Area Rug Update - April 2013

By Darius Helm

Area rugs are unique among flooring options because they are the only floorcovering designed to go on top of a finished floor. As such, area rugs can on the one hand be among the first items cut from a tight household budget and on the other hand can serve as a low cost alternative to replacing an old or outdated floorcovering.

The latter is especially true these days with the falling price points seen during the recession, with entry level items starting at well under $100 for a 5’x8’—mostly for machine made polypropylene rugs. Large discount chains and home centers fared particularly well during the economic slowdown, due to their buying power, their increased traffic when people are pinching pennies, and their ability to carry inventory.

The good news is that in the last year retailers have reported that higher price points are beginning to move again. With the economy starting to grow, there’s increased activity at price points like $600, where high quality machine made rugs meet the lower end of handmade imports. Flooring specialists and furniture stores both report growth in area rugs sales.

The big threat for retailers continues to be Internet sales. Rug specialists like AreaRugs.com, RugsUSA.com and many others compete with online chain and home center operations and even full spectrum online retailers like Amazon and Overstock.com.

Rugs are tactile, which ought to be a hurdle for online sales, but consumers are embracing buying products online at such a staggering pace that it looks like the sheer momentum of the channel may sweep up everything in its path. Furthermore, convenient return policies make it easy to return unsatisfactory products. It’s almost like window shopping at home; the deal is only really closed when the consumer decides not to ship the product back.

The risk is that, if consumers start to rely on the Internet for buying products that have traditionally required being experienced in person as a necessary part of the purchasing process—if they start to prioritize the ease of the shopping process over their passion to find the best product—then the brick and mortar channels may find themselves more vulnerable than ever and decide the category isn’t worth the investment.

As varied as the channels—and the products themselves—are the area rug producers. Many of the big players, like Shaw and Mohawk, generate most of their revenues from their machine made rugs, and they’ll import handmade goods. Others focus exclusively on manufacturing partnerships, which enable them to scour the globe for the best prices and best design capabilities. And there are a few players that do a good business with broadloom rugs, bound in various ways. Below is a sampling of mills that illustrates the variety on the manufacturing side.

PRODUCER SPOTLIGHTS
One of the most prominent American made area rug brands is Karastan, which has a history that goes all the way back to the mid 1800s and Marshall Field, widely acknowledged as the creator of the department store concept, shifting the model from “buyer beware” to “the customer is always right” (Field came up with that phrase). In his search for quality differentiated product, he ended up producing his own area rugs, and in 1928 that endeavor was named Karastan Rugs.

Karastan is best known for its machine made rugs made of fully worsted wool, but it also makes rugs using nylon. As a testament to the strength of both the brand and the design, Karastan’s number one selling product, called 717, was first introduced in 1938. The firm still uses Axminster machinery for its top of the line products, though most of its products are made on Van De Wiele looms.

Karastan targets the higher end of the market—its wool rugs retail from $700 to $1,200 for a 5’x8’, and nylon rugs average around $500—and most of its products are sold through furniture stores, along with independent flooring retailers, department stores and some Internet sites. None of its products are sold in big boxes or discount chains.

However, over the last 24 months, Karastan has changed the way it goes to distribution, dropping requirements like minimum buy-ins, which has enabled the brand to penetrate mom and pop furniture stores and flooring retailers.

Momeni, another major player in the U.S. market, owes its success to a strong family tradition. The firm was established in New Jersey in 1975 by a Persian family with a deep understanding of rugs. The firm started off specializing in Persian rugs, but quickly branched out, and now it offers a wide range of contemporary, transitional, tribal and classic designs. Most of its product is wool, but on the machine made side the firm also offers polypropylene rugs, and polyester in shag and handhooked constructions.

Momeni doesn’t have its own manufacturing facilities. Instead, it has manufacturing partnerships in India, China, Turkey and Egypt, and gets some stock goods from Pakistan. All told, the firm has about 70 collections, with about 2,000 SKUs running all the time. Its main warehouse is in Atlanta.

Momeni’s price points range from $199 for machine made rugs all the way up to $1,499 for its best hand-knotted products. The bulk of its business is in the $399 to $499 range—both hand-tufted rugs and higher end machine made rugs. The firm sells through all channels, including furniture stores, department stores, catalogs, Internet accounts and home centers.

