Bath Industry Down in Tough Environment
May 18, 2009,
The bath industry took a 7.5% hit in total retail sales in 2008 — dipping to $3,420.0 million from $3,699.0 million the prior year — when several factors worked against the category.
As a result, all bath product segments waned, especially bath accessories and shower curtains for their more discretionary nature. By the same token, bath towels and rugs, considered by shoppers as more necessary and replenishable purchases, suffered a notch less.
Also impacting bath last year — as it did the entire home textiles business — was the demise of several key retailers, mainly Linens N' Things. Bath being a major product presentation at this former home textiles specialty chain, category suppliers got slapped and were left scrambling to find other avenues to reroute their wares.
"In the current retail environment there are fewer opportunities for new programs in the marketplace," said PK Markandy, chief executive of Trident Group. Trident/Abhishek Ind. posted $140 million in bath towel sales last year, positioning it as the fourth largest category supplier.
"We have seen very competitive prices being quoted on these new programs," he continued. "The current economic environment in the United States has also given us an opportunity to expand our business in other markets and brands segment. We are closely working on some of the brands/licenses and hope that by September we will be able to launch a few."
With fewer distribution channels on the landscape, they were left with little recourse. But off-price and closeout chains constituted one venue hungry for "deals" — or the leftover inventory originally meant for LNT and also now defunct Mervyn's and Value City.
Not surprisingly, discount department stores and warehouse clubs increased their market share of the total bath industry's business as shoppers sought more affordable distribution channels to meet their needs. Discount chains grew their total share to 56%, up from 51% in 2007; warehouse clubs' portion of the business saw more modest growth, inching to 2.1% from 2% the prior year. And off-price chains like Ross Stores, T.J. Maxx and Marshall's, also benefitted, increasing their share of the bath business to 4.3% from 4.0% in 2007.
Miami-based bath towel supplier J.R. United grew its business in 2008 with new Egyptian cotton solid-colored towel program at the warehouse club channel.
"Warehouse clubs are getting more foot traffic because people are saving on their staples and going to these clubs to get them," Grosfeld said. "Last year, shoppers went there for their food, their gas, everything, so they got to see a lot of other products — like towels — that they weren't seeing before because they were shopping somewhere else."
Grosfeld also said the single-price chains, or dollar stores, are also "having a great moment in home."
"They have thousands of stores, and they are improving their home assortments."
At one such chain, he cited, bath towels retailing for $4.99 — a step up from past home product-related prices.
"The unpredictable economy and tightening job market continues to drive consumers to discount stores," said Jeffrey Seagle, director of marketing and product merchandising, Sugar Valley, Ga.-based Mohawk Home, the largest bath rug supplier last year with $196 million in sales. "Consumers are still shifting their discretionary purchases from mid-tier department stores to direct-to-consumer channels — all seeking more for less. We see no shift in this behavior anytime soon."
Mohawk's competitor, Scottsboro, Ala.-based Maples Rugs, sees the same picture.
"Pricing will remain extremely competitive, and we are doing everything we can to be competitive partners to retailers," said Arnie Stevens, vp, Maples Rugs, the second largest bath rug supplier last year with $120 million in sales. "We're not in an inflationary period. But if your prices are not competitive, you are going to have a hard time."
Not necessarily, thinks Gretchen Dale, coo, New York-based Loftex USA. That is, if you are talking about the bath towel side of the business, which is Loftex's forte, she said.
"On pricing, we always go to the middle or better levels. We don't even bid on opening price points," Dale said. "If you are just bidding on a 15 pound-per-dozen ring-spun towel, you probably won't win."
Of a similar opinion is India-based bath and bedding manufacturer and supplier Venus Home, which operates its U.S. offices in Foot Hill Ranch, Calif. The company is also concentrating on the middle and higher retail brackets, representing a refocused effort for the Venus, which has traditionally worked with some discount retailers in its towel business.
"In the past year, we've been doing the opposite of what a lot of other suppliers were doing," explained Keith Leal, vp, sales and marketing. "We still try to satisfy our opening price point customers, but now we've moved to a more moderate and better price level, and our [HGTV star and interior decorator] Candice Olson collection is an example of that."
Venus introduced its designer collection with Olson last fall during the New York Home Fashions Market in New York. It includes bath coordinate groups comprised of shower curtains, bath towels, bath rugs and accessories. The bath towels come in two solid-colored styles — a two-ply combed cotton towel made at Venus' new plant, and a Supima low-twist towel imported from China.
