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State of the industry: Area rug segment moving in right direction

June 9/16, 2014; Volume 27/Number 29

By Louis Iannaco

Screen Shot 2014-07-03 at 9.44.44 AMThere’s no doubt the area rug category has experienced a tough go of it the past several years with overall flat to low single digit top-line sales. But it seems that, while difficult times may still play a role in the area rugs’ present and immediate future, things are seemingly beginning to shape up in a positive way regarding the segment’s sustainable growth for the second half of the year and beyond.

Jeff Seagle, director, marketing and product merchandising, Mohawk, noted the cash-strapped consumer and an overall sluggish economy, along with the shift to online purchases, have been the major inhibitors to overall category growth. “As 2013 came to an end, we the category as a whole showed signs of a recovery with a 3%-5% year-over-year projected growth for 2014. The inclement weather throughout the first quarter created a delay in the rebound, but we still feel the category will increase over the back half of 2014 with the annual number being closer to 2%-3%.”

Challenges center around the conservative approach at retail, he said, both with overall inventory levels, static price points—which inhibit the ability to infuse “newness” into the category—and with lower discretionary income levels for a majority of consumers. “The propensity for the supplier base and at retail is to drive to lower price points without top-end assortment rejuvenation to enrich the product mix,” Seagle added. “This is unsustainable over time for the category.”

Allen Robertson, vice president of sales, Capel Rugs, said the slow housing market recovery continues to impact flooring sales. As a result, many mills have had to source or create lower price points.

“Consumers are also settling for smaller-size rugs, using 5 x 8 and 6 x 9 offerings instead of 8 x 10 and 9 x 12,” he explained. “Of course, the smaller sizes are one half the price of larger rugs. Fortunately, the $249 to $299 products are good sellers.”

Robertson said the company’s research indicates area rug sales would remain flat this year in dollars and are trending at below $4 billion in retail sales. So far in 2014, much like Seagle, he sees the weather playing a major role in delaying growth.

To counteract this, he noted, Capel expanded its branded programs with all its partners “to enhance our rugs with the unique styling they bring. Our Genevieve Gorder and Kevin O’Brien programs are creating buzz in the marketplace. We’ve also increased our efforts in social media and are seeing strong results from Twitter, Facebook, Pinterest and Houzz.”

Others predicted some positive developments in the near future. For example, Alex Peykar, principal at Nourison, said the segment has been experiencing a “bounce back” year thus far in 2014. “During the first six months of this year we’re experiencing an estimated 15% increase over the same period last year.”

Economic indicatorsScreen Shot 2014-07-03 at 9.45.12 AM

Imports of carpets and rugs to the U.S. grew 10.6% in the first quarter of 2014, according to figures recently released by the U.S. Department of Commerce, Office of Textile & Apparel. Including both wool and manmade fiber products, first-quarter 2014 shipments amounted to $463.8 million compared to $419.2 million in first-quarter 2013.

Business continues to thrive at AmericasMart, according to Kevin Malkiewicz, vice president, area rug leasing and sales. Since January 2014, AmericasMart has leased, expanded or renewed over 45,000 square feet of integrated home and rug showrooms.

As the economy improves, he explained, “we are able to bring more new showrooms to our marketplace. Additionally, our current exhibitors continue to grow their businesses by expanding both their showrooms and product.”

According to Malkiewicz, AmericasMart also has some major home vendors who have already committed to new showrooms for the January 2015 market. “These additions will continue to draw resources and buyers to the home and rug floors,” he said. “There will also be further capital investments in the facility to enhance our vendor and buyer experience. As the housing market continues to improve, we anticipate a bright future ahead.”

Some retailers are also experiencing an increase in sales and optimism. Sam Presnell, owner of The Rug Gallery in Cincinnati, said business has been on an upswing for the last 18 months, and that growth can be attributed in large part to area rugs. “It started right after the 2012 election. Most people, who were reasonably positive about their financial situation and felt they had job security, were tired of living on hold. In 2013, we experienced a 15% growth in revenue over 2012, and so far in the first five months of 2014 we’re up another 15% over the same period last year. The majority of that growth comes from area rugs.”

Buying, design trends

As Presnell noted, consumers have definitely changed their buying habits. Where they were once buying one rug as a replacement, they are now buying for the whole house, or at least multiple rooms.

Accordingly, The Rug Gallery has hired extra operations personnel as “the demand on the staff became too great for the number of associates we had been comfortable with during the downturn.”

As Ryan Beauchamp, creative director for custom rug producer Creative Accents noted, when it comes to buying trends, a consumer will pay more for a Made in America product as compared to one made overseas, such as China, India, etc. “I only know about the material that goes into our rugs and it is among the finest in the world, from Wools of New Zealand and the like. Complaints I get from consumers and dealers are often about low-end imported rugs that shed profusely and end up falling apart.”

However, Robertson believes the middle-income consumer is still reluctant to buy higher quality products. “She is settling for average quality versus long lasting. Our mid- to upper-income customers are asking for the latest color stories and transitional and soft contemporary designs. We see this trend continuing, and it has been embraced and expanded upon by online retailers. We are an industry that still needs our distribution channels to take our message to consumers through in-store promotion.”

Peykar is seeing the same trend. While a good portion of homes within the U.S. are still very traditional, he noted, “we do see an increase in demand of transitional and contemporaries. Most of our debuts were concentrated toward this change in consumer demand. Overall, simple looks continue to grow, proving that more is not always better.”

Seagle agreed, saying lower-end, simple and easy-to-decorate offerings are working well in the market. “We see more solid and two- to three-color offerings than in the past. Product value and fiber attributes are increasingly important.”

