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Area rugs: State of the industry—Category thrives on popularity of hard surfaces

June 11/18, 2018: Volume 33, Issue 26

By Mara Bollettieri

 

The U.S. area rug market continues to surge forward, thanks in large measure to the growth—ironically—of hard surface categories such as LVT, WPC and hardwood. Preliminary FCNews research shows the area rug sector is on course to replicate the 3% to 4% growth rate achieved over the past few years. For calendar year 2016, sales of area rugs in the U.S. reached about $2.5 billion, a 3.5% increase from the year-ago mark.

Dealers who have achieved success in the area rug sector cite several reasons, first and foremost the fact that rugs represent an ideal complement to hard surface purchases. “I presume, all would agree, the increase in hard surface is driving rug sales,” said Adam Joss, co-owner of The Vertical Connection Carpet One, Columbia, Md. “Every time we change a floor from carpet to hard surface, the customer needs a rug to go in that room.”

Joss is not alone. For dealers like Cheri Chinnici, area rug buyer/manager of Crest Flooring, Allentown, Pa., hard surface and area rugs are a perfect match. “Because of all the hard surface that is sold, I think that area rugs go hand in hand.”

Sam Presnell, owner of The Rug Gallery in Cincinnati, attributes the increased consumption of rugs to a variety of factors, namely “hard surface affordability, open plans in new and remodeled homes, the cool vibe from the millennials, the great designs and colors available at every price point.”

Another factor driving sales of area rugs for dealers is the availability of flexible ordering and shipping programs. Many dealers are finding custom-cut rug programs in particular to be an attractive option to warehousing or stocking products in store. This absolves the retailer from the responsibility—and cost—of maintaining inventories of product that might not sell quickly enough to justify the space. Custom-cut programs, which also provide creative selling opportunities for manufacturers, enable retailers to let their customers design their very own rugs.

For dealers like The Vertical Connection, not having to worry about warehousing product is a big relief. “We have no inventory issues,” Joss stated. “We only go after the custom or made-to-order rug business. Our feeling is that unless you have a really unique and special selection of inventory, it’s just not worth it to have any.”

Crest Flooring’s Chinnici agrees. At her store, she doesn’t have to allocate space in the showroom to stock rugs. “We just special order everything. We just have 5 x 8, 4 x 6 samples on our racks.”

Having a custom-cut program also allows Chinnici to meet the specific needs of her customers instead of guessing what would be popular in the category. “People are looking for certain styles; you never know what’s going to be hot when you buy.”

But special-order programs don’t always go smoothly, despite a dealer’s best intentions. That was the case with Billy Mahone III, president of San Antonio-based Atlas Floors Carpet One. Bad experiences forced him to scale back. “We used to stock area rugs several years back, but eventually stopped due to poor sales and slow inventory turns. Once our rug stock and racks were gone, we brought in a couple of displays from popular area rug manufacturers to start a special-order area rug business, but it never took off. My theory is we lost quite a bit of sales to internet retailers during this time, and we struggled to convince our sales staff to show them to every hard surface customer.”

But Mahone has not abandoned the rug category altogether. Since he adopted a custom-cut program, he has had more success moving product. “Now we offer a custom program where we cut and serge carpets to our customers’ exact specifications, and we have had some decent success.”

Even those dealers who turn consistent profits selling rugs attest to the channel conflict inherent in the category. The Rug Gallery’s Presnell believes the broad availability of rugs across a range of retail outlets is an issue. “My concern is the general public is not buying rugs in the old channels [retail] and everybody has them. The distribution is wide open—the consumer is confused and doesn’t understand why one rug cost x amount of dollars and another is twice that amount. They tend to go the path of least resistance, and price has become a big factor for a lot of consumers—especially the younger first-time buyers.”

Presnell sees the most area rug activity—price-wise—in the $599-$899 range, with a little less action in the $2,000-$3,000 bracket. “Modern and traditional designs are driving the bulk of sales,” he said.

In terms of formats, Presnell is seeing movement in larger sizes. “We sell mostly larger sizes in 8 x 10 or 11. We have always had large inventories of rugs, probably 3,000 to 4,000 pieces. The key is to have a cash- flow projection plan and live to it. You also need a purging system as well.”

At the Vertical Connection, customers’ design tastes are “all over the map—contemporary, traditional, etc.,” Joss explained. But he seems to have found that sweet spot. “Given the fact we focus on the custom/made-to-order rugs, prices tend to be around $1,000.”