Bath Industry Picks up the Pace in 2009
Cecile Corral -- Home Textiles Today, April 26, 2010
Dead-set on turning business around after one of the most unforgiving years in memory, bath product suppliers and retailers gave consumers a reason to start shopping in 2009 with new products that offered performance and value at the right price.
The fruit of their labor resulted in a modest but hopeful 1.8% increase in total industry sales to $3.48 billion from the prior year's $3.42 billion.
Welspun USA's director of marketing, Bob Hamilton, attributed the growth to several factors, including low inventories at retail that needed to be replenished, rampant promotional activity in all channels, and aggressive pricing.
“There was and is a lot of action at $3.99 and $4.29 in bath towels,” he explained. “The business is being done by [mid-tier department stores] at 60% on Saturday mornings. What is regularly priced at $10 is promoted for $4.49.”
The catch, however, he pointed out, is that “it never really was $10. The level of percentage is greater, and values being promoted to consumers on bath towels, as an example, are far greater than they have been in long, long time. They really carry a great value for what the consumer is getting for the price.”
Reviewing the year, 2009 got off on a slow start, observed Joanne Krakowski, U.S. sales and marketing manager for Trident India.
“Customers were selling more lower-priced goods and more towel packs,” she said. “That's what was selling at the start of the year.”
Des Plaines, Ill.-based Revere Mills “concentrated on developing very compelling promotional packs. These packs allowed our customers to retail bath, hand and wash packs all at one price,” said Elaine Aschenbrand, director of marketing and product development.
The company's business was slightly up last year. Its core everyday programs were off, “but we made up volume with promotional activity. The biggest factor on the core business was that retailers seemed to be controlling their inventory levels very tightly.”
Once the fall season kicked in, consumers' and retailers' attitudes as well improved and the bath business turned for the better, noted Jeff Kaufman, president and coo of Moonachie, N.J.-based Avanti Lines, an embellished towel and bath coordinate supplier.
“We saw buying patterns return to normal in the second half of 2009 after seeing a great deal of inventory pulled out of the supply chain by retailers in the fourth quarter of 2008 and the first quarter of 2009,” he said. “Once the inventory levels were reset to the new lower levels, we saw a more regular flow of orders since a lot of safety stock was pulled out of the stores. With an upturn in business and relatively light inventory levels in the stores, we expect to see a strong, consistent order flow in 2010.”
By the time the fourth quarter arrived, consumers' uplifted attitudes about the economy drove them back to stores to restock on much-needed bath linens and fashions.
“People deferred their spending on decorative items,” Hamilton said. “People waited and waited and waited and waited, and when they saw their home had not foreclosed and that things were looking brighter, there was some pent-up demand that began releasing in the marketplace.”
Added Keith Sorgeloos, president and ceo, Atlanta-based Home Source International: “In the second half of 2009, particularly in the fourth quarter, we started to see some movement from consumers that enabled the bath area to pick up. There were incredible values going on last fall season. Consumer business started to gradually turn positive, driven by value available in the marketplace.”
Sorgeloos also noted a resurgence of the luxury customer. These high-end shoppers returned to their usual upscale department store haunts. But the affluent customer, unlike lower- to middle-income shoppers, was not necessarily looking for aggressively priced products. “She was starting to spend her money again but not on value,” he explained. “She reemerged because she felt more positive in the second half about her position.”
So where did the business go in 2009? Like many other home textiles categories, bath products made the greatest turns at off-price chains and discount department stores, which grew by 6.5% to $156.6 million and 4.8% to $2,008.0 million in share of sales, respectively, for the year.
Mid-price chains and home textiles specialty chains also grew but at a lesser rate — 1.8% to $563.8 million and 1.0% to $497.6 million, respectively.
Suffering the greatest loss in category business were home improvement centers, which dipped 27.3% to $17.4 million in share of total industry sales.
One major discount department store chain reacted quickly to the recession's effects, earning the retailer considerable growth in home products including bath, said Gretchen Dale, president of New York-based Loftex USA.
“They were right on top of that wave. They took a lot of business away from the retailers above them and they brought to the market some pretty interesting stuff, some innovation,” she said.
This retailer launched a branded home program that “appealed to a customer who could not shop at [a major mid-tier department stores] or higher,” Dale continued. “And [the new bath program] was something they wanted and could afford.”
But other stores across all levels of retail quickly caught on and began offering their own value programs — branded and unbranded.
While pre-packs got the year off to a strong start, products with performance attributes at the right price carried the category into the rest of the year.
In both bath towels and bath rugs, quickly-drying goods that saved energy earned points with shoppers.
“I think one of the most interesting things, candidly, is the introduction of lighter-weight, bulkier bath towels at a $4.99 price point,” Hamilton noted. “It had a huge impact on growth within the industry. It's a great product, it has great shelf appeal with its loft, and it sells for a great price.”