This is not to say that Loftex isn't creating special programs for the more competitively priced set. Commenting on recent shifts in Walmart's home department, which has been reinvented with new house and licensed brands and the home business — specifically bath and bed, Dale said: "There was a real planned effort to do their part on the value-price equation."
Incidentally, Walmart's vice chairman, Eduardo Castro-Wright was recently quoted as saying bedding and bath — not grocery, as one might expect — are among the chain's best-selling product categories lately.
And he attributed this turnaround in Walmart's home business to new customers as well as "a very clear merchandise strategy." More specifically, that means a broader assortment that includes added value attributes on basics goods like bath towels for more demanding and better educated customers.
"The consumer demands more innovation. And she understands it, but when the message is communicated simply. She resists a lot of the mumbo jumbo," said Bob Hamilton, director of marketing for Welspun USA. The company is the leading bath towel supplier, with $253 million in bath towel sales last year.
If you can state clearly that the product dries better or is softer, for example, the customer's response will be better," he added.
Hamilton said Welspun works closely with its retail partners on "how to more effective on the shelf in explaining the product's attributes simply."
And it's working, he said. For its proprietary High Grow cotton line, the supplier has a program at retail that has seen a significant sales increase, and Welspun credits explanatory in-store signage that shows images of the towels before and after they were washed.
"Our High Grow towels actually get fluffier and a more plush loft after they are laundered, and we wanted to show that to the customer," Hamilton said. "So we did that with a sign at the store, and our sales went up 30%, 40% and even 50%."
Keith Sorgeloos, ceo, Atlanta-based Home Source International, has also noticed customers becoming "more discerning about the price-quality ratio. So everyone now is scrambling to create a value story that isn't all about price. And what is happening is that there are many shifts at retail to add more value — which we started seeing this spring and will continue to see in the fall this year."
To bath accessory and shower curtain suppliers, that could mean the business is leaning on the more decorative and fashion side.
"We're hearing from a number of our buyers that the decorative towel business as well as the more ornamental pieces of the bath accessory business are outperforming the basics," said Jeff Kaufman, president and coo of Moonachie, N.J.-based Avanti Linens, a longtime embellished bath towel company which recently added full bath coordinates to its line. "The likely explanation is that with consumers' dollars being so tight, they are reacting and buying items that really make a difference to the look of their homes. Everyone has towels to dry themselves, but a decorative towel can change the look of an entire bathroom without making a big investment. Avanti is positioned to take advantage of this both in the towel and bath accessory businesses."
Still, bath towels and bath rugs experienced market share gains, albeit modestly — to 50.2% from 50.0%, and 25.2% from 25.0%, respectively while bath accessories and shower curtains lost, also modestly — to 9.8% from 10.0%, and 13.9% from 14.1%, respectively.
Loftex's Dale said she can explain this shift: "People aren't spending $7 on a lotion pump, but they will spend that or more on a bath towel because they need it."
The bath accessories category has not had the opportunity to create differentiation with the kinds of new fibers and technologies towel and rug makers have been able to tap.
"Although the [bath ensemble] category is not going away all together it will never be the same ...[it] is at a very mature point in the marketplace" said Bob Weiss, vp of sales and marketing for Creative Bath. In 2008, the company was the second largest bath accessories supplier with $52 million in sales, and the fourth largest shower curtain supplier with $30 million in sales.
Weiss said soap dishes are not as popular as they were in the past because of the increase in demand for anti-bacterial liquid soaps pre-packaged in plastic bottles; similarly, toothbrush holders have lost some appeal as toothbrushes "evolve into electric and battery-operated pieces" that don't require a holder for storage.
"Here is a perfect example — the TV antenna, such a useful item that has been replaced with underground cable," he continued. "Remember the rabbit ears that everyone had on top of the TV?"
2008 Total Retail Sales: $3.420 Billion
Down 7.5% from 2007
|*Other channels include direct-to-consumer and other channels such as PXs, grocery stores, and the like.
|Discount department stores||$1,915.2||1,886.8||1.5%|
|Home textiles specialty chains||492.5||651.0||-24.4%|
|Home improvement centers||23.9||37.4||-36.0%|
|Single-unit home specialty stores||27.4||36.4||-24.8%|
|Bath towels||$ 1,716.8||1,849.8||-7.2%|