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Working the Niches in Dec Pillows

Suppliers Scramble to Alter Mix

Cecile Corral, Carole Sloan -- Home Textiles Today, October 29, 2007

New York —The past five years for decorative pillow suppliers have been a rollercoaster ride, some say, sparked largely by the halting of quota on the category.

Since 2002, competition spiked as many newcomers to the business set up shop and retailers tried their hand at direct importing. The decorative pillow category represents the easiest of home textiles businesses to take on, suppliers agree, especially sans quota restrictions.

“The dec pillow category is, as they say, a football,” said Don Tweel, president, Harrison, N.J.-based Tweel Home Furnishings. “Anyone with a garage and sewing machine can get into it.”

And that's just what many did — and still do, observed Neil Zuber, evp, New York-based Westgate. Zuber, a veteran of the decorative pillow industry for more than four decades, said he has noticed over the past five years, “more people in this business than ever before. Every time you walk into a major store, like a TJMaxx or a Ross, we just see [product by] more and more dec pillow companies that didn't exist before. There are so many companies in China that you've never hear of, and a lot of them are contract people.”

This proliferation proves, Zuber said, that the decorative pillow industry “is not a shrinking business,” as some might argue. “It's just that the pie is being divided by more and more people.”

A recent shift in the industry might suggest — but not prove — otherwise.

The third-largest supplier, Mohawk Industries, is no longer taking such a slice — and therefore is leaving plenty of pie behind for the taking. Soon after shutting down two facilities related to the manufacturing and warehousing of its flat-weaving businesses late this past summer, the Sugar Valley, Ga.-based company announced that it would call it quits in dec pillow category (as well as in throws) by spring 2008.

In 2006, Mohawk reported $26 million in category sales. But its sales and status had been softening progressively over the past few years.

By abandoning its downtrodden throws and decorative pillows, which sold for the most part at the discount and specialty store levels, Mohawk can now concentrate on its core business, soft flooring, the company recently stated in its third-quarter earnings call.

Mohawk's departure, however, is not the rule but the exception in the current dec pillow industry, suppliers said.

In fact, old and new players see opportunity in Mohawk's wake as they hurdle staid pricing and shorter shelf space.

Top decorative pillow supplier Brentwood Originals, which has claimed the highest volume of category sales for several consecutive years, attributes its double-digit growth this year in dec pillows to a leveling playing field. President Loren Sweet said, “All of the dynamics changed in the dec pillow business in 2002 when dozens of people got into business. They went to Shanghai and bought goods and opened up warehouses in L.A.”

But now, he said, “two things are happening.” Retailers are reducing their direct importing activity after experiencing program failures on the selling floor; and there has been some weeding out since the influx of new players, Sweet said.

Mohawk's departure hasn't hurt, either.

Carson, Calif.-based Brentwood reported $131 million in sales in 2006, the leading share albeit a 9% drop from the prior year.

“We just have more real estate now than we've had before,” Sweet asserted.

Tweel said his company has also picked up some new business — and hopes to recover more left behind by Mohawk — through novelty and licensed designs.

“The trick in this business is you've got to figure out your own niche. With the right approach this is still a good business,” he said. “And the key for us has been to work with licenses.”

Inspirational art that uses heartfelt-type expressions like “Live. Love. Laugh.” and the like are “strong sellers for us,” he said.

“We can't sell the same old solid-colored pillow. We don't do well with those,” Tweel explained. “We are more gift-oriented, and Christmas is big for us. Novelty is our niche.”

New York-based Arlee has its eye on Mohawk's former tapestry business, now that it has ownership of two manufacturing facilities in China.

“With Mohawk giving up the tapestry business,” said Bud Frankel, president and ceo, “our tapestries, which we weave, are exploding because where do you go to buy tapestry now? Only from us. We're really the only ones left in the business.”

Arlee's new factory, Frankel added, affords his company another advantage: price.

“The fabric comes from my own mill, which helps,” Frankel said. “I've got 32 machines running in my factory. We weave the goods, and because of that I'm able to sell for $10 a pillow that normally goes for $14 or $15. We can create higher-end looks but we weave them ourselves and because of that can offer lower retails.”

U.K.-based Caldeira, founded in 1991 in Liverpool, England, only 10 months ago expanded its forces into the United States. Its European perspective tells it that although American retailers are overly price conscious and are also cutting back on shelf space for dec pillows or moving part of it to the bedding departments, the pendulum will soon swing back in favor of this category as it did three years ago across the pond.

“Three years ago the U.K. stores became very competitive at retail and we lost the good-better-best [categories of retailers]. All of them were going after the same low price points,” said Carolyn Winderbaum, product development manager for Caldeira USA, based in New York. “But now they are back to that good-better-best. We've seen this return. With one major mid-tier customer of ours there, we just put to bed a new pillow program of three solid-colored and 20 fashion pillows. That right there tells you that retailers in the U.K. are again willing to take a chance and be different.”

Because the United States follows European trends, at about a three- to five-year pace, “We think U.S. retailers will soon swing back the way European ones have,” she said.

Caldeira U.K. ships its dec pillows to 15 countries, “which adds more validity to what we believe,” Winderbaum added.

On the cusp of the quota close was New York-based Décor by Beader's Touch, which for 20 years has sold apparel but about six years ago added decorative pillows and top-of-bed to its repertoire.

Its first design approach was upscale beaded pillows. At $24.99 to $29.99 each at retail, these goods were “very hot for us at first,” recalled Rekha Gadhvi, director of design and product development. But as competition bolstered, Décor found itself altering its business plan to stay competitive and “broaden our retail reach,” Gadhvi said.

“We are doing more business with discounters, and we are creating more different pillows with more price points for other stores,” she said.

Décor's line now includes a healthy assortment of “plainer” tonal looks with embroidered designs — pillows that retail more competitively at $16.99 and $19.99.

“Also, now many retailers want feather-and-down for their pillows, not poly fill, so we offer both,” she went on. “And we've added woven pillows out of China. We do much more now to stay competitive.”

For Newport/Layton, a 50-year player in the dec pillow business, it is not imported woven pillows but rather a new kind of domestically woven spun-poly, water- and stain-resistant outdoor pillow that is motivating its sales.

“Outdoor pillows have been a real plus business for us. We got into the outdoor pillow business in a pretty big way, and with those outdoor sales in my [dec pillow] numbers, business has been good,” said Newport/Layton president Corey Faul. “They're a good add-on sale for us.”

Newport, the fourth-largest dec pillow supplier last year with $23 million in sales, domestically produces about 45% of its products at its Portland, Ore., headquarters. And there is no plan to move that chunk of cut-and-sew business overseas, even as importing possesses the industry.

“We see it as an advantage to be a domestic manufacturer,” Faul explained. “We are certainly motivated to maintain as much domestic cut-and-sew businesses as we can. It shortens lead times, reduces minimums and allows us the opportunity to do different constructions. We can make maybe five or six different pillows out of one fabric by cutting and sewing them ourselves.”

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