Rugs top home fashions with nudge from shifting channels
January 13, 2003,
Rugs are everywhere — from dollar stores selling rag rug accent sizes to high-end resort boutiques offering handmade room-size rugs.
The accent and area rugs industry experienced fervent growth over the past year, with sales surging by 12.5 percent to $6.3 billion in 2002, according to exclusive research by Home Textiles Today. That figure might surprise some, considering the overall state of last year's economy and compared to a modest 2.3 percent rate during the prior year.
Several factors propelled the category in 2002, suppliers said, including increases in imported goods, improved marketing of scatter and accent rugs, and stronger placements among home improvement chains.
The findings are from annual market research conducted by Home Textiles Today. For the eighth consecutive year, HTT's "The Facts: Rugs" offers a statistical analysis and trend forecast for the category. Moreover, this year's report employed improved research methods intended to yield even more accurate reporting and a greater depth of understanding of the marketplace's constant gyrations. (See accompanying explanation of methodology on page 8.)
The study found that slight shifts occurred in retail market share during the past year, at times resulting in a sea change in real dollar volume.
For example, home centers experienced the most substantial growth on both counts: market share increased 2 percent, leading to a 58 percent leap in sales, to $441 million.
Home specialty chains also gained. A 1 percent pick-up in market share yielded a 27 percent jump in volume, growing to $567 million from last year's $446 million, the study reported.
Those gains came largely at the expense of other channels, particularly the two that historically have held the largest control of the market: department stores, which dropped 3 points to a 14 percent share, and mass merchants — the discount department stores — which lost a point, dipping to a still-dominant 28 percent share, the report stated.
Despite those losses, only department stores experienced a decline in actual sales volume, dropping 7 percent, to $882 million, for the segment. Discount store sales still increased 9 percent last year, to nearly $1.8 billion, according to the findings.
Saddle Brook, NJ-based Nourison's Ed Vairo, director of creative marketing, noted that, while home improvement centers are still dominant players, "they are obviously no longer new kids on the block, and their quantum growth is changing to incremental growth."
Even with this slight decline, discounters still own the most — almost one-third — of the total market share The reason is simple math, said Louis Ragy, senior vp of marketing and sales, for Norcross, GA-based Trade Am.
"The discounters have the best traffic. "More than 100 million customers per week visit Wal-Mart stores around the world — at least that's what they report," he said. "And the reality is, the big box stores [discounters and specialty chains] are the ones that most heavily promote the category and offer the most value for the customer."
Michael Shabtai, president of Los Angeles-based The Rug Market, agreed that discounters have played an important role in the growth of the category, "adding more racks and rug displays," he said.
But the downside to this increased emphasis, particularly on small sizes from 2' x 3' through 4' x 6', is that it has created an increasingly competitive atmosphere among suppliers and in the process has eroded margins.
"Eventually, the push for these promotional goods is bad for us because as the prices get cut lower and lower so do our margins until there is nothing left," Shabtai said.
To stay afloat in this cutthroat environment, suppliers must make sure they establish themselves as a "one-stop shop for all kinds of rugs," Ray Ehsani, vp of sales, Dallas-based Feizy Import & Export said.
"To be able to sacrifice some margin, suppliers must be sure to carry and produce a wide variety of rugs and have a heavy product volume from synthetics to hand-knotted goods," Ehsani explained.
Aside from offering affordable price points, accent rugs grew in popularity — especially 3' x 5' offerings, which occupied 29 percent, or one third, of the total share — thanks to better fashion programs and constructions by suppliers.
"There is now also a fashion potential with these smaller rugs," Vairo said. "They used to go only in front of the kitchen sink or in the hallway; but now with the many new fabrications they've become more like decorative accessories for an added spot of color or texture throughout the home."
Kea Capel, director of marketing and creative services for Troy, NC-based Capel, said her company offers a broad spectrum of accent sizes in many different fashion styles and constructions, including tufted, carved, felt and printed items that can be sold at inexpensive prices.
"These are impulse items that retailers can sell at the more popular price points," she said.
Trade Am does a large part of its accent rug business with discounters, which "heavily promote our cotton weave rag rugs, which we import from China and India, and sell for anywhere from $9.99 to as low as $2.49," Ragy said.
Dalton, GA-based Shaw Rugs in February launched a program of printed accent rugs with washable backs. "And it's still doing very well for us," Jeff Meadows, divisional vp, said. "And it's not only selling well at the mass merchants, but now we have the program at Lowe's and other home improvement centers, where it's really taking off."
Meadows said the program is composed of both promotional and seasonal full-price goods, priced at retail from $14.99 to $19.99, with a strong focus on fashion.
"If a female consumer buys one [accent rug] a year, or even more than that, it's not a big deal to [to her pocketbook]," he said.
Because of the improved methodology of the research, there were some areas where year over year comparisons were difficult. Complete data from the study are included in the accompanying tables and graphs.
|DISTRIBUTION CHANNELS (in $millions)||2002 %||2002 $|
|* Other includes interior designers, military exchanges and warehouse clubs.
|1. Discount department stores||28%||$1,764|
|2. Department stores||14||882|
|3. Mid-price chains||12||756|
|4. Home textiles specialty stores||9||567|
|5. Off-price chains||8||504|
|6. Home improvement centers||7||441|
|8. Furniture stores||5||315|
|10. Carpet/floor covering stores||3||189|
|11. Gift/home accent stores||2||126|
|13. Single unit specialty stores||1||63|