Carpets & Rugs

INDUSTRIAL CODES

NAICS: 31-4110 Carpet and Rug Mills

SIC: 2273 Carpets and Rugs Made of Textiles

NAICS-Based Product Codes: 31-41101 through 31-41105008

PRODUCT OVERVIEW

Carpets cover two thirds of floors in the United States and thus dominates the floor covering industry. Other floor coverings include ceramic tile, stone, laminate, vinyl, and wood. After carpet was declared an approved floor covering by the Federal Housing Administration in 1966 it rapidly took over the floor covering market. In 1973 shag carpeting was introduced and outsold other carpeting types for years thereafter. The popularity of carpet is due to its many benefits. It is soft, quiet, warm, and generally considered affordable. Special treatments can be applied to carpets and rugs so that they are stain, static, and soil resistant. New colors, patterns, and textures are introduced every year to keep up with fashion trends. Carpet is relatively easily replaced to update the interior design of residential and commercial properties.

The cushioning effect of carpet controls both airborne sound and impact noise. Airborne sound is noise like radios and voices that carries between rooms and levels. Impact noise is sounds like footfall and vibration from appliances that radiate through structural parts of buildings. Carpet on floors, and sometimes on walls, is an important acoustical component of public places like auditoriums, restaurants, and schools. How carpet performs depends on the type of material used to make it. The most common material for carpets is nylon. Polyester, polypropylene, and wool are also used. These materials are used to make long skeins of carpet yarn for the face fiber, or pile, in carpet and rugs.

Long skeins of carpet yarn are made in two ways. Carpet yarn is known as either spun staple fiber or bulked continuous filament fiber. Both create yarns that produce carpet and rugs with distinct characteristics.

Spun Staple Fiber

A series of short strands, typically 5 to 7 inches long, are spun together to form one continuous skein known as spun or staple fiber. Several skeins are twisted together to form a strand of yarn. When tufted into a carpet or rug, spun staple fibers bloom more, exhibiting a bigger hand finish.

Bulked Continuous Filament Fiber

A continuous strand manufactured as one long skein is twisted and heatset together to form yarn known as bulked continuous filament fiber. The continuous strands of synthetic fiber are texturized to increase bulk and strength. When tufted into a carpet or rug, continuous fibers allow a smooth fine finish.

The material used to make long skeins of carpet yarn determines the aesthetics and performance of the finished carpet or rug. Factors like available colors and textures, and resistance to stains, static, and soil are determined by the face fiber, or pile. The most common materials for carpet and rugs are nylon, polyester, polypropylene, and wool.

Nylon

Nylon was invented in 1939 by DuPont Company and first used for carpet in 1959. Nylon is the most common carpet material. It represent 65 percent of all U.S.-made carpet and rugs. Nylon is a petroleum derived product defined by the Federal Trade Commission as a manmade fiber produced from a long-chain synthetic polyamide. The polyamide is melted, spun, and drawn into strands after cooling to make both spun fiber and bulked continuous filament fiber. Nylon takes color well and can be dyed either during the melting and spinning phase or white skeins can be made to be dyed later.

Besides its excellent color affinity, the benefits of nylon include affordability, durability, and versatility. While higher priced than other materials, nylon pricing is favorable compared to wool, its closest competitor. It can be treated to be stain, static, and soil resistant. It is versatile enough for both residential and commercial uses. Nylon withstands rigorous use and can be readily cleaned.

Polyester

Sometimes referred to as PET, short for its chemical name polyethylene terephthalate, polyester is a petroleum derived product defined by the Federal Trade Commission as a manmade fiber produced from any long-chain synthetic polymer composed of at least 85 percent by weight of an ester of a substituted aromatic carboxylic acid. Polyester is made by combining ethylene glycol with terephthalic acid at high temperature and in a vacuum to achieve the high molecular weight needed to form useful fibers. PET is melt spun into primarily a spun staple fiber, although some bulk continuous filament fiber is produced.

Polyester fiber is noted for its luxuriously soft hand and bloom. Polyester has good color clarity and colorfastness. It resists water-soluble stains and retains its luster. Polyester is used for value-priced carpets and rugs. Its use as a face fiber material is growing, almost doubling between 2001 and 2006. In 2006 the three largest manufacturers introduced new carpets made from polyester because it is less sensitive to price increases than either nylon or polypropylene.

Polypropylene

Commonly referred to as olefin, polypropylene is a petroleum derived product defined by the Federal Trade Commission as a manmade fiber produced from any long-chain synthetic polymer composed of at least 85 percent by weight of ethylene, propylene, or other olefin units. Basically, olefin fibers are products of the polymerization of propylene and ethylene gases under controlled conditions. The fibers resist dyeing, so colored olefin fibers are produced by adding dye during melt spinning; this results in a somewhat limited color selection.

Olefin is generally used for bulked continuous filament fiber and is very lightweight. Olefin is preferred for commercial installations. It is favorably priced, colorfast, easily cleaned, and inherently resistant to chemicals, fading, mildew, moisture, stains, static electricity, and wear. Olefin is the fiber of choice for indoor-outdoor applications.

