STAFF REPORT -- With a few notable exceptions, 2018 will go down as a somewhat frustrating year for many specialty flooring dealers in the area rug category. Despite a strong economy, and growth in most other flooring categories, rug sales were negatively impacted by the allure of online sales, retailers said.
"2018 has been disappointing for our rug business," said Sam Presnell, owner of Cincinnati-based The Rug Gallery. "The biggest challenge remains in-store traffic. I believe a lot of this is due to the fact customer buying habits are changing. More is done online, and less in the store. I also think it is a combination of great-looking products that are very reasonably priced, and the ease of purchasing online [that has hurt bricks and mortar business]."
For a retailer like The Rug Gallery, where rugs are their bread-and-butter, any dip in sales is painful. However, even for some specialty flooring retailers where rugs represent only a small percentage of their business, albeit an important add-on piece, the trend is concerning.
"The challenge with rugs is that so many stores, even supermarkets and catalogs sell them," according to Steve Weisberg, president, Crest Flooring, Allentown, Pennsylvania. Rugs represent only 2.5 percent of Crest's overall business, down from 3.5 percent in 2017.
"We show a great selection, which you need if you're in the rug business," Weisberg said. "But it seems every quarter there are more discounted rugs that need to be marked down in order to get rid of them. As a result, profit margins are always eroding."
A RACE TO THE BOTTOM?
Some flooring retailers have noticed that customers are spending less on their purchases and are treating rugs as a commodity to be disposed of rather than as a design element for the home. "I think this trend continues [in 2019] and I feel this is the new norm for a while," Presnell said. "I am beginning to feel like the last of the Mohicans. I think we as buyers must adjust our buying habits and footprint. I hope I am wrong."
Despite the challenges dealers are not giving up. Earlier this year, CCA Global Partners offered members of Carpet One Floor & Home and Flooring America the opportunity to compete more effectively in their area rug business through the e-commerce platform Rugs.Shop. The website offers over 35,000 unique area rugs and facilitates the online ordering experience for customers.
Several members said they were excited about the possibilities the new program offers. Some were looking to expand their current area rug offering while others saw this as a way to start selling area rugs. "We're just getting started with it," said Adam Joss, co-owner of The Vertical Connection Carpet One, Columbia, Maryland, who promotes the new program in all his correspondence. Other Carpet One dealers fabricate many of their own rugs from their broadloom collections through cut and sew programs.
Carpet One dealers, like many others, are trying to leverage the growth of hard surfaces with rug sales. In many cases, it takes creativity and discounting to make the sale. "We do a program that offers the purchaser of a set number of hard surfaces to get a coupon for $100 towards an area rug," Weisberg said. "That program has some traction and obviously cuts deeper into our margins. But we feel that getting our hard surface customer back to Crest to buy their rug is better than their going somewhere else."
Avalon Flooring, with 14 locations in three Mid-Atlantic states, reported "an up and down" 2018 in rugs, with some strong periods, but soft periods as well. "The challenge is to make our selection unique from the competition and help plan the whole room for our flooring customers to make the selection process easier," said Gerry Yost, director, area rug and window treatments. "I see an opportunity for growth in the first quarter. People change their décor faster than ever and area rugs are a great way to transform the room. Renovation and remodeling shows on TV always use rugs as a way to complete the room, so customers are looking for ways to copy that look. We hope to capitalize on that trend with new ways to merchandise and advertise our area rugs."
Many dealers are rethinking their strategies when it comes to selling area rugs, with a greater emphasis on digital marketing/advertising to create a presence both online and in the showroom. As Charlie Dilks, chief product officer of CCA Global Partners, noted, "While customers still prefer to go into the store to purchase installed flooring, the area rug business has greatly shifted towards online sales. Rugs.Shop allows us to help our members compete and increase profits from online sales."
Rug dealers are learning that the traditional way of doing business no longer applies. "The phrase the new normal has already run thin, so we adjust our mindset, do the best we can and be thankful for what we do have," said Miriam Thompson, owner of The Rug Rack in Chattanooga, Tennesee, which had a strong finish after an uneven beginning to the year.
Presnell echoed a sentiment shared by others: "Any true rug retailer without a compelling story or a serious online presence is in for a shortage of traffic and revenues. I hope I am wrong; check back with me in six months."