Trident India also went the quick-dry route, but using a lighter-weight cotton towel, and it comprised “a majority of our business” last year, Krakowski said. It retails for $4.99 to $5.99 at various different channels.
“What happened for us was that we began focusing on performance-based [bath rug] products, and one took hold pretty well at retail,” said Joe Shafran, vp, Faze Three Ltd. “We got a nice boost from that. It was for a quick-drying fiber. It didn't weigh less, we just used a new technology in making the fiber to make it dry faster.”
Maples Rugs in 2009 “did pretty well” because the Scottsboro, Ala.-based bath rug domestic manufacturer “reacted to market conditions and we were able to give value to our customers, which resulted in better business performance.” This included new placement with existing retail customers for its sustainable PET fiber offerings, and additional business into 2010.
Sugar Valley, Ga.-Based Mohawk Home said that in 2009 synthetic fibers still represented 80% of the market — specifically mostly nylon with a few micro-poly programs. The balance, or 20%, was occupied by natural fiber products, mainly reversible pieces and table-top constructed cotton coordinate styles.
“Retailers changed fewer programs in 2009 in an attempt to save markdown dollars, and they seemed to focus more on color updates and extended sizes and constructions within their current assortments,” said Bart Hill, general manager of bath products, tufted and printed area rugs, Mohawk. “Retails stayed relatively flat for the year in rugs, but we did see some downsizing in traditional sizing — from 21-by-34 to 20-by-34 [for example] — at a couple of retailers.”
In the accessories and shower curtains side of the bath business, New York-based Town and Country Living said its strong 2009 category sellers included basic bath goods, such as liners and hooks, and PEVA shower curtains. Down slightly for the company were sales of bath ensembles.
Creative Bath Products, based in Central Islip, N.Y., made strides with its domestically made plastic goods that could retail at opening price points.
“Low-end discounters took advantage of opening price point plastic sets, [of] which we shipped tonnage units, but they offered low revenue,” said Bob Weiss, vp, sales and marketing. “These plastic four- and three-piece sets sold between $2 and $6. Customers purchased the basic items. Shower curtains, wastebaskets and rugs were the bulk of the sales.”
Suppliers are optimistic about sales in 2010, as business remains buoyant for bath. But new concerns are cropping up in the form of escalating raw material prices for everything from cotton to wood, metals, synthetic fibers and more.
Revere Mills described it as “the most serious situation — pricing,” Aschendbrand said. “We are facing a major issue with the incredibly large increases the on cost of raw materials and freight. Retailers must face this and deal with the realities of the situation.”
Added Dale: “Cotton has gone up almost 20% all over the world, relating to a roughly 10% increase in the towel. It is shaping up to be a tough year, and everyone is trying to figure out what to do about it. As it takes effect in the third and fourth quarter, I expect retailers will be a little more cautious this year than last year.”
With raw material prices escalating, “we might see a fallout,” Sorgeloos projected. “If consumer demand keeps picking up, we'll weather the storm. But if consumer demand doesn't keep moving in the right direction, these increasing raw material prices will make it very hard [for suppliers] to offer that value-driven product. That will be the telling sign of what will happen in the second half of 2010. We're in a very wild and wacky time in our industry.”
Maples is also feeling heat from raw material price hikes, which are creating “an ongoing daily challenge to maintain value retails. The increases are being absorbed by the manufacturer.”
Ex-Cell/Croscill/Glenoit, based in New York, is taking the same approach, swallowing the added expense stemming from raw material prices. But the company noted another new hurdle — altered consumer attitudes toward spending, which in turn relates directly to the effects of raw material price increases.
“Even if consumers are not personally affected by the economy, they are out there in a different shopping mode,” said Ida Moran, vp, merchandising, fashion bath. “They don't want to be conspicuous. Whether you can afford it or not, it's not en vogue to be ostentatious. Today's bragging rights are about how inexpensively someone paid for something whereas before they bragged about the exclusivity of a product they bought. And so what all this means is that price points are still really important.”
Distribution Channels ($millions)
2009 total retail sales: $3.48 billion
up 1.8% from 2008
|*Other channels include direct-to-consumer and other channels such as PXs, grocery stores, and the like.
|Discount department stores||$2,008.0||$1,915.2||4.8%|
|Home textiles specialty chains||497.6||492.5||1.0%|
|Home improvement centers||17.4||23.9||-27.3%|
|Single-unit home specialty stores||20.9||27.4||-23.7%|
Merchandise mix ($millions)
|Source: HTT Research
|Bath towels||$1,750.4||$ 1,716.8||2.0%|
In determining product category sales figures, as well as determining retail sales for those categories by channel of distribution, the editors and research department of Home Textiles Today used data compiled from a variety of sources, including publicly filed financial reports, vendor sales information compiled by the editors, and information provided by retailers and home fashions suppliers. The research was compiled by Cecile B. Corral, product editor; and Dana French, director of market research.
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