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Area Rugs: State of the Industry

June 6/13, 2016; Volume 30, Number 25

By Ken Ryan

The U.S. rug business, which grew an estimated 4% in 2015, continues its modest pace in 2016, driven in large part by the growth in hard surfaces and the popularity of custom rug programs.

While carpet in general has been flat to slightly up in the last two years, rugs have benefited by trends exclusive to that segment. “I’ve been with Couristan for 25 years and seen time periods change,” said Larry Mahurter, vice president of marketing and advertising. “Today hard surface is elevating the sale of area rugs; the pendulum has switched back to rugs from carpet. For a good many years it was carpet that led the way.”

Industry executives say the improving economy has bolstered the rug category because consumers feel more comfortable making purchases, particularly following a hard surface sale. These same experts also note a shift in buying patterns to cheaper goods as consumers today are less concerned about fiber type and are instead looking for color, pattern and texture. “Area rugs are selling well for us but at a modest growth,” said Gerry Yost, director, area rugs and window treatments for Avalon Flooring, a Cherry Hill, N.J.-based dealer with 14 stores in three states. “With so many options on where to buy rugs—the Internet, furniture stores and other home accessory retailers—finding the right styles, colors and price points for our customers remains a constant commitment.”

Indeed, merchandising, stocking and selling area rugs can be challenge for specialty flooring retailers who have to compete with home centers, mass merchants and catalog/online dealers—the latter representing the fastest growing channel for rug sales. The speed to market has dramatically increased to the point where a consumer can order a rug from a domestic manufacturer and have it delivered in a few days. This, of course, has burdened brick-and-mortar dealers.

“Unless the retailer has designers on staff who value their own expertise and charge for their services accordingly, the consumer won’t spend money on a beautiful wool rug,” said Olga Robertson, president of the FCA Network, a buying group representing nearly 60 dealers. “The category has been relegated to the lowest common denominator: disposable rugs. Specialty retailers can inventory $1 million in rugs in all shapes and sizes and invariably you never have the right rug. It’s an uphill battle between merchandising, marketing, sales training and competition. You can buy a 6 x 9, 3 x 5 and 2 x 8 runner package from a home center that’s in stock for $189 out the door. It’s tough to compete.”

Other retailers attest to the challenges. Sam Presnell, president of The Rug Gallery in Cincinnati, said flooring dealers need to step up their game and “make them buy from you” in the face of all the different channel options. He said his business is up about 10% over the same period last year but he knows that is not the case for everyone. “I have been hearing rumblings from dealers [covering] a wide range of geographical areas who are missing their sales targets; I really don’t understand why. The residential builder market is getting healthy again and existing sales are up all across the country.”

Executives noted that area rugs have shown some vibrancy thanks to new technology, which has allowed manufacturers to create a fashion statement while keeping costs down. Furthermore, as hard surface sales continue to climb—especially hardwood flooring and LVT—area rugs offer a natural add-on sale for flooring retailers to capitalize on the trend. It makes for a compelling sales opportunity for the specialty dealer. “If you do not have rugs on your floors, your home is just an echo chamber,” said David Duncan, senior vice president of marketing and sales operations for Mohawk.

The popularity of hard surfaces has helped the growth of rugs, which are often sold as add-ons. Pictured is Karastan's Euphoria.
The popularity of hard surfaces has helped the growth of rugs, which are often sold as add-ons. Pictured is Karastan’s Euphoria.

Custom rug trends

Shaw Floors exited the rug business two years ago and yet is doing well with its Cut A Rug program. One interesting aspect of customized rug programs is manufacturers can benefit from rug sales without having to inventory millions of dollars worth of rugs. The custom rug trend continues to grow with a large movement toward simplistic bound patterned carpets vs. traditional rugs. “There are new programs available from our residential carpet manufacturers that make binding carpets into rugs simple to order and deliver,” said Dave Snedeker, division merchandise manager-flooring, Nebraska Furniture Mart in Omaha.

Mohawk’s custom rug program, called A Cut Above, launched April 1. The company reports the number of retailers participating has exceeded expectations. “Our custom rug program is successful in part because of its connection to the Karastan brand, which has a long history of producing beautiful, quality rugs,” said Mike Zoellner, vice president of marketing services.

Heather Yamada, director of consumer marketing for Shaw Floors, noted that Shaw’s Cut A Rug program has been available to retailers for some time, although it has never been a formalized program until now. “There is a lot of energy and support around the program like never before,” she said, adding that it’s a major initiative for the company. “Cut A Rug offers us the unique opportunity to offer rugs while not having to be in the traditional rug industry. It’s a custom approach that not everyone can offer and provides real benefits for flooring retailers.”

At Shaw, the Cut A Rug program focuses on better-end styles such as Tuftex, Caress, its new St. Jude carpet collection and products from the company’s best-selling Anso Colorwall, Soft Shades and Clearly Chic lines.

Observers believe custom rug programs are viable because consumers want to use their imagination in decorating. At the same time, manufacturers have the technical know-how to create virtually any custom rug a customer desires. “We’re seeing a lot more stores sampling our product, for example,” Couristan’s Mahurter said. “We started seeing it in the fall of 2015 and it has continued in 2016. Before (and through) the recession rug sales were flat. That’s not the case any more. We run two rug promotions a year, and the last two promotions have been our best in terms of volume in the last seven to 10 years.”

The excitement surrounding the category is opening up avenues for broadloom manufacturers. Stanton Carpet, for example, continues to proactively seek new opportunities in the rug business. As a supplier of decorative carpet across multiple categories, Stanton—which won an Award of Excellence in area rugs in 2016 (FCNews May 23/30) — offers fabrication on all products including basic serging, hand serging, cotton bound, linen, faux leather and patterned fabric borders. “We offer square-foot rug pricing on most products and are currently working on a new platform to significantly streamline the custom rug ordering process with deep flexibility and accessibility,” said Jonathan Cohen, CEO. “Many of our customers utilize our fabrication services, which are performed in our new distribution center in Calhoun, Ga., and can turn around most custom fabricated rugs in 5-7 business days.”

Retailers said one trend they are seeing is a swing back to traditional rugs, albeit with trendy colors that give classic patterns a fresh look. “What the customer is looking for is stylish, affordable and easily changeable to adapt to the changing trends in home décor,” Robertson said.