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Rug vendors keep steady, look for improvements in housing market

RetailersALTHOUGH RUG VENDORS ARE reporting a slight to moderate increase in sales for 2011 and say they are optimistic for the second half, the ongoing housing market problems are keeping the industry essentially stuck in neutral.

But as they recognize that there's no quick solution to this issue, they are continuing aggressive product-development strategies to provide the best looks at the best prices that they can for the consumers who are still shopping.

Alex Peykar, principal of Nourison Rugs, said he expects the second half of 2011 to be "steady with no high expectations - we've had periods of success but not enough to project rug sales will increase dramatically this year."

At KAS, Wendy Reiss, key accounts and manager of sales and marketing, said she is looking for a second-half boost, based on the shipments of the company's products from the winter and spring markets, which she described as "some of the best markets that we have had in the past three years."

"We are forecasting a stronger, or maybe the better way to put it would be more consistent, second half in 2011," Reiss said. "Our shipping of all of our new products from spring markets, our brand new warehouse facility in Calhoun, Ga., and the launch into fall market season has us optimistic."

Other reasons for optimism, cited by Surya Rugs' VP of Sales and Marketing Seth King, are the new channels of distribution, which have helped spur his company to significant growth this year. "I think (the rug industry) is stable, not increasing or decreasing dramatically," King said. "What has changed is the retail channels where rugs have been sold. Historically they were sold through retail stores with inventory. Now product is sold through virtual inventories. These can be e-commerce sites, or stores or designers with special-order capabilities."

Reza Momeni, principal at Momeni Rugs, said that while he is optimistic for the rest of the year, there are still a lot of negative factors that are weighing the industry down.

"Over all, I think the industry is flat," Momeni said. "We had a good first quarter, the second quarter was flat. The reasons are not clear -- we've had the economic slowdown that has been ongoing, gas prices are higher, and home sales are low. And in our business, especially in rug sales, it is driven by new home sales. When people buy a new home they want to decorate it. And also because of the job situation, not many people are moving from town to town or state to state. I think the second half of the year will be better than the first half, especially in our case because we have the introductions from the winter markets, and those products will be hitting the floor. The stores are gearing up for fresh new products."

Cameron Capel, VP of national accounts at Capel Rugs, said sales are up over 2010, but incrementally, so the company is continuing to look for ways to manage costs wherever possible.
Retailers"(We have implemented) cost-cutting measures throughout, and when business does pick up it will serve us well," she said. "We are searching for ways to keep costs down, and prices down, and not pass it all to the consumer."

Price controls are increasingly difficult, though, in this era of high gas prices, increased freight rates and spikes in raw materials costs.

"Pretty much every aspect of a rug's cost is rising; from raw materials to manufacturing to freight to cost of doing business," said King. "These are increasing across the board from U.S. and foreign manufacturers."

There's also ongoing fear about international instability weighing on the marketplace overall.

 "Honestly, I think there is still a lot of fear out in the entire home furnishings industry right now," Reiss said. "A poor housing market combined with uncertainty overseas (in all areas) and shipping rates have many retailers and wholesalers looking for some consistency and some security."

But it's not just about controlling price. Rug vendors are being challenged to improve their businesses in every regard to survive and be well-positioned for success when the long-awaited turnaround comes.

"We have focused on developing our special order programs to help retailers sell more product with less inventory, and improved the effectiveness of our training programs so our internal team, independent reps and sales associates are better prepared to sell our product," King said.

For KAS, the focus is on moving its showrooms to better-attended locations, and "we are studying regional trends and updating all of our tools to stay competitive," Reiss said. "We continue to develop and introduce great new trend designs to stay in front of the retailers and show that we are a leader in what we do."

Momeni said his company is operating "leaner and meaner" and being aggressive with its product development to offer quality rugs at sharper price points that better fit the spending mood of the country. He said the most exciting of these - the Vintage Collection - will debut this month in Atlanta, offering high-end, hand-knotted looks at about half the price.
Retailers"Supply and demand is irrelevant. Demand is not increasing, but we are experiencing increased prices due to increases in raw material and labor costs," said Peykar of Nourison. "We have controlled our pricing to the best of our ability. We continue to invest in infrastructure and have increased production of our power-loomed products.

"Rug sales are directly related to housing. Until the housing sector strengthens, rug sales will continue to be soft. As we wait for the situation to change, we continue to create products that offer the consumer value and are consistent with fashion trends.

At Nourison, the middle price points have been hit the hardest, while low- and high-end goods are performing better, according to Joyce Lowe, national director of rugs for the company. "The new color trend is gray. Transitional borderless designs are also in demand."

Other vendors echo that opinion - it's all about product development and staying on-trend right now.

"We have a new program called Creative Concepts, which is on fire," Capel said. "Customers can design their own rug. It is an easy-care, polypropylene base, with a choice of over 100 fabric borders, or even COM. Borders can be one, two or a mix of three fabrics. We have set sizes, but can also do a custom size.

"In color, gray is strong, and lots of blue - from teals to navy," she continued. "The ikat and suzani-inspired designs are still very popular, as well as animal print designs. In times as this, people tend to gravitate towards traditional patterns and designs, because they are safe, however there is still a great desire for transitional designs."

Grays are working at KAS, too, Reiss said. "(Our best-sellers are) shags, bright colors, grays and sharp price points, but color and design has become more important again, as it should."

Vendors say they are looking ahead to a solid summer market season, and are hoping for the news at retail to improve somewhat after a bumpy May and June.
Retailers "(Stores) are coming to us looking for hot products, and for the July market, we have a few very hot products that hopefully will boost the sales," Momeni said.

Nourison is introducing a new collection of shags called Style Bright, as well as new additions to its Contours, Jaipur and Regal collections, Lowe said.

Capel is adding a lot of new products for the summer season, as well.

"For Atlanta we have seven new collections, or color additions to collections we are introducing," Capel said. "Within the new collections, there are multiple colorways and sizes, especially with the American Originals - made in America items."

Surya has about 300 new rugs planned for summer, but King said the emphasis was on filling niches that the company has been missing, hoping to extend its appeal even further at the retail level.

Peykar described the mood at retail as just that - "moody." "If you visit several retailers in the same city, one may find one to be distressed and pessimistic while another is excited and upbeat," he said. "In general, retailers that are proactive and are continually promoting their business are doing better. Others who hunker down with the attitude of waiting for a turnaround before spending on marketing are not doing as well."

Momeni agreed, saying "retail is still sporadic - some states are doing well, some are still flat or even worse. But the ones who have stayed alive in this recession by being aggressive at advertising, marketing and bringing fresh goods in are doing better than the people who aren't doing anything."

But retailers are tenacious folk, and have learned a lot of lessons over the last few years, King said.

"Although the economy is not getting better at a rapid clip, they feel they have learned enough over the last couple years to survive and possibly even thrive in these conditions."

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