The challenge in selling area rugs is space, so it is to be expected that channels with floor space to spare are strongest in this category. Overall sales in area rugs for 2005 of $5.2 billion are expected to increase slightly more than 3% to $5.4 billion in 2006. Americans' love affair with hardwood and tile floors continues, and the area rug market fuels the romance with attractive designs at the high and low ends of the market.

The megastore spaces of discount department stores/off-price retailers and home improvement centers/warehouse membership clubs allow the two to control nearly half the market at 46%. The biggest share of that is the one-third of the market sold at discount department stores/off-price retailers to the tune of $1.8 billion in 2005 and an estimated $1.9 billion in 2006. The likes of Lowe's and Home Depot, Costco and Sam's Club account for 2005 sales of $640 million expected to grow to $685 million in 2006.

Those two channels are the only two expected to grow at a rate greater than the category's 3.2% estimated growth. Expected to lose market share are department stores, home accent/gift stores and floor covering stores. The number of floor covering stores, according to the U.S. Census of Retail Trade, declined 8% between 1997 and 2002, a trend that continues.