By Kimberly Gavin

 At the July Atlanta rug market, vendors were cautiously optimistic that the market would be good and, more importantly, that business is on the verge of improving. On the other hand, rug suppliers are facing increased raw materials costs and higher labor and transportation costs, which are squeezing profit margins. “Business is not bad, but people are pushing for value price points,” said Alex Peykar, president, Nourison. Nourison continues to focus on bigger buyers who are asking for product with greater perceived value. The issue for manufacturers and retailers alike is that more rugs have to sell to get the same dollars as three or four years ago, Peykar said. “We do see some customers who are saying I don’t want to go below this price and who want to get their customers back up in price points,” Peykar said. “It all depends on how the second half of the year goes.” For the last year and a half there have been pressures on price points, rug suppliers have said. Bud Young, vice president of marketing for Capel Rugs, told FCW that the pressure comes from retailers and consumers for better value. “The consumer wants to do more with less. They may put a better quality in certain area, but for guest rooms and other areas it might be a lower price point.” The issue for manufacturers is that price pressures are going in the opposite direction, said Stephen Hoberman, national accounts manager for Momeni. There are labor issues in India and China, as well as raw material increases and increases in transportation costs. Labor to produce hand-crafted rugs is facing some pressures. A recent change in India’s wage and welfare system has caused weavers to leave the business. Fewer weavers ultimately means higher labor costs. China, where wages are rising as a middle class grows, is seeing some upward pressure. And there are increases in raw materials like wool and jute, nylon, polypropylene and even polyester, which are emerging as a relatively new fiber in the rug business because it meets a price point. “Costs of raw materials are definitely a factor especially for hand-crafted rugs,” Peykar said. “The shortages of labor are the worst that I have ever seen.” Labor issues exist in India, China and even Pakistan. Peykar added that the changes in the Chinese currency are not helping. “It’s almost a perfect storm. When the economy is great, you can deal with these things and pass them along. We are trying to hold back as much as we can and not let price be affected hoping it will let economy get back on its feet,” he said.

Source: Floor Covering Weekly July 2010