04142016 Rug Industry Surges in First Q 2016; Exec Survey Part 1

The rug suppliers that RugNews.com spoke with for this exclusive survey reported a strong first quarter with positive sales growth ranging from high single digits to about 25 percent. Heading into High Point, the momentum is expected to continue with rug price points inching upward, and growth in large part attributed to e-commerce and the furniture store category.

Winter markets kicked off a good season and the weather cooperated. Seth King, vice president of sales at Surya said, "We had great turnout during the winter markets, which definitely helped to spur sales. I think the milder winter in many parts of the country also contributed (to better sales)."

Larry Mahurter, vice president marketing and advertising at Couristan, reported, "We are up 20 percent to 25 percent across all segments -- hand mades, machine mades and outdoor rugs. The current trend to hard surface flooring in homes is good for the rug business," he added. 

"Amer Rugs is coming off the best first quarter in the company's history: We're currently ahead in six measurable categories with national accounts, ecommerce, and furniture stores performing extremely well," stated Joe Barkley, company vice president of sales and marketing." 

"The first quarter has been very strong for us," reported Jonathan Witt, senior vice president at Oriental Weavers.  "We were fortunate to put together some strong programs with retailers in the fourth quarter that hit stores in Q1 -- and of course, the outdoor category is a huge sales driver for us every spring."  Witt pointed to continued strong growth in the catalog and ecommerce channels, adding, "Furniture retailers are also showing nice comps in Q1."

Furniture, e-commerce fuel growth

"Home furnishing stores in general have been the bright spot of our business," noted Steven Peykar, Nourison co-CEO.  "We are finding that furniture stores with dedicated rug departments in their stores and a designated buyer for the department are having great success,"Â?Γ?╟▄?Θ?Ñ Peykar explained. 

"The consumer seems more comfortable purchasing area rugs where they buy their furniture and, provided the sales staff is well trained and knowledgeable about rugs, the customer will purchase an area rug to finish the room," he said, adding, "In general, stores that offer a variety of products and are driving traffic into their stores tend to be trending up in their sales of area rugs."

E-commerce is also growing for most suppliers. For Couristan, the greatest activity is from catalogs and ecommerce. "There is no stopping the online business, especially from rug specialty sites such as Rugs-Direct.com and RugStudio.com as well as home furnishing sites like Wayfair.com," Mahurter said. "We are also seeing some sales from Mom & Pop stores that are getting back into rugs, as well as chain stores like JC Penney. But the greatest volume is from online and catalogs," he stressed. 

Capel is bullish about its business with brick and mortar stores, said Cameron Capel, vice president of national accounts, noting that Internet sales are growing and very important to the company. "Bricks and mortar store locations are the biggest for Capel, with furniture stores doing especially well," she added. 

Designers and to-the-trade showrooms are working for some suppliers. Seth King at Surya reported, "We're seeing strong sales momentum and growth across all of our channels, in particular in the design side of our business, which has been gaining a lot of traction this past year."

Prices vary by rug category and channel 

Considering that area rugs can be machine made in synthetic yarns or hand made in a variety of natural fibers, or any of a host of other construction and material combinations, there are a wide range of price points. OW's Jonathan Witt noted, "It really depends on the channel, but in general terms, everyone seems to be looking to raise their average retail ticket price."

"At Safavieh, the most popular price points are now in the range of $200 to $800 as more and more people discover that beautifully styled area rugs are well within their decorating budgets," said Arash Yaraghi, Safavieh principal. "We are creating high quality, fashion-forward designs, colors and finishes at this price level.  This equates to an affordability factor for consumers that has been a wonderfully successful recipe across the board."

Capel is seeing increased pricing. Cameron Capel said, "We have been able to up these (prices) over the past year, which is fantastic. It means more margin dollars for the retailer, so they love it. At wholesale, our new tufted $375 Izmir collection had been well received; and for hand knots, wholesales at $699-$899 have been fabulous sellers as well." 

Michael Ackelbein senior vice president global sales at Feizy said first quarter sales results exceeded expectations, with an increase of 20 percent year over year. "Furniture and to-the-trade are delivering the highest engagement level and sales results. Ackelbein noted that best-selling prices fluctuate depending on the dealer, "But in general the $399 to $799 retail price range seems to be a sweet-spot for us."  

Couristan offers a wide variety of products and prices, starting with flat woven outdoor rugs that are popular in an approximate 5x8 at $129 retail, Mahurter said. "And we are seeing a lot of action in power loomed polypropylene styles retail priced from $219 to $299 in a 5x8," he added. "Power loomed in wool are selling at about $380, while handmade rugs cover a wider range from $499 to $1200 in wool or some blends with other fibers including viscose and bamboo." 

The sweet spot drives volume

Entry-level and mid-priced rugs are in demand, as many rug suppliers surveyed by RugNews.com reported. According to Santhi Yarlagadda, vice president, business development at Kas Rugs, $299 is the most popular price point today.  "$299 seems to be a sweet spot, but we see a fair amount of $199 and also more and more $399-plus retails being sold," she explained. 

Blake Dennard, senior vice president at Kaleen, observed, "Synthetics are in demand at $299 in a 5x8, including handmade polypropylene outdoor styles." The next most in demand for Kaleen is its handmade wool collections, retail priced at $399 in a 5x8 as well as $599.

LR Resources, which experienced an uptick in Q1 sales of 15 percent over the period in 2015, reports its most active price point is $299 at retail in a 5x8, according to Mike Thompson, vice president sales and general manager for the company. "We have had a great start to the year with our introduction of some machine mades, and Kareena, a collection of Indo-Oushaks, as well as the continuing growth of our Naturals collections," he said.

Surya consistently does very well with rugs in the $199-$299 range. "At that price point, a consumer can get a high quality, fashion-forward rug without making a substantial financial investment," King explained. "Also, many consumers want to update their rugs and accessories every few years or change up their look to reflect the latest trends, and mid-priced rugs make that easier."

Spanning the price spectrum

For suppliers with a wide range of rugs, popular price points can be at both ends of the spectrum. "At Nourison this is a story of two worlds," said Peykar. "In terms of units, 5x8 rugs that retail from $299-$599 drive the most unit sales. In terms of total dollar sales probably our biggest selling products retail for $899-$1299 in that size."

Jaipur Living is seeing very strong interest in its tufted collection priced in a 5x8 in the $500-$700 retail price range, as well as its Natural construction in organic fibers including jute and wool priced at retail at $200-$300 in 5x8s, according to Asha Chaudhary, president of the company.

At Amer, which concentrated on hand-knotteds until entering the hand-tufted and hand-loomed categories in 2014, Barkley noted, "the average price points are higher than at many other rugs companies: $499 to $799 are the strong retails for us."

Known for its high-end assortment, Harounian Rugs International's most popular suggested retail range for a 6x9 has been hand-knotteds at $859 -$2,299 according to Greg Jordt, executive vice president, sales and marketing at HRI.  "We've experienced a fantastic trend of double digit increases since expanding our assortment past traditional and into transitional designs. Our first quarter has been terrific, and we could not be more positive about the balance of 2016," Jordt said.