Rugs Direct Spreads Into Catalogs, Stores

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With a Web site that gets more than 100 million hits each month and moves about 10,000 rugs, there's not much room for improvement in Rugs Direct's online business. So when president Randy Kremer began thinking about how to increase volume, he decided to look toward "more traditional" means of selling.

Rugs Direct began in 1998 as an online venture. With 50,000 items online, it stocks everything from "a synthetic $30 rug up to a handmade, one-of-a-kind rug and everything in between," Kremer said. The average rug sold by the company is in the $300-$500 range. Customers tend to live in major metropolitan areas and have an average household income of $90,000 or higher.

The company opened a store last year in Winchester, VA, the town where it is headquartered. The first Rugs Direct catalog followed in March 2004. This fall, the company will mail a second catalog and open another store, "in a major metropolitan area," Kremer said.

The first print effort had 48 pages, measured 8 1/2 by 11 inches and featured 1,500 rugs. It had a "higher-end, elegant look," Kremer said.

The book went to 500,000 names consisting of the company's customer base and prospects.

"We cast a very broad net because we wanted to capture more sales from our existing customers but also wanted to figure out what other demographics we should be going after," he said.

The same catalog with a different cover was mailed during the summer, also to existing customers and anyone who requested a copy online or in response to ads in magazines such as Good Housekeeping, Southern Living and Martha Stewart Living.

The company experienced a 25 percent increase in online and phone-order sales after both the March and summer drops compared with the periods immediately preceding the mailings.

One surprise from that initial effort, Kremer said, was that the average catalog buyer had a household income similar to Rugs Direct's Web site buyers. Catalog shoppers generally have a lower household income compared with online buyers, he said.

Other demographic groups responding well to the catalog were new homeowners and those who are married with children. Another surprise was that hooked rugs, a niche category, did very well.

The fall book, which will have three drop dates in September, differs from the first one. It will have a much broader selection of products, with 4,500 rugs, almost triple the number of items in the first edition. The company decided to feature all colors available for each pattern in the upcoming book after receiving calls from potential customers interested in a rug they saw in the first catalog but who were interested in a different color.

Imagery in the fall book will be similar to that of the initial effort, but copy has been reworked to include more information. Featured items will be accompanied by background information about the rug's origins and materials used to make it.

"We want to provide a visual image, a little story, to help romance it and sell it," Kremer said.

A few things are unchanged. The fall book will be 48 pages, mailed to 500,000 names. The list again will be split among existing customers and prospects, with a change to the demographic focus of prospects.

"We're going to focus on higher average household incomes of between $75,000 and $90,000 and major metropolitan areas," he said.

The company now plans to produce at least one catalog per quarter. In between drops, it will create supplemental issues with new covers.

It also will produce catalogs focused on niche categories. This fall it will mail a 12-page holiday rugs book.

"We have plans for some other types of catalogs as well in sectors that do well online and in the catalog," Kremer said.

Kremer hopes to pinpoint Rugs Direct's catalog demographic more precisely by spring 2005.

"We're still trying to figure out what's going to work," he said. "It's all trial and error right now."


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