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10182016 Retail Insights: Rugs Direct's Winning Formula Garners Double-Digit Growth

10/18/2016

RETAIL INSIGHTS: RUGS DIRECT'S WINNING FORMULA GARNERS DOUBLE-DIGIT GROWTH

Rugs Direct's executive team includes (top row from left): co-owners David Craig, CEO, and Randy Kremer, president; Bill Martin, executive vice president and chief merchandising officer.  Second row: Greg Culler, chief information officer; Rex Creekmur, marketing director. Right: Rugs Direct's single storefront.

 

WINCHESTER, Va. -- When Rugs Direct started in 1998, consumers were gun-shy about buying rugs and other home furnishings online, wanting instead to be able to touch and feel their merchandise before bringing it home.

Still, David Craig, then a Carpet One dealer, wanted to dabble in what he saw as the growing opportunities in online retailing, and decided to take his chances at selling rugs on the internet.  The gamble paid off, with the company citing double digit growth for several consecutive years including 2016, and industry statistics pointing to solid increases in online rug sales among all demographics. 

"Dave knew he could ship rugs sold online because of their weight and size," recalls Bill Martin, executive vice president and chief merchandising officer. Martin, a former rug industry sales representative, joined Rugs Direct 13 years ago. He's part of an executive team that includes Craig as co-owner and CEO; Randy Kremer, co-owner and president; Gregory Culler, chief information officer; and Rex Creekmur, marketing director.

Craig was onto something two decades ago, and today, consumers buy rugs online without a second thought. Rugs Direct has grown from a few racks in the back of that Carpet One storefront (now closed) to an assortment of more than 180,000 SKUs. And while the privately-held company does not disclose annual sales, it has been named one of the top 500 e-commerce sites by Internet Retailer. 

Martin says there are plenty of advantages to being online-only. "The big advantage is, you don't have to carry stock," he says. "We order directly from the manufacturer to the consumer. We also have a larger audience," he says, pointing out that brick and mortar retailers are limited to those within driving distance of their stores.

 "There is no merchandise mix. We have everything."   -Bill Martin, Rugs Direct
 
He adds that Rugs Direct can be more nimble than a physical retailer, changing merchandise quickly, offering last-minute deals, and adding new products. The company has worked hard to take leadership in search engine results, and usually ends up in one of the top few spaces in Google, Yahoo and Bing.
 
HIGH TECH / WHITE GLOVE
 
But the retailer makes sure that it offers some of the niceties that a physical store offers. For instance, customers can call and speak with a live customer service associate Monday through Friday, in addition to using an online chat function. Carriers are contracted across the country to offer white glove delivery services, bringing in the rug, unwrapping it and unrolling it in place, and removing the packaging. A price matching program offers a 10 percent discount over a matched price that a customer finds elsewhere online.

Finally, Rugs Direct also has a generous return policy: "If you get it home and you don't like it, you can ship it back to us within 30 days," says Martin, though the customer does have to pay for return shipping (shipping to the customer is free). Although he wouldn't divulge specifics about how many rugs are returned, he says that the percentage of purchased rugs returned is in the single digits, compared to returned furniture, which is in the 20 percent range.

LIMITLESS ASSORTMENT
 
Because it's an online retailer and does not have to maintain inventory, Martin says Rugs Direct is able to have a limitless assortment. When asked about the company's merchandise mix, he says, "There is no mix. We have everything."  When the company decides to work with a supplier, it is able to take on every product within that manufacturer's assortment. The company won't add new vendors if there would be significant overlap with something already on its site, however. While they don't offer private label collections, Rugs Direct does do some proprietary labeling.  
 
Having such a broad assortment is not without its challenges, though. "One thing we're trying to do is figure out the best way for consumers to [navigate and] digest 180,000 SKUs," says Martin. The format of the website helps customers narrow down their options quickly.  
 
The online retailer immediately guides consumers through the rug buying process with homepage links to a Super Sale, top style categories, best deals, and more. Below, search filters further narrow choices .

Because of the wide range of products, and the broad breadth of customers, Martin says it's difficult to pinpoint trends in what's selling best. He says that traditional styles are a big category for the site, and color-wise, customers are also rather traditional, with blues and reds topping the list. "Our customers don't tend to be cutting edge," says Martin. "If Pantone has the hot color, that's probably not going to sell really well for us."

CHANGING RUG INDUSTRY

After nearly 20 years in the business, Martin has some perspective on the changes within the rug industry. He says the biggest change is the scope of offerings from suppliers. Two decades ago, "Most rugs were wool, and hand-knotted was a big deal," he says. "When I got in, it was just the start of the synthetic revolution, and that has really grown. Polypropylene, olefin, cotton, and viscose -- those weren't used a lot in the rug business, but now they are everyday product." He also notes that the average price of rugs has gone down as efficiencies were made at the mills; loomed products are half the cost of what hand-knotted and hand-tufted products would cost. 

LOCAL STOREFRONT

Rugs Direct isn't all online: it does have one physical store, at its Winchester, Va. headquarters. It was originally opened because "we needed the legitimacy of having a retail store," says Martin, at time when manufacturers were skeptical of selling to online-only retailers. Today, that store stands on its own, stocking merchandise that's on trend for the area, which is about an hour west of Washington, D.C.


Rugs Direct operates a brick and mortar store at its Winchester, Va., headquarters. 

 

 

VENDOR PARTNER AWARDS 

The retailer is known for its awards program, with winners names kept under wraps until presentation at markets to vendor partners. The program was developed as a way to thank the vendors for the hard work they put in. "So many times the business is all about, 'what can the vendor do for me' [the retailer]?" says Martin. "People often get the complaints, but very few get the complements. It was an idea we had one day, our way of acknowledging that we know that they do a good job for us. Does it help our business? I don't know, but hopefully it shows we at least appreciate our vendors. It shows it's more of a partnership than a one-way street."

DOUBLE DIGIT GROWTH 

Looking ahead, Martin says that Rugs Direct aims to continue its growth pattern, which has been in the double digits over the past few years, and even setting records for a couple of those years. As far as expansion into other categories, he doesn't rule that out. "I can't say there's a specific thing we're looking at, but we're always keeping our eyes open for something that either complements it or grows Rugs Direct in another direction," he says.
 
 
The Rugs Direct buying team, photographed at a recent market, includes Randy Kremer, Adrienne Wooddell, Bill Martin, and David Craig.

 

 

Editor's Note: Winners of the 2016 Rugs Direct Vendor Partner Awards published by RugNews.com in July are: Partner of the Year award to LoloiVendor of the Year to Oriental Weavers; Sales Rep of the year to Surya

 

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