Presnell said most of the increase in his store has been in high-end handwoven products, but he has also observed exponential growth in machine-made business over the last year. “Our carpet business is up as well, with probably half the carpet sold being fabricated into rugs.

“2014 is the year of blue, although we still see gray as the leader in our showroom,” he added. “Stronger colors seem to be emerging in both rugs and carpet, with orange being the front-runner. These bold colors will work well with the neutrals we’ve seen sell over the past few years. Less traditional, more transitional and contemporary designs are selling well. This is also a big year for geometrics.”

Looking ahead

While thoughts were mixed on the current state of the rug industry, there seemed to be an optimistic consensus among those who talked about the future.

Screen Shot 2014-07-03 at 9.45.39 AM“I foresee our company finishing strong for 2014,” Beauchamp said. “Our sales and marketing approach is customer-service based and I see a huge lack of this in the area rug business. I believe 2015 has further potential as long as our economy can at least remain static to positive.”

Robertson’s inclination for the next six to nine months is that while sales would be sluggish through July, they will begin to accelerate beginning in August. “I anticipate fall sales to increase by at least 5%, rejuvenating to a growth pattern.”

Seagle also foresees growth in the category for the back half of 2014 and into 2015. “Continued product newness, increases in consumer confidence and the retail focus to drive sales through brick and mortar as well as ecommerce will be keys to the growth.”

Peykar has noticed consumers spending more money than they have been on upgrading to better qualities, and he is hoping that the trend will continue for the balance of the year. “While not all retailers have felt the improvements, financial reports that relate to the U.S. future, as well as the housing rebound, should continue.”

And, according to Presnell, prices are going up at retail. “The major players are increasing their pricing to dealers. This is a good sign things are moving in a positive direction.

“I’m very positive about 2014,” he concluded. “Barring something catastrophic, the mood of the consumer will continue to be positive. People are ready to enjoy life again.”

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Capel, Hable Construction to create rug line

Screen Shot 2013-09-06 at 1.10.44 PMTroy, N.C.—Capel Rugs has joined with Susan Hable Smith and Katharine Hable Sweeney of Hable Construction to create a line of exclusive area rugs. 
The initial rollout, scheduled to debut during the upcoming October High Point Market, includes several wool loop-hook constructions and three complementary, made in the USA braided collections with a simple contemporary style theme. Continue reading Capel, Hable Construction to create rug line

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Capel kicks off 2013 with “The Guide”

Troy, N.C. – Capel Rugs is proud to announce the release of its sophisticated 2013 catalog “The Guide.”

Filled with 240 inspiring and engaging pages, “The Guide” encourages readers to be their own interior decorators by providing creative ideas for mix-and-match patterns and helpful information about each featured piece. Readers can browse rugs by room, collection, rug construction, texture, designer and color in this easy-to-use showcase of Capel’s premier designs. Continue reading Capel kicks off 2013 with “The Guide”

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Industry’s future, product colors brighten at fall High Point Market

By Deena C. Bouknight

Feizy enticed High Point attendees into its showroom with an array of colorful rugs in the entryway.

HIGH POINT, N.C.—Area rug companies reported a positive showing at this year’s fall International Home Furnishings Market, held Oct. 13 to 18. While many businesses and consumers are waiting on the results of the tight presidential race before making major financial decisions, the home furnishings industry appears a little less reserved.

Analyst Jerry Epperson of Mann, Armistead & Epperson, is optimistic that if the stock market and auto industry are guides, the U.S. could have a dramatic economic recovery. He pointed out the lack of household mobility that has depressed both housing and furnishings sales over the last four years could be about to change. Continue reading Industry’s future, product colors brighten at fall High Point Market

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Capel appoints regional sales manager

TROY, N.C.–Capel Rugs has named Dave Calderwood regional sales manager for its Midwest marketing area. Calderwood formerly served as manager of area rug sales for a large Ohio furniture retailer and was a key sales and product developer for a large importer of handknotted and tufted rugs, the company said. Continue reading Capel appoints regional sales manager

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Biltmore partners with Capel Rugs to debut new collections at October High Point Market

Asheville, N.C.—Biltmore is expanding its home furnishings offering at the October High Point Market with new wood accents and rugs from manufacturing partners Encore and Capel Rugs.

Capel Rugs will debut a new rug collection, Arrondelle, inspired by architectural details found on the Biltmore Estate or in Biltmore House. Continue reading Biltmore partners with Capel Rugs to debut new collections at October High Point Market

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Celebrity licensing = profit: Trusted names boost consumer confidence, drive purchasing activity

With consumer confidence wavering in the wake of the last few years, buyers need more than motivation to make a purchase. She needs assurance the product on which she is spending her hard earned money will perform as she expects. Unfortunately, the salesperson’s word is not enough these days and a recognized third party—a celebrity— is often good support, regardless of whether there is any connection to the endorsed product. Buyers likes translate across markets based on a perceived connection to that celebrity. Continue reading Celebrity licensing = profit: Trusted names boost consumer confidence, drive purchasing activity

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Atlanta International Area Rug Market: Dog days of summer livened up with host of new products

ATLANTA—Comedian Woody Allen is credited with the line “80% of success is showing up.” That summed up the mood of the Atlanta International Rug Market last month, held during what even Southerners consider a scorching summer.

Chas Sydney, senior vice president of business development at AmericasMart, owner of the show, said traffic appeared to depend on price. “Many of the [companies specializing in] machine-made offerings had good traffic.” That is likely due to the continued squeeze on the economy. Continue reading Atlanta International Area Rug Market: Dog days of summer livened up with host of new products