RUG COMPANIES GIVE CONSIGNMENT THE FLOOR.
Executives at major rug companies said consignment has become a way of life in the industry today.
"I don't think there's a dealer out there that doesn't consign rugs -- it's a reality of business today that retailers rely on the financing of their inventories by wholesalers," said Bill Ward, chief executive officer of Obeetee Inc., which has increased its consignments to between 20 percent and 25 percent of its business. "Because of the large quantity of merchandise in the market, consignment is more prevalent than five years ago," he said. "It's about maintaining market share."
"Consignment helps grow the industry, and it's been a part of the industry for a long time," said Michael Jobst, marketing director at Safavieh, which does about 40 percent of its business in consignment. "To grow the rug industry, you need to show as much product as you can."
Many larger companies, however, are decreasing their consignments, said Jobst.
"In our business, over the last three years, consignment figures have plummeted," he said, adding that Safavieh's consignments accounted for 60 percent to 70 percent of sales in the past. Jobst attributed the change to the company's dealing with different, and bigger, retailers.
"We are selling directly to companies that don't hold inventory," he said, "more clients that are catalog-based or online, and have stock that is paid for instead of having showrooms." The entry of more furniture stores, such as Henredon and Baker, into the retail business is also beneficial, said Jobst, because they purchase rugs instead of consigning them.
The policy seems to be a niche business for most.
"Consignment works better on a specific and ad hoc basis," said Ed Vairo, director of creative marketing at Nourison, adding that the company is not currently consigning goods. "The person to whom it is appealing would be a smaller dealer who wants to take on a specialty look and has a consignor who has a nice collection, in a very specific category. He can bring merchandise into a limited space and see how it works," said Vairo.
Vendors also tend to consign merchandise that is less marketable because of current design or color trends -- even quality.
"There are always rugs that are better than others," said Ward, "and the best merchandise is most often only available for purchase."
"Consignments are for when people have a lot of inventory, or want to make a lot of money," said Steve Mazarakis, president of Hellenic Rug Imports, which does only 1 percent of sales in the category.
Mazarakis was one of several executives who said they prefer to work with retailers on extended terms or special events instead of consigning as a general policy.
"We make samples for stores on consignment, and as they sell, we take special orders. The rugs never leave the premises," he said.
"We're not a consignment dealer," said Dan Mayer, regional sales manager at the Endless Knot Rug Co. "We have an approval policy, where rugs go out to a consumer's home if the retailer requests it. If neither the customer nor the retailer wants it, it comes back."
While Feizy has consigned in the past, it prefers not to anymore, said Ray Ehsani, vice president of sales, division one, at the company. "It's not our cup of tea," he said. "We sell outright, and give terms and concessions."
Wholesalers are more willing to consign higher-priced rugs, said Robert Moomjy, general manager of MER Corp., where about 10 percent of business is in consignment.
"At the higher end, inventory turns more slowly, and people are willing to consign to give product more exposure," he said. "At mid to lower price points, it is not as necessary."
No matter how much they consign, vendors said they are definitely being more cautious about that segment of the business since the Nahigian case.
"Everyone's a little more careful now," said Moomjy. "We get more information, know who we are consigning to and what their position is financially," he said, adding the company is also more strict about following up on its orders. "In the past we weren't as vigilant because we were more comfortable with it. Now, we know that anything is possible in this day and age."