Shrinking rugs helping sales
January 12, 2004-- Home Textiles Today,
Rug companies 'shrunk' their businesses in 2003 and, as a result, the industry was able to eke out a 2 percent increase to $4.8 billion in total sales over the prior year.
Players can thank their smaller sized offerings — mainly 2' x 3' and 3' x 5' accents and scatter rugs — for the upswing in a year otherwise plagued by a slow economy, war in Iraq and stubborn unemployment rates. Closer to home, rug companies were forced to also overcome downward price pressures, a situation exacerbated by the volume shift to lower priced and lower margin impulse purchases.
Earlier in the year — and in many cases before that — the top five rug companies and many of their top competitors discovered the value in adding smaller ticket items to their offerings.
"The fastest growing segment [of the rug industry] is accent and scatter sizes," said Jeff Meadows, division vice president, Shaw Living, based in Dalton, Ga. "They are way outgrowing the woven area rug and bath rug businesses."
Through its acquisition of Georgia Tufters and its partnership with Norcross, Ga.-based Trade Am last spring, Shaw Living grabbed a tighter hold of the accent and scatter business. The deals instantly added new constructions and coordinated lifestyle programs with other product categories, including decorative pillows, throws and top-of-bed goods.
Meadows estimates that these smaller rugs experience on average a growth rate of 10 to 12 percent versus area rugs' 3 to 4 percent growth rate.
"In 2003, the rug category inched up from flat," said Leon Capel, executive director of Troy, N.C.-based Capel Inc. "From '98 to '01, the industry was growing at a 9 to 16 percent rate annually. Then the recession hit, and in the past two years we've only seen 2 to 3 percent growth overall."
Sugar Valley, Ga.-based Mohawk Home tripled its accent size sku count in February with olefin, nylon and cotton blends soon after experiencing what is described as a spike in consumer interest. More recently, for its upscale Karastan division, the company created a new free-standing tower fixture to help retail partners promote its recently expanded accent rug offerings.
Atlanta-based DuPont Nylon Flooring hired a new sales and marketing executive in the spring to aid in expanding consumer recognition of its DuPont fiber brands in accent rugs.
Before Fort Mill, S.C.-based Springs Industries acquired Beaulieu of America's rug division in early '02, accent rugs comprised only 5 percent of the latter's line. But last fall, Springs made the smaller sizes a major focus, along with doormats in unusual constructions like stuffed cotton quilt mat.
Nourison, based in Saddle Brook, N.J., was one of the first companies to establish a separate accent rug business more than three years ago with higher-end offerings, all hand-made in China and machine washable — and most importantly, not coordinated to the company's core area rug programs.
"For a long time, the accent or scatter rugs were considered an afterthought to an area rug purchase … and kitchen and bath mats were considered only utility items," said Ed Vairo, director of creative marketing. "I think (smaller size rugs) potential in those two arenas was limited. But more recently, the category has been established as an independent accessory category that can go anywhere and doesn't have to cater to anything else. It can be bought for its own sake and for how it contributes to a home's fashion environment."
Sphinx by Oriental Weavers, based in Dalton, Ga., "spent a fair portion of our time and effort on enhancing our accent and scatter offerings," said Mike Riley, executive vice president. Being that Sphinx has placement for its area and accent rugs in most of the major distribution channels, Riley said, the company focused on further improving its designs and constructions for its smaller size rugs — a move that gained it more placement with its major mass-merchant customers.
"We increased our share there for our machine-made rugs as well as our new hand-made tufted rugs, which we added to our line last year," he said.
Riley said that price points are about the same for machine-made accent as they are for the company's new hand-made tufted rugs imported from India and China.
By virtue of their flexibility on the sales floor, accent rugs opened new doors at retail for rug companies.
"More and more retailers are finding (that) developing a larger percentage of scatter-sized rugs versus area rugs nets an overall greater return on their investment," said John McLeod, executive vice president, sales, Kennesaw, Ga.-based Burlington Rug Corp.
McLeod noted that while most consumers will consult their spouse or partner before spending more than $100 on any purchase. Area rugs and accent rugs — which typically sell for well below $50 — are impulse purchases that help drive sales.
The discount department stores continued to dominate the category of rugs last year, churning $1.2 billion, or one fourth of the total market share. "Discounters do most of the unit and the dollars," Capel said.
But after these stores, the playing field seems to have evened out and rug companies attribute this shift to the growth in accent rugs.
Carpet and floor covering stores together snatched up second place as prime rug destinations, with $528 million, or 11 percent of total sales.
A close third were home improvement centers with a 10 percent share, or $480 million. Furniture stores made up 9 percent, or $432 million, followed by direct-to-consumer, which has 8 percent, or $384 million. Department and mid-price chains each took 7 percent, or $336 million a piece.
"Accent and scatter are a natural for lots of people. Domestic department stores, the big boxes, specialty chains, and so forth, and once the shift happened in those places it quickly spread to home centers, independent furniture and floor covering stores and then to gift stores," Vairo said.
Distribution Channels (in $millions)
2003: $4.8 billion
2% increase over 2002
|2003 %||2003 $|
|* Other includes interior designers, military exchanges and warehouse clubs.
|1. Discount department stores||25%||$1,200|
|2. Carpet/floor covering stores||11||528|
|3. Home improvement stores||10||480|
|4. Furniture stores||9||432|
|6. Department stores||7||336|
|7. Mid-price chains||7||336|
|8. Home textiles specialty stores||5||240|
|9. Gift/home accent stores||5||240|
|11. Off-price chains||4||192|
|13. Single unit specialty stores||1||48|
|14. Warehouse clubs||1||48|
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