Rug makers find cool life at independent retailers
May 5, 2003,
Writer Thomas Wolfe said you can't go home again. And yet rug suppliers are finding that they want to be with mom 'n pop.
A growing number of rug companies are seeking incremental sales increases by pursuing oft-forgotten channels — single-unit stores as well as other independent dealers of furniture, floor coverings, gifts and home decor — with surprising results.
In 2002, rug sales at single-unit specialty stores reached $63 million — 1 percent of the category's total sales, which were $6.3 billion. What's more, the distribution channel grew significantly in importance, with a 12.5 percent rise in sales, from 2001 to 2002.
"By spreading your distribution to more channels, you reduce your risk if a segment of the marketplace goes soft," said Pat Moyer, president, Balta U.S.A. "It's a way to balance yourself out, especially in tough times like these."
Added Donald Scarlata, president and ceo, CMI, Pawtucket, RI: "Today you never know who is going to stay in business, no matter how big they are."
But this down-home approach to business comes at a cost.
"It's definitely an investment," added Moyer. "It's more expensive to manage, for example, two sets of inventory for two different distribution channels."
There also are added expenses associated with hiring a separate sales force to gain these new customers and establishing the infrastructure for the inventory and its delivery.
Taking that plunge is Kennesaw, GA-based Burlington Rug Corp. The company is currently in the midst of assembling a new sales team and creating several new upscale lines of accent and area rugs in an effort to woo these smaller mom-and-pop shops scattered around the country.
"We want to get our fair share of that $63 million market," said John McLeod, senior vp, sales and marketing. "And we figure our portion of that could be from $6 million to $10 million, or about 8 percent of our total business. It's not huge, but it's a business worth building. Anything is worth building if it's profitable like that."
Single-unit specialty stores are currently not part of Burlington's roster of customers. The company's thrust is with the mass merchants, which generate 60 percent of Burlington's sales, McLeod said. But looking to expand its reach, the company is currently developing a new and separate sales force for its new and more fashion-oriented lines, including a collection of dyeable pile washable novelty rugs with collegiate themes, dye sublimated embossed prints and New Zealand wool and silk shags.
Troy, NC-based Capel has made its share of investments to expand its assortments and appeal to a greater audience, Leon Capel, executive director, said. One example: 5 percent of profits from the Navajo collection of hand-loomed rugs, launched in January in Atlanta, will be donated to the line's Native American weavers. But this high-end line, which includes a 3' x 5' that retails for $2,000, has meant a new set of independent retail partners, especially in the Southwest.
Capel also recently introduced a collection of polypropylene indoor/ outdoor reversible floor mats that caught the attention of a small home goods e-commerce retailer.
"That's been a good business for us," Capel said. "It's just another way for us to sell. It's different — but another way to travel to get the product to the consumer."
But not everyone has had to dig deep into their pockets.
The Rug Market, Los Angeles, is breathing new life to an old category it had long neglected, Chinese-made wool scatter rugs for the kitchen and dining room, through a licensing partnership with a tabletop brand. While this partnership is still being finalized, Michael Shabtai, Rug Market president, said the line will help his company gain new and greater ground with independent specialty stores.
"We are very dedicated to these customers because they are the ones who helped us grow and made us who we are today," Shabtai said. "We hope to offer them differentiate product that will help them compete against the bigger chains."
Sugar Valley, GA-based Mohawk Home is leveraging the independent dealer customer base that parent Mohawk Industries has for its Floorscapes carpet program and the upscale area rug division Karastan.
To help this effort along, the company recently restructured its national sales force and promoted David Moyer to the new position of national sales manager for rugs. He will concentrate on expanding the company's placement and presence at furniture and independent floor covering retail stores, a channel that has proven highly successful for Karastan.
"We see the kind of volume Karastan does with these independent dealers, which are practically exclusively its dealers," Merle Johnson, vp, marketing, said. "We want to take advantage of that growth. We already have a large open line that can service these stores."
Saddle Brook, NJ-based Nourison didn't have to spend heavily to launch its domestics division of handmade washable accent rugs almost three years ago, Ed Vairo, director of creative marketing, said. The products for this line are "produced to order," which means once the rugs are made in China, orders are shipped directly to customers.
And yet, the accents line has flourished into "a significant component of our overall business," Vairo added. "It has grown by quantum leaps and has gained us placement at stores we otherwise would not have done business with."
The case is even simpler for braided rug manufacturer CMI. Through two designer licensing partnerships, first with quilting designer Lynette Jensen and now with folk artist Leslie Beck, the company has made its entry into quilting stores — where the rugs carry a higher price point than CMI's.
"I had never thought of quilting stores," Scarlata said. "But for [Jensen's] customers, for example, quilting stores are an important market because that's her customer. Her product is now getting noticed for the first time in our marketplace, basically the floor covering and furniture stores and some catalogs, and now we are getting noticed in her marketplace."
For its licensed line with Jensen, CMI uses Jensen's quilting fabrics to produce the rugs and then distributes them on a made-to-order basis. "They are small orders, but customers can order through a sampling program at the stores," he said. "These stores don't have to carry the inventory because we just drop-ship the product to customer's house."
While rug suppliers still consider the major chains a critical source of business, they admit working with independent stores, no matter how small and despite some extra costs involved, offers many advantages — higher margins, most notable.
"When you deal with the independent stores, your margin is higher, said George Berbery, executive vp, sales and marketing, Carpet Art Deco. "It can be more expensive for you to work with them because of production costs, but you do earn a higher margin, so indirectly you are covered."
Pat Moyer, of Balta agreed, citing reduced pricing pressures. But he also said independent stores are kinder to their vendors, not forcing them to pay added costs for fixtures or co-op advertising as well as not slotting allowances or markdown money.
"We actually entered the market knowing we were not going to be really important to the majors," he said. "From the beginning, I had a segmented product offering — promotional and upstairs — to serve all of our customers, which include one-store independents. But as we grow and move in with bigger accounts, I hope to keep the independent stores as partners of Balta forever."
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