Area Rug Report: Rug retailers must adapt to compete

By Calista Sprague

Over the last 20 years, developments in machine-made rugs, inexpensive imports and hard surface flooring sales have helped drive the area rug business, which has been good for manufacturers, but rugs are still too often a losing proposition for independent flooring retailers. 

Not only do area rug retailers have to compete with the comparatively huge inventory and rock-bottom prices available at big box stores and on the Internet, but they also have to deal with a consumer base that prefers to one-stop shop and craves instant gratification. On top of that, retailers of area rugs need to stay abreast of the latest developments in fibers and construction, and they need to follow all the trends in color, design and interior decor to ensure that they’re stocking rugs that are going to sell. 

Despite all the challenges, however, some independent retailers continue to thrive, having cultivated a winning combination of quality service and unique offerings.

HEIRLOOM VERSUS MODERN
On the higher end of the rug market, where you find the hand knotted heirloom rugs woven of natural fibers, retailers are engaged in an uphill battle, educating consumers about the long-term value that these luxury goods possess.

For hundreds of years, hand knotted wool rugs have been passed down from generation to generation, and quality antique rugs now fetch handsome prices. However, advancing technologies in the construction of machine-made rugs have made rugs affordable to everyone, opening up vast new markets. And many of these new consumers don’t know much about rugs, including fiber types and the various constructions and weaves, and how they impact quality and durability. Instead, most of today’s shoppers have a tendency to look only at design and price.

Valerie and Sam Roberts have been in the flooring business for over 30 years and have sold area rugs for 20 of them. In addition to Roberts Carpet and 

Fine Floors with several locations in the Houston, TX area, they own Dazzling Decor Rugs and Accessories with a full range of area rug options. 

“Unless someone is in the design field, they don’t typically know the history of rugs,” Valerie Roberts explains. “But I find that many are interested in learning.” Knowledgeable retailers take the time to educate their customers about rug construction so they can make informed decisions, whether that ultimately means purchasing a machine-made polypropylene rug or a hand knotted, wool heirloom rug. 

“There have certainly been improvements in technology, and we’re able to offer less expensive rugs still at a beautiful look,” Roberts says, acknowledging that not every person’s budget or lifestyle lends itself to the highest quality rugs. “But even with modern technology, we can only emulate the handmade creations. We can’t replicate them.”

Miriam Thompson and her husband Mike opened The Rug Rack in downtown Chattanooga 14 years ago. Her husband worked for Shaw for 16 years, and she brought a background in custom window treatments, so they blended his knowledge of rug construction and sales with her knowledge of color and design. They began with an inventory of machine-made goods and worked their way up the learning curve to hand tufted and eventually hand knotted goods. 

“We also see people who want the new hand knotted rugs and those styles that can only be achieved or accomplished through the hand knotted weaving,” Miriam Thompson points out. “In order to get that very, very soft neutral, pale, pale blue and grey with ivory, it requires a silver wash or a white wash. There’s a big market for that. And there’s only one type rug for that—and that’s the Peshawars or Chobis.” 

New colors and techniques help attract younger customers to heirloom quality rugs as well. “We’re seeing some of the handmade rugs being stone washed, which is a new technique, or using bold colors,” Roberts says. “It gives us several fresh looks, still with the handmade technique.”

Thompson notes both generational and regional gaps in appreciation for heirloom rugs. “It depends on where you grew up. There are certain regions of the U.S. where more people have grown up on Oriental rugs than other areas of the country, and of course you’ve got the generations that grew up on carpet.” 

She reports that a friend who sells rugs in the Northeast has recently enjoyed a significant uptick in demand for older rugs. In the South, Thompson sees a split. She says that some young people don’t want what their parents had, but others, especially older millennials, show more of an appreciation for higher quality rugs.

According to Thompson, customers need to be educated, not only about the value of heirloom rugs, but also about how rugs fit into interior design. 

“One of the things that concerns me a lot is the trendy side of the rug business,” says Thompson. “People say, ‘I like to change out my decor, so I don’t want to put a whole lot of money into it.’ A lot of those rugs are just going into the landfill. It speaks to the throwaway mentality of our economy.” Thompson believes designers and retailers have a responsibility to steer consumers toward more durable rugs with a timeless look, reserving the trendy colors and patterns for smaller throw pillows and accessories. 

RUG INDUSTRY CHANGES
Within the past five years, retailers of imported area rugs report troubling changes in the hand knotted rug industry. There are fewer traditional weavers and they’re producing fewer rugs. And lesser quality fibers are finding their way into rugs once exclusively made from natural fibers.

Many hand knotted rugs are made in Turkey and South Asia, and much like their Western counterparts, the younger generations there are shunning the traditions of previous generations. “Many of the techniques are dying out due to loss of weavers and increased expenses,” Roberts says, “but I don’t believe it will ever totally die out. It will just change.”

One of the recent changes is a shortage of rugs on the larger end of the spectrum. “We’re no longer finding those very, very large rugs like we used to find,” Thompson says. “So many of the weavers want to be paid sooner, so unless it’s a custom job where they get a deposit up front, they’re not going to spend their time weaving those rugs. But the majority of the public now does not want to wait a year for that 12’x18’.”

Another major change in handmade rugs in recent years concerns fibers. Silk is becoming harder to obtain, and viscose, a rayon filament, has become a substitute, although an inferior one. Rayon is a manmade fiber derived from cellulose, but, like synthetic fibers, it takes a great deal of energy and water to produce.

