Window Industry Works Hard to Stay Flat

Anthony Guerra, May 9, 2005

New York — A continued deflationary trend in the soft window business during 2004 saw retailers moving more lower-priced items for largely the same overall dollar amount, as the size of the business at retail remained flat at $2.6 billion.

“It is no secret that the amount of finished goods coming in from offshore has driven prices down,” said Barry Goodman, vice president of national accounts with Montreal-based Commonwealth Home Fashions.

Frank Foley, CEO of New York-based CHF Industries, said business was especially slow at retail in the back half of 2004. “I think both wholesale and retail pricing was down, so either the units were flat or slightly up, but total retail dollars and wholesale dollars were down,” he said.

In terms of their pieces of the overall pie, the still-leading mid-price chains segment grew from 39 to 40 percent; the discount department store category increased its share from 32 to 33 percent; and the direct-to-consumer channel grew from 1 to 2 percent. Heading in the other direction, home textiles specialty stores dropped from 20 to 18 percent; and department stores fell from 3 to 1 percent.

The great driver of mid-price channel performance was Plano, Texas-based JCPenney as the country's market-share leader in window turned in a solid year. Elsewhere along the retail spectrum, vendors pointed to Costa Mesa, Calif.-based Anna's Linens as a hard-charging up-and-comer in the specialty store segment.

In 2004, retailers continued to try and build margin by cutting out the domestic middleman and working directly with offshore factories, which didn't always boost overall sales.

While far from their core competency of selecting and presenting merchandise to the retail customer, going direct is not beyond a retailer's capabilities, according to Salih Yilmaz, sales manager with New York-based National Curtain.

“I believe it is more difficult than they think, but it really depends on their performance to deal with factories and customs. If they do a good job, there are benefits. Of course, it is not good for me,” he said.

Though not good for U.S. suppliers, Foley said the trend is here to stay. “(Retailers going direct) happened in 2004, and there is no indication it will decrease. I think retailers, by and large, don't fully understand the mathematics in the window business. It's different than the rest of their businesses, but this could change over time. (In window) inventory turns a lot slower, so if you are going to capture all the retail sales dollars, you have to have your shelves full and you have to be stacked up behind that and really on top of the mechanics of that business.”

Goodman said retailers going direct didn't necessarily mean a windfall for the consumer. “Direct importing by retailers hasn't brought the retail prices down — they have just made more money,” he said.

In addition to more retailers going direct, mergers and acquisitions have affected the retail landscape. “The fact that the retailer pool continues to shrink has probably been the largest hurdle for us,” said Barbara Tippin, vice president of sales and marketing with The Oxford House Collection.

With fewer retailers to woo, it has become even more critical to have the right product with the right look. When it comes to selling window merchandise, price may be king but fashion and quality still get a seat at court. Embellishments in 2004 trended toward casual, though unique top-treatments still reigned as the differentiating factor most likely to catch a buyer's eye.

“It's about valances and tassels — it is so much more than just the fabric,” said David Kahn, CEO of New York-based Croscill Home. “At the end of the day, having a pretty fabric is not enough. Adding different valances and specialty trims is what you need to get to the next level.”

Jenny Gruber, vice president of design with Evandale, a division of JWE Silk, said getting to the next level is sometimes best done by taking it down a notch. “I think people were looking for casual, which was kind of new on the scene. People had been looking for formal window — fussy and pretty, but I think casual and more simplified is now taking the lead.”

Marc Teller, a vice president with Darien, Ill.-based Teller Enterprises Inc., agreed that the trend at retail in 2004 was toward a cleaner window. “Many were looking for a more simple look, with not as much filling up the tier. Others, however, were looking for more upscale embellishments so they could bring the prices up,” he said.

Concurring that simple was in is Carl Goldstein, a senior vice president with New York-based S. Lichtenberg. “I think you have seen and will see growth in sheers, jacquards and lace. Or if you want to call it casual looks, I see growth in casual looks,” he said.

But trending toward simple does not mean plain, said Goodman, adding that retailers were still looking for texture along with specialty valance treatments in 2004. “Anything with embellishments was popular because the value can be tremendous. The labor is so cheap overseas that you can have tassels and fringes,” he said.

National Curtain's Yilmaz noted that a valance is one of the best ways to have a window product stand out. “The right top treatment can be big if you come up with the perfect element that's not in the market,” he said.

Tippin agreed that retailers were looking for something extra in 2004. “Embellishment continued to be a huge trend in window import products. Whether it be embroidery or beading, labor intensive processes continued to flood the market at very low prices,” she said.

Many retailers looked to push the envelope by dictating that every product on their floor be completely distinct from the one down the street, giving more headaches to their suppliers in 2004.

“The major retailers were looking to differentiate themselves from the competition by having their own label, exclusive merchandise and unique packaging. What that meant to suppliers was more work and risk because if you only have one customer buying the item and it doesn't sell — what happens?” asked Yilmaz.

What also happened, and continues in retail, is a serious trend toward having a known name on every label. “Licensing, licensing, licensing seems to be the trend with discount department stores and mid-sized chains. From Chris Madden at JCP to Ty Pennington at Sears, every month some name is added to spice up the retailer's assortment and give focus to the furnishing of the whole house with a coordinated program,” noted Oxford House's Tippin.

Yilmaz agreed that licensing will continue to be a huge trend in the window space. However, he noted that not all licenses are created equal.

“If the brand hasn't been in home before, the question is whether or not it will be perceived as a home supplier,” he said. “For example, if you take Dockers Home into window, will it translate?”

2004 Pattern

Sheers 34%
Solids 30
Jacquards 21
Prints 11
Lace 4

2004 Construction

All Synthetic 75%
Cotton-dominant Blend 11
All Cotton 7
Other/Blend 7

Distribution Channels (in $millions)
2004 Total: $2.6 billion (no change over 2003)

% of total 2004 sales
*Other includes warehouse clubs and military exchanges
Mid-price Chains 40% $1,040
Discount Department Stores 33 858
Home Textiles Specialty Chains 18 468
Home Improvement Centers 2 52
Direct-to-consumer 2 52
Department Stores 1 26
Single Unit Specialty Stores 1 26
Off-price Chains 1 26
Variety/Closeout 1 26
Other* 1 26

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