||49%||$1,813|
|Home textiles specialty chains||18||666|
|Home improvement centers||1||37|
|Single-unit home textiles specialty stores||1||37|