Road to Recovery
November 4, 2010,
By Andrea Lillo
As with other furnishings categories, pricing issues are top of mind for rug manufacturers, which have seen price points dip to new levels in the new economy. As 2010 wraps up, companies say that 2011 will remain in a recovery mode, but also become the time to address passing along price increases.
Manufacturers have had a long list of issues that have driven up costs at every step. The challenging economy, raw material cost increases, labor, shipping and currency concerns have all compounded the problem, not to mention natural events this year such as the flooding in Pakistan and the earthquake in China, which affected the work force.
For the most part vendors have avoided raising prices, but many said that's no longer possible.
"We've eaten price increases for so long," said Austin Craley, vice president of sales, Momeni, and now it can't absorb them any longer. But though prices have come down, "quality has gone up, and color and design are better than ever." These are reasons price increases "shouldn't affect the rug industry as much as others, as there is room for retailers to raise prices if they choose to," he said. "Only so many people come into the stores every day, they have to make the most of it."
Safavieh saw a 30 percent jump in its costs since January 1, said Arash Yaraghi, principal. Already the company has talked to retailers about gradual price increases, starting with 10 percent in January, and the possibility of another one later on.
Nourison will also look at increasing prices eight to 10 percent next year on a number of items, said Steven Peykar, principal. "Price points have been driven down so low, you have to sell more and more to make it up." Like other companies, Nourison expanded its lower price point offerings in the past few years because that's what the market called for.
"Those are the volume turnovers," Peykar said. But the lower price points "can't be maintained much longer."
That a lot of retailers don't attend markets anymore, or have cut back doing so, doesn't help, said Tom Morris, national sales manager, 828 International Trading, so they are not seeing new items. Retailers who bring in current product are reaping the benefits, he said. But many others are working off their old inventories instead.
And consumers don't want old, they want fresh. They flip through magazines and see the trends, and "that's what they want," said Yaraghi. "When the market comes back, the growth will be on the new generation of retailers," such as online, catalogs and fashion-forward boutiques. "They can reach customers more efficiently," and offer new colors and designs.
And even with the troubles of 2010, Yaraghi felt the signs for 2011 looked good. "The market is coming back ... It's not getting any worse," he said, pointing to signs of the company's activity at October's High Point Market, one of its best High Point Markets ever. "A lot of designs that were not getting attention before now are."
Business is picking up, agreed Aaron Gray, marketing director, Oriental Weavers. "People are still looking for value, but it has to have fashion as well." The company's new lower price points are now $99 to $149, which it never had before. But Gray added that the company is bolstering its higher end options as well. "When things turn, we will be ready," he said. "We don't want to only focus on the lower end."
For Surya, the new low price point is $99, but that was more of a strategy, said Seth King, vice president, sales and marketing. A retailer selling a $300 couch always wanted a $99 rug to pair with it, and now Surya is able to give him that.
Besides different price points, some companies are adding complementary categories to become more of a resource to retailers. Surya debuted its home accessories line last month at High Point Market, for example. The group consists of five design groups, from antiquity looks to modern ones.
Rizzy Home expanded into furniture at the market. "It goes hand in hand with our rugs; they have a lot of common buyers," said Mark Ferullo, vice president. "Our rugs are geared toward the furniture stores anyway." Made of reclaimed and solid wood, the furniture line includes dining room tables and chairs, occasional and other pieces.
And Oriental Weavers Group recently reorganized its hospitality group, now known as OW Hospitality. That division will be a big part of the company going forward, Gray said.