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Issue Date: 2006 DECEMBER, Posted On: 12/26/2006


12262006 Internet Rug and Home Furnishings Sales Growing
By Janet Herlihy

CONSUMERS USE INTERNET FOR
RESEARCH,  BUT ONLINE RUG AND
HOME ACCENT SALES ARE GROWING

By Janet Herlihy

Despite the consumer's need to "see, touch and feel,€VbCrLf online sales of rugs and other home furnishing items are increasing.

"I'm stunned by the volume of home furnishings being sold online,€VbCrLf said George Whalin, president of Retail Management Consultants, San Marcos, CA.

"Still, the Internet is primarily a research vehicle for consumers today and probably only represents about 1% of home furnishing sales,€VbCrLf Whalin noted.

 "For niche items like designer lamps and hi-end rugs, the Internet will continue to grow, but as the item gets larger,
shipping becomes a costly problem," he added.

 According to a study by PriceGrabber.com, when it comes to home furnishings, 72% of Internet
shoppers will research online first, then 29% say they will
"most likely" also purchase Online, while 71% say they will "most likely" purchase at a retail store.

WSL Strategic Retail, a New York based research firm, reported that the home décor and home furnishings categories ranked ninth and tenth on a list of items purchased online. Sales increased over 40% in both categories from 2003 to 2005, according to
WSL.

Rugs are represented on every one of the Top 10 Retail Home Furnishings sites, according to rankings compiled by Media Metrix. Here is the lineup:  (1) Home Depot, (2) Sears, (3) Lowes, (4) Williams-Sonoma, (5) Wal-Mart, (6) Ikea, (7) Pier 1 Imports, (8)Crate and Barrel, (9) Brylane and (10) Home Décor Products.

In addition to the top ten home e-tailers, there are  hundreds of other sites  that sell rugs online. So consumers can get access to thousands and thousands of rugs in every possible shape, size, style, construction and price point.


                    Rug Specialty Sites Pay Per €˜Click'

When a potential shopper enters "area rugs€VbCrLf in the blank of any search engine, the list of sites that pop up is virtually endless.  A search at Google on Dec. 12, revealed 1,470,000 possibilities.

The first window or two list "sponsored links" to e-retailers.To appear at the top of the list, the e-tailer must participate in an auction with the search engine. The top bidder gets the top position at the search site.

The auctions keep on rolling, so the companies often shift position in the list of  "sponsored links." 

On the Google search engine, approximately 30 e-tailers participate as "sponsored sites" selling area rugs. After  the sponsored links, the "natural€VbCrLf search results are listed.

The purpose of sponsoring links is to get your name to the top of the search heap. The philosophy is that most consumers are not going to search though more than the first ten or so links, so the sponsored links get most of the traffic. The e-tailers pay the search engine on a per-click basis.

"But having the number one spot isn't always the most
cost effective thing,€VbCrLf explained Joey Lemmons, owner and founder of 123erugs.com. For example, if a site is paying $2 per click and it takes 100 clicks to generate a $100 sale, than the site has paid $200 to make a $100 sale, of which perhaps only $50 is profit.

"Competition is fierce and keeps prices low," Lemmons pointed out. "If your average sale is $300, you may only make $100 profit, you have to decide just what you can afford to pay for the clicks,€VbCrLf he said.

Rugs Direct Evolves into Multiple Channel Retailer

 Rugs-Direct.com was launched as an online retailer in 1999, according to Randy Kremer, president, who partnered with David Craig, company chief executive, to create the business.

Rugs-Direct.com is a multi-channel retailer with Internet, catalog and bricks and mortar divisions. In 2006, the Winchester, Va-based company was honored with the AmericasMart's "Rug Retailer of the Year€VbCrLf award. 

 "We can offer the consumer just about anything. We advertise and focus on rugs and are competitive,€VbCrLf Kremer stressed.

That positive attitude is paying off. "Business is up
this year,€VbCrLf Kremer said. "We had a record month in
November in both the bricks and mortar stores and the
online operation and have not been effected by the slow-down in  real estate.€VbCrLf

Kremer has a background in computer software and Craig had owned a Carpet One store.

 Rugs Direct began as an Internet business and has expanded with the addition of a montly catalog and  bricks and mortar stores in Winchester and Richmond, VA.

 "We are planning to open two more stores in
Virginia in 2007,€VbCrLf said Kremer.

Devoted exclusively to rugs, Rugs Direct has  "70,000 SKUs Online, covering every niche and possibility
except for one-of-a-kind rugs,€VbCrLf said Kremer.

Rugs Direct has about one million visitors a month and
sells 15,000 to 20,000 items a month, according to
Kremer. Approximately 70%  of the rugs are drop
shipped from suppliers' warehouses, the others are
stocked by Rugs-Direct.
   
Rugs Direct's catalog is mailed once a month to a
mailing list made up of requestors, existing customers
and €˜cold call' names.

