By Andrea Lillo
As companies prepare for a tough start to 2009, rug manufacturers still remain optimistic about how this category could perform later this year, with some thinking business could pick up eventually.
But they are also realistic, and say the retail environment is challenging. Consumers are still wary about spending, and the floor coverings priced at the lower end are the drivers now, vendors said.
With the new presidential administration now in place and the planned incentives and money to be invested into the economy, Lee Harounian, president of Harounian Rugs International, believes that “within the next three to six months, business will come back,” he said. “When the consumer confidence is there, things will pick up,” he said.
“I’m always optimistic,” said Joe Barkley, executive vice president of Kaleen. “There’s not a single decorative floor covering company that has more than one percent market share, so we have to work harder.”
Already, the January market in Atlanta was “outstanding,” Barkley said. It’s “got us off to a good start.”
However, “The consumer is becoming much more discriminating,” Barkley said. “At least for right now they are sitting on their wallets until they see something that really motivates them.”
The low- and high-end priced rugs are what’s selling now, Harounian added, while midpriced product saw “hardly any sales.”
“The customer is trying to find the cheapest deals,” Asha Chaudhary, chief executive officer of Jaipur, agreed. “The stuff that’s price point driven is moving better than the mid to high end.” Jaipur added its tufted business about a year ago, she said, and there is growth in that area. However, “I don’t think there will be any major growth in any category this year,” she said.
“Everything revolves around the economy and the impact it has on each retailer,” said Seth King, vice president of sales for Surya. The company expects its rug business to increase slightly, but at a slower pace than its lighting, wall decor and textiles. “One of our challenges is to make sure our customers do not lose confidence in their ability to be successful in a down economy,” he added. “I have read about many customers who want to hunker down and control costs and inventory, which definitely makes sense—but we hope these customers don’t completely close out new ideas.”
Alex Peykar, president of Nourison, is encouraged by a recent report that area rug sales are expected to increase by 12.6 percent over the next five years. According to estimates made by New York-based Easy Analytic Software Inc., area rug sales are projected to grow from $5 billion in 2008 to $5.6 billion in 2013.
Nourison has also launched two merchandising solutions—the Rug Boutique and Fifty-to-Infinity programs—that are “designed to maximize our retailer partners’ profits by vastly increasing their offerings of available designs, shapes and sizes in a minimal investment of space, while simplifying and enhancing the customer experience,” Peykar said. These displays and the company’s inventory will open additional markets for the company, he added, through lesser tapped distribution points, and thereby “enlarging the overall market for area rugs.”
“Even though market experts anticipate sales to remain slow through most of 2009, I still feel there is viability in the rug segment,” said Elise Demboski, industry public relations/marketing consultant for such companies as Wools of New Zealand and Karastan. “People may not be buying new homes or tackling large remodeling projects, but they are interested in finding affordable ways to spruce up their interiors,” and there are opportunities to entice consumers with spring sales, financing options and at-home decorating services.
“The upside of the down economy is the opportunity it affords manufacturers to strengthen relationships and promote their products,” Demboski said. Additional financing options, Internet selling/promotional tools, and more salable display systems are a few ways to help “lift sales,” she said. “The quiet environment gives even a whisper of marketing effort a louder voice.” — Jennifer Alexis contributed to this report.