“Frankly, I’m really, really concerned over all of this viscose coming in,” Thompson says. “People are buying hand knotted rugs for their sustainability, and viscose is not a sustainable product. I’d like to see the hand knots stay pure, if you will.” 

Unlike silk, viscose fibers do not hold dye, so they may fade or bleed, and the fibers can yellow when wet, causing irreversible discoloration on expensive rugs. Viscose filaments are also fragile compared to wool and silk. Some reports suggest that wool fibers can be bent up to 10,000 times without breaking and silk 2,000 times, but viscose breaks after bending only 70 times. 

To keep up with changing tastes, some makers of handmade rugs have introduced new colors and less intricate graphics. “From geometrics to damask, transitional designs are continuing to increase in popularity,” Roberts notes. “And with the optimistic 2015 forecast, we are also seeing requests for more vibrant colors, such as teals, yellows and pops of corals, to create a cheerful ambience.”

RETAIL SHIFTS
Rug retail business, along with retail overall, has changed dramatically in recent history. In the shadow of big box stores and the Internet, many of the local rug retailers who have managed to maintain a foothold have done so by expanding their inventory to include more than just rugs. 

At The Rug Rack, Thompson carries custom drapery and accessories to complement the rugs. “A lot of times we purchase our accessories with particular rugs in mind to get that add-on sale.” She says that people have only so much time to spend decorating, so offering decor that coordinates with the rugs saves them time. “A lot of area rug dealers I have spoken with have had to bring in a product mix in order to stay alive,” she says.

Roberts offers furniture, lighting, mirrors, wall art and tabletop accessories at Dazzling Decor Rugs and Accessories. “People don’t just go buy a rug by itself,” she explains. “They’re furnishing their house, and it’s important to be able to provide them visuals and options.”

More rugs are sold at furniture stores than at flooring stores, which may seem counterintuitive, but Roberts says it’s all about the visuals. “With rugs, visuals are an important merchandising tool that come naturally in a furniture store.” Furniture stores, she explains, show how rugs coordinate with furniture and accessories in vignettes throughout the store. Flooring stores, however, typically don’t have the space or furnishings to show rugs in multiple vignettes. 

The concept for Dazzling Decor came from the furniture store model, combining area rugs with furnishings and accessories. “We’re kind of a rug store with furniture versus a furniture store with rugs.”

While extensive inventory and competitive pricing tend to be the driving forces behind the shift from local shops to big box stores and Internet outlets, Thompson cautions that much more is at stake. “There are some products sold online that look great, but once you start talking to someone who knows the business, they can save you a lot of money in mistakes,” she says. 

Roberts agrees that the Internet has its limitations. “On the Internet you can see design, but you can’t really see quality or coloration,” she explains. “We find that our customers use the Internet to do their research, but come into the stores to get the service and the education. That’s where a brick and mortar store has the advantage.”

Thompson points out that local retailers carry a unique selection as well. “We have a lot of one of a kinds, things that you can’t find online,” she says. “These local businesses are where you find the people who are going to be able to run down that special Oushak, that unique Turkish Bessarabian. How sad is it that we’re only going to have big box stores and big chains to shop in down the road? I just hope that people don’t wake up too late.”

Wholesalers who do not hold Internet sites to the MAP line have caused ongoing issues for retailers. Thompson mentioned losing two sales to a customer who shopped in her store, but then bought on Wayfair.com for prices below MAP. As a result, she has begun sourcing hand knotted rugs from overseas that Wayfair doesn’t carry. “I have just recently purchased rugs that are very, very beautiful wool Wiltons,” she says. “No, they are not American made, but the price point is very good.” 

Thompson prefers to buy American and one of her go-to domestic suppliers was Shaw, which shuttered its machine-made rug operation at the beginning of 2014, investing instead in LVT and leaving a sizeable hole in the American rug market. “When Shaw decided to stop making rugs, that was just an incredible disappointment,” Thompson laments. “They did several things in the way of style and construction and size that other companies still have yet to offer. It causes us to have to really hunt for those types of products.”

It’s worth noting that there are several domestic rug producers offering a range of machine-made rugs. Shaw was the fourth largest domestic producer when it exited the business, with sales in the neighborhood of $100 million, while Mohawk, Maples and Oriental Weavers have combined domestic sales of about $1 billion. Other domestic mills include Orian, Dalyn and Caples. Several carpet mills, like Dixie’s Masland, also make rugs. 

However, many of these mills also sell products through discount sites like Wayfair.com and Overstock.com, and occasionally at prices below MAP. “If these wholesalers don’t support us brick-and-mortar stores, then we’re doomed,” one rug store owner recently asserted. 

Despite the popularity of discount sites, Internet sites cannot compete in the realm of customer service. Consumers who buy rugs online don’t get a chance to hold paint and fabric swatches against the rugs prior to the sale, and returns can be difficult and sometimes costly. Local retailers, however, make returns and exchanges relatively simple and even allow customers to take rugs out on approval. “We encourage it because everybody’s lighting is different,” Thompson explains. “If a rug is not going to work, nine times out of ten it’s going to be due to the lighting being different in my store.”

The Internet can also help traditional retailers by driving consumers into brick-and-mortar stores. “We often get referrals from our websites or from our vendor websites, and we find that the Internet has become a great tool for reaching a larger population, although I probably wouldn’t have said that when we first started,” Roberts says. “People need advice. They need assistance, and that’s where a brick-and-mortar store has the advantage.”

Related Topics:Masland Carpets & Rugs, Mohawk Industries, The Dixie Group, Shaw Industries Group, Inc.