A couple of years ago, Momeni got into the broadloom business with a range of wool carpets including Wiltons and flatweaves, targeting the higher end of the market through design centers in metro areas and high end carpet stores, including members of CCA Global’s International Design Guild. And last year the firm introduced its custom made area rug program, with handmade products from Nepal, hand-tufted goods from Mexico and flatweaves from India.

Shaw Living, Shaw Industries’ rug division, manufactures in-house a range of machine made rugs in polyester, nylon and polypropylene, as well as higher end Wilcom tufted wool rugs. The firm sources handmade rugs made of wool, polyester and viscose blends of both. A growing category for the firm is indoor/outdoor rugs, handmade and machine made out of polypropylene. The bulk of the firm’s products retail from $199 to $399 for a 5’x8’.

Like Momeni, Shaw targets most channels, including independent flooring and rug retailers, big boxes, mass merchants, furniture stores and national furniture chains, and the Internet. Big boxes and mass merchants have exclusive products for their stores, typically at opening price points.

The firm’s running line products are sold through furniture stores and flooring and rug dealers in a good, better, best assortment across various constructions and styles.

Shaw Living has for a long time been a leader in licensed products. And though the pace of licensing has slowed across the industry, Shaw has maintained its licensed products, which continue to perform well: Bob Timberlake, Tommy Bahama, Timber Creek by Phillip Crowe, Jack Nicklaus and HGTV.

At the beginning of this year, Shaw Living announced a nationwide sales realignment with its Tuftex division for its area rugs to be sold through Tuftex’s sales force. The change does not affect the Shaw Living sales team targeting mass merchants and home centers. According to John Godwin, executive vice president of residential sales, “The alignment allows Shaw Living to greatly diversify our custom rug offerings while also expanding the Tuftex sales footprint.”

A very different type of area rug manufacturer is Bentley Prince Street, which is best known for its commercial broadloom and carpet tile. All of its rugs are made from broadloom. Most go to the commercial market, but some are used by architects and designer for higher end residential applications.

While Bentley Prince Street (BPS) has been producing area rugs for over 30 years, it was only at the end of last year that the firm launched its formal Area Rugs Program. The program offers a range of edge options, including serging and binding, a leather edge stitched to the carpet, or an ADA compliant rubber edge that is fused and stitched. There are also three backing options: a nonslip back for high traffic applications, monk’s cloth (woven polypropylene) for protecting higher end surfaces, and a synthetic felt made of nonwoven polypropylene.

The corporate sector is BPS’ biggest commercial market for its rugs. The firm’s rugs can be seen in Chase Bank branches across the nation. Healthcare is another strong sector for its rugs, for installations in the public, higher profile parts of healthcare facilities, and the rugs are also used in the hospitality sector.

Most of Bentley Prince Street’s rugs are made with nylon face fiber, though it offers some wool products as well. The custom rugs can be ordered through BPS sales reps. The firm hopes that the new program will boost the profile of its rugs, and if the program gains a lot of traction the firm will likely start looking at additional routes to market.

Like BPS, the Dixie Group, which makes area rugs under the Masland and Fabrica brands, manufactures rugs from broadloom, and it also produces traditional loomed area rugs. Products are channeled through existing accounts, design firms and independent retailers. Over two thirds, by volume, goes through retailers. The commercial market for rugs is a growing part of the firm’s business.

Dixie makes its rugs from both nylon and wool, and its wool business in particular has been doing very well. The firm offers 200 standard colors in its custom wool rug program.

Masland Rugs currently has a much broader offering than Fabrica, though the firm has been working on building its Fabrica rug business, with new introductions coming later this year. Fabrica has always done custom rugs, but the goal is to start adding pre-made rugs to that brand. Both Masland and Fabrica target the upper end of the market, with Fabrica at the very high end.

On MaslandCarpets.com, anyone from designers to consumers can go into the Infinity collection and choose from over 130 transitional, organic, classic and geometric designs, and then custom color the rug online from a palette of about 200 wool colors. At the end of the process, a PDF is generated that includes an image of the custom rug along with the color and pattern details.

These kinds of custom design programs can be a real blessing for design-oriented consumers with a moderate budget, and they are yet another indication of the central role of the Internet in bringing product to consumers. And, along with the relentless growth of online rug sales, it suggests that more change is coming in the pathways area rugs take to consumers.

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