follow us

Cecile Corral

Rug pricing rides the roller coaster

The current climate for the area rug industry calls for tight advertising budgets, heavy competition and tense battles for market share.

And yet, many manufacturers, especially the larger companies that sell product into multiple retail channels, are reporting an increase of higher ticket items at the behest of retailers.

"We reached a price-point bottom in the late 1990s, so the trend has reversed with better product offerings on the rise," said Patrick Moyer, vp, marketing for Mohawk Home, based in Sugar Valley, GA.

Moyer said that some of Mohawk's retail partners that historically prefer to keep area rug prices barely above the $99 price point are increasing their price tags by almost one-third.

Similar price expansion is occuring where the ceiling on price traditionally runs higher.

"Department and specialty stores are looking to set themselves apart from the mass merchants," said Mitchell Brumlow, president of the Calhoun, GA-based Brumlow Mills.

In this age of HGTV and interior decor publications like Martha Stewart Living, consumers are educating themselves and refining their tastes for home furnishings, looking for more distinguishing product, manufacturers say.

"The customer is more educated, has more disposable income and is looking for a better rug," said David Starr, national sales manager for Anderson, SC-based Orian Rugs.

At Expo Design Centers, upscale machine-made and hand-woven area rugs are selling well. The most expensive rug at Home Expo is $10,000 and is part of an exclusive collection titled "Heirloom" by Nourison.

"We're seeing it more now, and I think a lot of it has to do with all the new housing going up," said Ed Vairo, director of creative marketing for Saddle Brook, NJ-based Nourison. "People are using more hard surfaces in their flooring, more hard wood, tile, parquet, creating a need for area rugs."

Specialty stores are looking for product that features more knots per square inch, wool and silk in the construction, workmanship and fashion-forward colors and designs, said Lee Harounian, partner of New York-based Harounian Rugs International.

"A lot of specialty stores over the past five years are looking to move up in regard to quality," Harounian said.

Trading up price points has its merits in many respects for retailers, manufacturers agree, in that it:

  • Expands customer base, providing more long-term security and growth prospects;

  • Increases profitability;

  • Improves stores' positioning with goods;

  • Establishes a stronger identity in the marketplace.

Retailers are trading up because they are looking to increase the productivity per square foot of their selling space, said Austin Craley, vp, sales for Kas Oriental Rugs, based in Somerset, NJ.

And deeper pockets are allowing affluent American consumers to spend on higher-quality area rugs that are more sophisticated in style and construction than the average area rugs sold at mass.

More than happy to answer that call is Shaw Rugs in Dalton, GA, which recently introduced two new heavy wool collections-Anthology and Nexus-that have helped step up Shaw's average price point for machine-made area rugs to $699 and $999, respectively.

"We are looking for the handmade rug customer willing to spend $1,500 but sees our Anthology or Nexus rugs that are just as beautiful but cost less so they buy them instead," said Jeff Meadows, division vp.

Also heeding retailers' and consumers' demands, Hellenic Rugs originally launched its "Room in a Bag" concept-a package containing one 6' x 9' flat-weave area rug, one scatter rug, two decorative pillows and one throw-in October. But after getting lukewarm reception from its retail partners like Sam's Club because the price point was too high for the quality, Hellenic will introduce at April market a revamped version of the concept that bumps up the price point to $99 from $69.

"It contains better product," said Steve Mazarakis, president of the Brooklyn, NY-based importer, meaning rugs made of chenille cotton or wool as opposed to cotton. Mazarakis explained that a customer is more likely to buy the higher-quality product at the higher price than a lower quality product that is arguably overpriced.

For Glenoit Corp., based in New York, area rugs made with the KromaJet technology are showing the most flexibility in higher price points, said Kevin Kennedy, president.

But with the economy still teetering, many area rug manufacturers find themselves not trading up prices but being asked by retail partners to shrink price tags.

"We've kept our price points about the same for the last three years," said Marie Wagner, buyer for decoration rugs and hard surface flooring for Sears, Hoffman Estates, IL. "Price points are pretty stable. Actually, last year they were down a little, and this year they might be down a little again."

Plus, Wagner said, Sears sells many "terrific rugs" for $99, which "always move very quickly." After that, the key price point for a rug is $299. The most expensive area rug Sears sells is $800. "We're not on par with department stores, and we aren't like Home Depot," Wagner said.

Louis Raji, senior vp of marketing and sales for Norcross, GA-based Trade Am, said that during the second quarter of 2000, his company responded to retailers' requests for higher-quality and higher-priced product. Trade Am "stepped up a notch" some of its lines to $299 from the original $199 price tag.

But the tactic backfired, Raji said, when consumers' response was limited.

"For us, our $199 rugs continue to be our key rugs," Raji said, describing Trade Am's wool hand-tufted line. "People are more attracted to promotional or sale prices. Most of the business that remains is promotional. Even though retailers are trying to go up, 80 percent remains with the established product or promotional."

West Warwick, RI-based Natco/Central Oriental president Michael Litner's concern, like Raji, is that "if the economy ends up worsening, retailers could very well start trading down soon."

Trans-Ocean, based in White Plains, NY, has seen its key price point stay at $299 since 1976. But while price and quality have remained stable, the product has been altered with the fluctuations of the economy over the years, from wool to viscose to Chinese wool tufted back to viscose machine-made rugs.

"There's always a desire on the retailer's part to trade up, but there also continues to be a competitive aspect keeping the price points down," said David Record, vp and national sales manager for Calhoun, GA-based Georgia Tufters. Record said that in the limited number of cases in which Georgia Tufters is asked to trade up prices on higher-quality area rugs, his company responds with more fashion-forward items that reflect design trends.

"What we are seeing is that it's definitely only happening in a small percentage of the business, maybe 10 percent to 15 percent" said Ralph Grogan, president of Greensboro, SC-based Burlington House

Floor Accents, which is negotiating to license its name to Montreal-based area rug manufacturer Carpet Art Deco. Grogan, like Record, said trade ups are occurring more among Burlington's "more fashionable tufted accent and scatter rugs, and not so much with our area rugs."

But as the economy remains somewhat unstable, Grogan said the rate of trade ups has decreased.

"Now we are just trying to keep the market share we have, even if that means lowering price points," he said. "In the last four to five months, we've had customers come in asking us for lower price points. And unfortunately, since no one wants to lose any business we've had to lower our price points."

Cartersville, GA-based Lacey Rug Mills design director Karen Townsend said her company is not experiencing any requests to boost price points.

"Actually, most of our people are asking us for more competitive prices," Townsend said.

Other Home Furnishings Sites

Casual Living
Gifts and Decorative Accessories
Home Accents Today
Kids Today
Home & Textiles Today