Some of the biggest Internet companies  are developing new formats to complement and augment their Internet sales.

RugsUSA.com epitomizes the changing landscape of  rug e-tailing. Plans for the future include a bricks and mortar store as well as an on-line auction format for consumers who want to sell rugs.

 Koorosh Yaraghi, president of RugsUSA.com, told Rugnews.com about some of the radical changes that are now taking place at the company.

On the Internet, RugsUSA.com plans a consumer-to-consumer auction website for people who want to sell  rugs.

The three-pronged clout of the Internet, a physical store and a catalog is setting the company on a new growth trajectory, Yaraghi noted.

Changes are also being planned for the RugsUSA.com website which will also broaden the company's scope, Yaraghi noted. "We change the look of the website constantly. We are always adding new elements and improving the way people can buy rugs online," he noted. "This industry is all about change. You have to move very, very quickly."

Over the next three months, RugsUSA.com will launch a new website. Although Yaraghi won't reveal details, he said the  move will "prove we are the most innovative rug retailers on the Internet."

He said the the new site will include:

• A consumer-to-consumer element which will allow participants to sell their old rugs online using RugsUSA technology in an auction format. "Anybody  will be able to sell any rug on our website -- free of charge," said Yaraghi.
• Continued development of a magazine-format selling environment emphasizing life-style presentations of merchandise. "We have editors and art directors, just like consumer magazines," Yaraghi noted.
• Increased functionality of the site, allowing viewers to search, shop and buy with enhanced results and fewer clicks.
• The creation of  new programs that will bring built-in value to consumers.
• The creation of new b-to-b programs which will allow vendors to access and modify their own data bases on the  RugsUSA.com site.
• The continued branching out into other product categories such as mirrors, tapestries and clocks. "If it's a good product and offers good value, we're interested," said Yaraghi.

Yaraghi emphasized that running a successful Internet-based business is a costly venture. "In the beginning, people seemed to think that Internet merchants had no overhead, just because many of us did not have bricks and mortar stores. But the costs of building a business are always significant. You can't grow without intense capital investment," he emphasized.

Driving consumers to the site represents one of the biggest costs in developing and maintaining an Internet business. Advertising on search engine can be extremely expensive. Internet retailers participate in key-word auctions to get the top-spot on search engines. "We spend upwards of $7,000 per day on key word buys. That's a huge advertising investment," said Yaraghi.

Just because you get a consumer to log on to your site doesn't mean you'll get a sale. "The number of hits that convert into a sale hovers around three per cent," said Yaraghi. "So you need a LOT of hits to survive."

Converting hits to sales is a constant challenge. "We want to create an interactive relationship with our customers. Customers are invited to do live instant message chat and also they are encouraged to call us," said Yaraghi.

For the future, Yaraghi said all types of rug retailers share many of the same challenges. "We are constantly trying to provide our customers with good products at good value. And we also need to make a profit in order to survive."

On the RugsUSA.com site, rugs can be accessed in several ways, including color, style, lifestyle and manufacturer's brand. "Before the Internet, rug brands meant nothing to consumers. Now, we are all helping our vendors build their brand names," Yaraghi pointed out.

Koorosh Yaraghi is a member of the illustrious Yaraghi family, which owns Safavieh, the New York-based wholesaler and retailer of rugs and home furnishings.

There is no connection between the two companies, Yaraghi stressed.

 "I buy rugs from Safavieh, but we have a normal vendor-retail relationship."

 Yaraghi started RugsUSA.com in 1998, at the age of 28. He had earned his Masters Degree in film at New York University, but his investment in an advertising film making company turned into a financial flop. He worked in the marketing department of Safavieh but he wanted to do something on his own.

Looking for something to do that would combine his creative urge and his experience in the rug business, Yaraghi started RugsUSA.com. "I used a template to design the site and became part of a Yahoo shopping mall site. I had $2,000 in my pocket, a lap top computer and a dial-up connection," Yaraghi said.

The site became a reality when Jodie Shapiro of Oriental Weavers allowed RugsUSA  to show OW rugs on the site. "At that time, the idea of selling on the Internet didn't appeal to a lot of vendors, so it was a major breakthrough to get the OW line," said Yaraghi.

After setting up shop on the Internet, Yaraghi sat back and waited for the customers to come in. He waited. And waited. After a couple weeks, he decided to leave town and headed for  Brazil.

"One day a few months later  I found an Internet Cafe with a dial up connection. Just for the heck of it, I checked the site. I had sold two rugs. I called OWA and told them to ship. We were finally in business."

Yaraghi went home to New York and now, seven years later, the company is one of the giants of the Internet rug business.