How to Make Money with Area Rugs - January 2009

By Sonya Jennings

In the current economic climate, there are still retailers who are successfully selling area rugs. We spoke to several retailers throughout the country and found out what they are doing differently in a down market. From New York City to San Diego, businesses are relying heavily on the reputations they have built in previous years and basically getting creative.

Gary Cissell of Omaha’s Nebraska Furniture Mart reports double-digit increases for the year in area rug sales. How is that possible? Advertising and sales events have proven effective in a down economy. A successful technique has been the “loss leader item” strategy. A heavy promotion is launched for $5, 4’x6’ bound area rugs on which the company takes a loss. This strategy gets customers through the door. The sales staff is trained to quickly qualify those customers who are prepared to step up from the $5 rug. They discuss design needs and the store offers financing on all rugs $299 and above.

Another successful strategy has been to meet with the store’s top 20 vendors and organize a special promotion such as a trunk show. The store stocks up on some of the value items such as best selling tufted rugs and the event is promoted with advertising. This also brings in customers. Once every two months or so, a one-page color newspaper insert features a large rug collage showing different patterns and styles. The event banner at the top announces a percentage off the purchase of an area rug.

Gram Head, vice chairman of ABC Carpet in New York, discusses the shift in what is selling in his stores. Before the downturn, approximately 50% of sales were “value” rugs and 50% the latest cutting edge designer rugs. Now that statistic is more like 75% value, 25% fashion. His store has gone into the market and bought in bulk at a lower cost. Head does point out that it’s easier to find a good deal from manufacturers. He’s able to pass some of that savings on to the customer. He notes, “We adapt to customer needs on a weekly basis. It is all about back to basics.”

When the economy is booming, a customer looking for a low end rug may not get a lot of attention, but now the attitude is, what do we have to do to make the sale? Even now, Head points out the importance of atmosphere. When people have less money to spend, they want to know they are getting a lot for their dollar. Showrooms must still look fresh and be ever-changing. ABC Carpet holds charity events, design seminars, and fashion shows to keep the buzz and energy going and draw attention to the store.

At K.A. Menendian in Columbus, Ohio, Philip Menendian describes one of his sales techniques, “When a customer walks through the door, she just did not happen to be strolling by, she is in the market for an area rug, so treat her that way.” Even if she insists that she is only browsing, it is still appropriate to give her a quick tour of the store, pointing out where and how the merchandise is grouped, and maybe give her a booklet or some type of literature. Then check with her often. What does not work is to respond, “Oh, you are browsing,” and then disappear.

Menendian also focuses on the design trade. His store gives discounts to designers and helps them serve their customers. With knowledge, expertise, and a good upscale selection, over time he has created a reputation for being a great resource for designers. This helps in a down economy because typically people who can hire a designer are less affected by swings in the economy.

Gary Garcia, area rug manager of Coles Fine Flooring in San Diego, California, points out how important the trust factor has become in area rug sales, “How many times do you see a ‘going out of business’ rug company that re-opens three months later just down the street? Consumers have caught on to this game, and they want to shop somewhere with a reputation for trustworthy business practices.” Particularly in a down economy, people are cautious about where and how they are spending their hard earned money. Garcia relies on the reputation that Coles Fine Flooring has built since 1947. He notes, “If the customer feels like she actually received a quality rug at a reasonable price, she will be back and will refer her friends in good times and in bad. It is about defining a reputation and living up to it.”

In addition, Garcia talks about grouping area rugs. He states, “Often times, a customer walks into a store and the area rugs are not categorized. It becomes too confusing to the customer to find what she is looking for.” He suggests grouping the rugs in categories. Display the traditional rugs together—the tropical, shag and textured, modern and contemporary should have defined areas to make it easier to browse through her particular style. Today, money is tight and so is time, so do everything you can to help her find what she wants without hassle.

A RUG DISPLAY FOR LIMITED SPACE

For retailers who do not have adequate space to display a varied assortment of area rugs, Nourison has a solution. The company has just released The Rug Boutique, which displays nearly 1`00 additional designs and more than 1,000 SKUs in less than 20 square feet of space.

Stores can choose from 360 designs in over 50 best-selling collections to create customized assortments for their own Rug Boutique. For every design, an actual sample is shown for consumers to see the depth of color and feel the texture of the complete area rug. Accompanying display boards show every product in a room setting with all available shapes and sizes.

This new display unit answers the question, "How do you place a lot of additional product in stores that have limited floor space?"

According to David Forman, marketing director for Nourison, "It addresses the retailer's main issue of limited floor space and the customer's need to be able to experience the product and see it in a natural setting. The display also presents runners and shapes, something that traditional rug rack displays can't do."

This month, more than 300 units will ship to stores, including national chains, buying groups and individual retail stores. Demonstrations are available and orders are being taken in the company's showrooms during Atlanta and Las Vegas markets. Information is also available from Nourison sales representatives.

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