RugsUSA to Re-Launch  Website in Early 2007

Launched in 1998 and incorporated in 1999, Rugs USA is
a dot com and a catalog business that will re-launch
its website in early 2007 with a new name and an
expanded product line, according to Koorosh Yaraghi,
president of the company.

 "The home furnishings category performs best in a retail setting, especially larger items that are difficult to ship, but other products like clocks that are easy to ship can do very well online,€VbCrLf Yaraghi said.

RugsUSA will also move its headquarters in Spring
2007 from New York City to a 20,000 sq. ft. facility
on Long Island in Spring 2007. It will house offices, warehousing and a retail outlet operation.

Today, RugsUSA offers tapestries, clocks, mirrors,
art, slipcovers, and other accents as well as rugs.

Yaraghi explained that he was inspired to establish an
online rug operation after seeing Home Decorators
Catalog. "If a consumer will buy a rug
from a catalog, why not online?€VbCrLf  said Yaraghi.

The site's first supplier was Oriental Weavers of America. "They made it easy for us to enter the market. We now have more than 100 suppliers of rugs and other merchandise.€VbCrLf

RugsUSA had a record November and the first factor was
the Oriental Weavers Sphinx promotion  that offered a free accent rug and a free runner with the purchase of a full size rug, as well as free shipping.

Yaraghi also has a catalog that is sent to approximately
300,000 customers five times a year. It will also be
revamped by its next publication in late January 2007
to feature more artful photography. "The catalog will
give inspiration by showing room settings and the website will be where the full selection will be shown,€VbCrLf he said.

123erugs Evolves from Retail Site

123erugs.com evolved out of  Rugs International, a retail store in Gaffney,
SC, according to owner Joey Lemmons.

"In 1983, my father and I started an outdoor advertising business in South Carolina.  In 1999, I purchased a 160,000 square foot retail building. Along with the building came a 12 year old established rug retail business with a standing inventory of around $2 million," he noted. That store, in the old World of Clothing building, later became Rugs Interational

In October of 2003, 123eRugs was launched.

"We had tried online sales about six years ago and it never really took off. So this time, we've tried to be a little different by offering a huge selection.€VbCrLf

With rugs from more than 140 suppliers, Lemmons said there are currently about 140,000 rugs on the 123 site.  "Most of our suppliers offer us their entire lines.
Rugs are drop shipped from the supplier to the consumer. If the rug is returned, it comes back to 123. The only time it would go back to the supplier is
if the wrong rug was shipped.

123erugs sells some high-end rugs, but 90 to 95% are
machine made or hand-tufted, and priced in the low to moderate range.

 "As the Internet continues to mature, every brand
will want to have a presence. Brands will need to set
minimum price policies to level the playing field and
protect the value of the products.€VbCrLf Lemmons stated.



How Low Can You Go?

Online shopping is a comparison buyer's dream. It is
relatively easy to browse sites and see what each is
charging for a particular rug that many carry. Many
consumers come into a store with a printout in hand
with competitor prices for the storeowner to match.
Virtually all the sites  featured "Lowest
Price€VbCrLf guarantees.

RugsUSA claims to have started the "price match
guarantee,€VbCrLf according to Yaraghi, who said, "We will
beat a competitors price by 15%.€VbCrLf

It used to be that a site could put a rug on sale for
whatever price it chose, but some prices got so low
that it was hurting the value of the brand and/or
bricks and mortar retailers, according to Lemmons of 123erugs.

"Now, many suppliers have a minimum pricing policy.
They will set a lowest price to protect their brick
retailers. If we sell one out every 100 hits at our
site, we can make money and haven't hurt other
retailers and suppliers,€VbCrLf he said.

To discourage site-to-site jumping, 123erugs
will only give counter offers on the telephone. "We don't
negotiate through e-mail. We don't want to end up in a
ping-pong match with another site with the 10% of
consumers who want to negotiate. For them, it's part
of the process. On the site, we promise to "beat
others' prices or give you $100 toward a next
purchase.€VbCrLf

Return Policies

Surprisingly, rug returns are not a big problem, according to Internet retailers. Having a bricks and mortar store helps solve the problem about what to do with the returns.

"We do take rugs back and, if they are in good condition, we put them on the retail floor at Rugs International . About 10% come back at 123erugs,€VbCrLf said Lemmons.

Rugs-Direct will take back any rug within 30 days of
the purchase for any reason. Returns amount to just
over 9%, according to Kremer.
   
According to Yaraghi RugsUSA inaugurated the 30-day return policy  and, "We were first to offer free
pick up on large items.€VbCrLf


ED NOTE: Janet Herlihy is a Texas-based free-lance writer who frequently covers the rug and floor covering industry. She was formerly rug editor for HFN and editor in chief of Carpet & Rug Industry magazine.
 


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