02112016 Suppliers Upbeat after Winter Shows; Predict Continued Rug Recovery in 2016

LAS VEGAS -- Wrapping up successful January markets in Atlanta, Dallas and Las Vegas, rug suppliers are looking forward to 2016 to carry forward positive trends experienced in 2015, and they forecast a bright outlook for a continuing rug industry recovery in 2016.

Amer Rugs enjoyed 30 to 35 percent growth in 2015, which president Tanuj Gupta said was very solid, with sales growing consistently throughout the year.  "I attribute the growth initially to our entry into e-commerce and the hand-tufted category.  Last year we increased our e-commerce business by 400 percent," Gupta said.  Crediting strong showroom traffic at AmericasMart and Las Vegas and tremendous growth in Amer's product assortment -- 29 collections were added including the new mid-priced hand-tufted rugs, Gupta is looking forward to continued steady growth in 2016. 

"We expected momentum from 2015 to carry over into Atlanta and Las Vegas, and it did," said Greg Jordt, executive vice president, sales and marketing at Harounian Rugs International. Jordt reported that 2015 was a very good year for HRI, with double digit sales increases at every market.  He attributes a tremendous amount of the increase from new accounts. "We made an effort to focus on new introductions and a more stylish direction, that is more toward the design trade and high-end retailers," he explained.

Queried in December, Alex Peykar, president of Nourison, said he was "cautiously optimistic" about winter 2016 markets. After Las Vegas, he told RugNews.com, "We expected retailers to be happier and -- based on orders and attendance -- the shows have exceeded our expectations." 

As reported in a December, 2015 RugNews.com special report, rug suppliers believe a price increase is in order. For 2016, Nourison would like to see a 10 to 20 percent increase but Peykar says a 5 to 10 percent rise would be an acceptable start. "The price pendulum is starting to swing up but not fast enough," he noted.

Cameron Capel, vice president for national accounts at Capel Rugs, reports that the company achieved steady growth by the second half of 2015, and expects 2016 to continue that trend following the response at winter markets.

"Based on the response we got to our new introductions and other products we featured in Atlanta and Las Vegas, we're very optimistic about our business prospects for 2016. We generated good business across the board, as retailers placed orders on a wide variety of new and current designs at both the promotional and higher price points," Capel explained.

Future forecast: Mostly sunny

Kaleen's business is strong, said Blake Dennard, senior vice president, adding "2014 was an outstanding year with sales up 30 to 40 percent and 2015 was close. We expect 2016 to continue to produce increased sales."

Kaleen's strongest price point has moved up from $299 for a wool hand tufted 5 x 8, to $399. "Color and fashion is what convinces a consumer to spend more money and Kaleen is very fashion-forward with soft contemporary styling. "We hope to add a new license in 2016 that will add another aspect to the line," Dennard said.

Price points edge up

The middle price point range does seem to be strengthening a bit. Seth King, vice president of sales at Surya, said, "We're seeing a lot of movement in the $299 - $599 price range for a 5x8. During the past year or so, we've added a number of new hand-tufted and hand-woven collections in this price point, and buyers have really responded well to those offerings. That said, we've also seen the higher end price points gain some momentum in Atlanta and Las Vegas."

Couristan, which celebrated its 90th anniversary at Atlanta Market, saw a significant increase in online purchases and not just promotional goods over the 2015 Cyber Weekend. "We are starting to see growth in hand knotted in the $799 to $899 range and also in 5 x 8 power-loomed rugs. Couristan is also seeing activity in larger sizes such as 8 x 11 hand knotted rugs at $2499 to $2799," said Larry Mahurter, Couristan's vice president of marketing and advertising.  

The average ticket price for independent retailers is rising, although there is still a big market for opening price point rugs, reported Oriental Weavers' Witt. "As Millennials mature, they are not buying $59 and $79 rugs. They are trending to $129 to $149 price points, which is a different level of fashion. There are two somewhat contradictory trends," he explained. "They want something that can stand up, but they also want to be able to swap it out when they are ready to. That's good for the mid-level machine-made rug category."

Jordt commented that for Harounian Rugs International, there has been a swing to better goods and higher price points, such as hand knotted rugs with a suggested retail price of $1100 to $1300 in a 6 x 9.

"The cycle is turning from inexpensive hand tufted rugs that might not wear well to an appreciation for better products that have quality, style and color," Jordt added. 

Growth Channels 

For Couristan, the Internet and catalogs are growing and some multiple chain specialty stores such as Avalon Flooring with 13 locations in New Jersey and Pennsylvania are doing very well with rugs, Mahurter reported. 

Furniture retailers are a growth channel for rugs and the Internet continues to grow. "A lot of brick and mortar retailers are selling as many rugs on their websites as they are in the stores--especially at mid-level price points," Witt added.

Challenges

Area rugs' greatest strength has long been that the category is so diverse with a style, color and price point for just about every taste and budget. But that is also its greatest challenge. With so many suppliers and products, competition is fierce. And, with the loss of many specialty stores during the recession, finding channels to the consumer is also an issue. 

"Rugs are still a challenge for many retailers," Mahurter noted. "Carpet has developed good display systems but rug displays are more limited. And a lot of consumers are looking for a quick change so they want a low price point, but we need to get price points up."

Reaching younger consumers and satisfying them is also a challenge, according to Capel.  "They seem to want to purchase a rug NOW, as a replaceable accessory, not as an heirloom to be kept and passed down."