Area Rug Vendors Stoic on Second Half
June 23, 2008,
As Americans trim vacation plans this summer, many manufacturers of area rugs are hoping some of those saved gas dollars will be spent on redecorating with new accent pieces. Otherwise, business is expected to only get tougher for the rug category at retail, said top executives in this HTT survey.
828 International Trading Co.
"I think if the same issues — housing, gasoline and food prices — are still affecting consumer sentiment, we will be hard pressed to see much improvement. But, being an election year, and with the fall season, yes, I do believe we will see some improvement."
Allen Robertson, vp, sales
"Consumers are making tough decisions … that said, I think there are some bright spots on the horizon. We're already seeing the positive reverberations throughout the economy from the consumer tax rebate.
"If a company shows flexibility and adaptation through those tough economic times, they can actually create great innovations. What we anticipate through the fall and winter is that consumers may not be as willing to make large scale luxury purchases, but they will be open to purchasing smaller scale items for the home. We're working hard on adapting products and creating innovative promotions to drive sales."
Central Oriental/ Natco Home Products
Jim Thompson, vp sales and marketing
"I think if retailers, wholesalers, reps, all of us work hard and stay positive, then we will find business.
"We are doing several things...first is to focus on U.S.-made product to offset exchange rate issues. We can be much more competitive, and making products in the U.S. allows us to promote our products in an environment of price increases. Second is to move our product offering to a more transitional mix. In the past we were heavily traditional, and now we are balancing out our assortment with more transitional designs. We are also being creative in our merchandising by offering value products to create increased sales. The key is to not complain, but to work for the business."
Larry Mahurter, director of advertising and sales promotion
"We're not being affected as much as some other companies because of the higher-end products we offer. Our sales are above the flat line because of that factor. How that can change in second half of the year, I don't know.
"But I will say any dealers who are foolish enough to refrain from refreshing their stores and adding new fixtures right now stand to lose. It's those who stay in the front of the public mind, with marketing and advertising and fresh merchandise during the tough times, that will remain in the front of customers' minds in better times.
"It's also important for dealers, in the second half of this year, to be very clever in their marketing and advertising and make sure they are included in everyone's dealer locators, make sure they have updated samples and displays, etc.
"Dealers should be finding their own niches and focusing on them right now."
Feizy Import & Export
John Feizy, president and ceo
"We definitely expect to see an upturn in the market as retailers prepare for the holiday selling season. Our bath and accent goods have already been performing very strongly, and we anticipate that all areas of business will improve in the second half of the year."
Kea Capel Meachum, brand director
"We're opening opportunities for our carpet-based retailers with area rugs that represent distinctively different qualities that have not been offered to them in the past. Hand-finished bordered rugs, custom rug options at key price points ($399 to $599), creative display options that strengthen our brand presence, and the merchandising of area rugs beautifully and economically, plus the industry's strongest selection of Stainmaster-branded rugs.
"Our Gulistan rug business is growing because we understand that carpet-based retailers must sell rugs that support their core broadloom business. In this down market, we've seen our rug business grow."
Hellenic Rug Imports
Steve Mazarakis, president
"Unfortunately the core of the business is suffering. Today, the price of oil and the inevitable increases of food and energy — natural gas and electricity — along with credit being so difficult to obtain for the bulk of our end users, does not give a rosy picture for the second half.
"But there can be an upside to this dilemma.
"There should be some increase in business in the area rug business the second half starting in the fall for the mere reason that people will need a positive change in their homes.
"The high-end area rug should hold its own, since people with tons of money are not as affected as the middle class.
"Let's hope the oil people and their partners show some compassion to the American people and their suffering. Once [the oil people] realize that their greed has disrupted not only America but the world, we can end this problem overnight."
Homefires and Home Comfort
Renee Ringstad, vp, merchandising
"The sub-prime mortgage crisis has definitely had an adverse effect on the home accessories market, especially when it comes to items that are generally considered investment pieces at higher dollar amounts. However, we have been extremely fortunate that sales for our accent rugs continue to be strong. Our colorful designs and great pricing allows our product to be considered 'functional gift.' Because of this particular characteristic, we enjoy a very diverse market — a real advantage in a struggling economy."
Bill Storey, svp, gm
"I expect the fall season to be challenging. The lower end of the market has been hit the hardest by these cost-of-living increases and it looks like spending in that segment will get worse before it gets better. Fortunately for us, the Karastan customer is more affluent and is less impacted by these rising costs. Though not as steadily, [customers] are still purchasing area rugs and continue to turn to Karastan for style, quality and value."
Wendy Reiss, key account manager
"I think the key word for the second half of this year is 'change,' right? The election will certainly bring about change, and people are excited about that. Everything is cyclical, so I'm optimistic that we'll see some bright spots in the housing market and the economy this fall, and therefore we'll also see increasing consumer confidence and spending."
Rob Beistline, market manager for area rugs and matting products
"Business for area rugs in fall 2008 will pick up from where the industry was in spring 2008. However, we still don't expect it to be at the levels everyone is typically used to for the fall selling season. As the economy starts to level out, we expect the market to start to normalize again. If we continue to see volatility of the markets, it will be anyone's guess where we end up. We will continue to offer customers high-quality rugs at a great value."
Jim Quist, vp, sales
"We are optimistic … we see more people staying home this year and spending discretionary dollars on updating or redecorating a room. We see the back-to-school business as running a bit later this year, as people have been delayed due to economic challenges. But they still need rugs as August and September approach.
"We see continued growth in the larger 8-by-10 category. More retailers are finding ways to add the larger sizes to their floors, and see them as plus sales. It remains our fastest growing piece of the business in tufted, printed and woven.
"The styling trend also continues to be casual/modern and transitional. We look for continued growth in the second half of the year as these trends continue.
"Regarding the holiday and seasonal segments of our business, we are taking a cautious approach."
David Forman, director of marketing
"We have been pursuing creative new ways to help stores maximize profits. In addition to our traditional marketing materials, such as customized direct mail and in-store signage, and an aggressive national advertising schedule, we've presented brand new, unique-to-the-industry displays that present hundreds of additional products in a minimal amount of space.
"The rising cost of raw materials for synthetic fibers has closed the gap between nylons vs. natural and wools. Our newest broadloom products, produced in our brand new facilities, are now a much better consumer choice in both price point and quality. Synthetics try to mimic the properties of pure wool, and we're now able to offer the real thing at very competitive prices.
"We are confident as we head to the July markets, and remain cautiously optimistic for the second half of 2008."
Kim Barta, brand manager
"Each fall and holiday season brings a sales upswing. Consumers want to make home improvements prior to holiday gatherings as well as purchase accessories such as rugs as gifts. This year will be the same. The question is how many consumers?
"We certainly don't expect the upswing to be as we experienced in the past but rather an upswing [relative to] today's market."
Diane Carleo, director of marketing and sales
"Human nature runs in cycles, and we're in a conservative, don't-spend cycle right now waiting to see who takes over Washington and where the gas is going to level out. By the fourth quarter, we will be back to spending on home furnishings, fixing up the house for the holidays and thinking that new accent piece — whatever it is — in our homes looks great and makes me feel good every time I walk into this room."