15445 Fri, 10/17/2008 - 2:26pm
By Jessica Goldbogen Harlan
As rug manufacturers head to High Point, they’ll be focusing on how best to service what many of them consider one of their fastest-growing retail channels: furniture stores.
While some rug suppliers have closed their High Point showrooms, others count this market as an important place to do business.
“Furniture retailers have been a nice area of growth for our industry,” said Charles “Bud” Young, vice president of marketing for Capel Rugs. He estimates that area rug sales in furniture stores has increased from about 7 percent to around 12 to 13 percent in recent years. And the relationship is symbiotic: “Rugs continue to be a saving grace for home furnishing stores,” Young said. “They might be weak in furniture sales, but categories like rugs are still popular and the margins are good.”
High Point is “our best market,” said Seth King, vice president of business development for Surya. “We’ve always marketed our product toward furniture stores, so we get a good draw at the show.”
But Austin Craley, vice president of sales for Momeni, has “moderate expectations” for High Point and is concerned that the tough economic conditions will keep attendance lower than usual. But he’s looking on the bright side: “We’ll have extra quality time to spend with those retailers who do attend,” he said.
Like other industry players, Craley sees the furniture retailers as an important segment for his business. While longtime exhibitors such as Couristan have pulled out of the show, Craley says it is crucial for Momeni to attend the market.
“We will not only be seeing a number of key current accounts, but also continuing to grow our furniture channel of business, which has been one of our fastest-growing channels the past few years,” Craley said.
His company’s focus at High Point will be on identifying ways to grow the business for the retailers. “By meeting with them at market, we can come up with more ways to have them succeed during the fourth quarter and into 2009.”
Meanwhile, Steve Mazarakis, president and chief executive officer of Hellenic Rug Imports, said, “Although this year has been a struggle for all industries, we expect High Point to be a great success,” depending on the state of the bailout plan, which passed a little more than two weeks before the market.
“We are seeing more buyers get rid of the old and focus on the new,” Mazarikis continued. “In hard times like these, buyers need to see the value more so than ever.” Hellenic is addressing this need with a 2-foot-by-3-foot rack program, which allows retailers to showcase 100 new styles and patterns with minimum expense and minimal floor space.
Alex Peykar, company principal for Nourison, expects caution to be the overriding attitude at High Point.
“Buyers do normally gravitate toward new product, but established stores will likely replenish their assortments with new designs from proven best-selling collections,” he said.
With that in mind, Nourison’s emphasis is on working with consumers to plan cost-effective assortments and helping them sell through with coordinating products, custom rugs and a wide range of sizes.
There’s no doubt that much of the water-cooler conversation at High Point Market will focus on the fourth quarter and the political and economic issues that will affect it.
“Despite poor market conditions and low new-construction figures, our entire year has been less disappointing than expected, led in part by excellent growth in our broadloom division,” Peykar said. “We are, of course, watching the nation’s economic situation closely, but we remain optimistic about an eventual turnaround in the housing market.”
Kaleen, too, has good initial news to report about its fourth-quarter sales. “We have been very pleased with our current activity and are optimistic that our positive trend will continue through the end of the year,” said Joe Barkley, executive vice president.
Young of Capel estimates that his company will see around a 5 percent increase in sales for the fourth quarter.
“It’ll be a struggle,” he admitted. “We need to be sharper and more aggressive in our approach to bring customers into the galleries.”
Young pointed out that the election and the economy could have either a beneficial or detrimental impact on the rug category.
“The election definitely keeps some consumers from focusing on the home furnishings business, and you’ve got a lot of instability on new home starts, which does affect the home furnishings business,” he said. “Fortunately for rugs, sometimes in lieu of a new home, they’ll spend a little money redecorating, and rugs are a rather inexpensive way to change the looks of their home.”
Said King of Surya, “We have high expectations [for the fourth quarter] but we know it’s rough out there on retailers. If their business is slow, ours will be slow.”
King’s main concerns include the frequent fluctuations of material prices, and the rising cost of freight. “Freight costs have probably increased 20 to 25 percent in the last year,” a cost that retailers have to absorb.
Continued price pressure from overseas is Momeni’s biggest challenge, Craley said. “The price we need to pay for our fine-quality rugs has been rising rapidly for the past few years, and we’ve only passed along one moderate price increase in that time,” he said. “The only way to keep the weavers in the factories with all the expansion in China and India is to pay higher wages, which together with increases in raw materials, freight charges and exchange rates, will continue to force prices higher in the months ahead.”
But other rug makers say that the best way to survive the current economic situation is to help retailers with their specific needs.
For instance, Abbyson introduced an interactive CD brochure that allows retailers and designers to create PDFs, cut sheets and more, said Yavar Rafieha, vice president of marketing. The CD is part of the company’s efforts to be more efficient and environmentally responsible.
Adds Barkley of Kaleen, “Our retail partners are terrific merchants that are still looking for new and innovative products that represent a great value for the consumers. Our job is to continue to show products that satisfy their assortment and margin needs.”