Wool

The most expensive carpet fiber, wool is noted for its luxurious hand and performance. It is soft, has high bulk, and takes dye more beautifully than any other fiber. It is a durable material with natural fibers that scatter light and reduce visible soil. Because it is a natural material, it is always spun, never bulked as a continuous spun filament. Wool is a style and trendsetter that other fibers are used to copy. At the Surfaces 2007 trade show in Las Vegas, the place of wool in the materials hierarchy was underscored. Traditionally nylon mills introduced carpets in wool, wool blends, or proprietary nylon technologies that create wool looks. Rising petroleum costs gave manufacturers the impetus to turn to wool. As the cost for petroleum derived synthetic fibers increases, the cost for all natural wool has leveled off, making wool relatively affordable.

No matter what material they are made of, carpets and rugs can be knitted, tufted, or woven. Knitted carpets are made using a method in which yarn is stitched to the backing and anchored by a plastics coating. Woven carpet involves a traditional manufacturing process where carpet is produced on a loom by which lengthwise and widthwise yarns are interlaced to form the fabric. The most common manufacturing method is tufted.

Close to 95 percent of U.S. carpet and rugs are tufted. The process involves several hundred needles (up to 1,200 across the typical 12 foot width) that thread carpet yarn through a lightweight backing, forming loops or tufts of the required height. An adhesive coating is applied to the back to anchor tufts in position then a second backing is applied for extra strength. The tufted manufacturing process is used to produce different carpet textures known as loop pile, cut pile, and cut loop pile.

Loop Pile

Loop pile is the basic look upon which cut pile and cut loop pile are built. Loop pile is formed by continuous rows of tightly spaced loops. The result can be textures from thick and nubby to smooth and plain. Either level loop pile or multi-level loop pile can be produced. Multi-level loop involves two or three varying pile heights to produce a high/low or sculptured effect. Level loop pile wears well because the tight pile bears the weight of the foot evenly. It also hides footprints and vacuum marks. Loop pile results in a carpet with a hand-crafted appearance that fits room styles from contemporary to country to cottage.

Cut Pile

After standard loop pile is constructed, all the tops of the loops are cut. The tufts of yarn stand up straight and form an even surface. Cut pile results in different looks depending on different twist levels of yarns. For example, cutting a yarn with low twist results in the smooth classic look of velvet or velour. Highly twisted yarn produces a hard twist pile affiliated with plush styles because a well defined twist gives the pile individual definition. Cut pile results in a thick, rich carpet suitable for bedrooms and living rooms.

Cut Loop Pile

After standard loop pile is constructed, a sculptured appearance is created by cutting some loops while leaving others uncut. Either level cut loop or multi-level cut loop can be produced. Cut loop combines the practicality of loop pile with the classic appearance of cut pile. The sculptural effects hide soil, stains, and vacuuming marks. Cut loop pile results in a carpet that can be casual or classic.

Whether the texture is loop pile, cut pile or cut loop pile, the word carpet generally denotes wall-to-wall floor covering while rug denotes area rugs, scatter rugs, and sometimes but not always bath mats. Rugs pose a special problem because they are a subcategory of other industries. Rugs are sometimes discussed as a category within the floor covering industry, the home furnishings industry, the textiles industry, and even the gift industry when it comes to bath mats or welcome mats. Commerce lumps rug statistics in with both carpet and textiles figures. This makes generalizing difficult within the rug subcategory of the carpet industry.

Premium high-priced hand tufted area rugs woven from wool are imported from places like Belgium, China, India, Italy, and Egypt. Rugs from manmade fabric are made in the United States. These can be categorized variously as area rugs, scatter rugs, bath rugs, door mats, and indoor-outdoor rugs. Common sizes are 3 by 5 feet, 5 by 8 feet, and 7 by 10 feet.

Indoor-outdoor rugs are becoming more common. This type of all-synthetic rug was typically referred to as utilitarian and inexpensive since "the words 'ugly' and 'cheap' are frowned upon in polite company," according to Lisa Wymann, editor of RugNewsBlog.com, writing in the December 25, 2006 issue of Furniture-Today. Retailing for under $100 in a 5 by 8 size, these rugs were sold out of cartons in discount stores and home centers. The newer breed of indoor-outdoor rugs is more decorative. They come in a broader range of styles and take advantage of olefin so that they are inherently resistant to chemicals, fading, mildew, moisture, stains, static electricity, and wear. This new breed of rug is used in outdoor kitchens, BBQ areas, decks, porches, boats, and even inside the home in kitchens, bathrooms, sunrooms, and garden rooms.

MARKET

Carpet and rug manufacturing in the United States grew during the early years of the twenty-first century. As part of its Current Industrial Reports series, the U.S. Census Bureau reported total product shipments from 1997 to 2006. Figure 49 depicts the growth of the carpet and rug industry during this 10 year period from a low of $10.3 billion in 1997 to a high of $14.3 billion in 2005 with a slight drop to $14.2 billion in 2006. Total cumulative growth between 1997 and 2006 was 28 percent. Figure 49 also provides estimates for 2007 through 2009 based on research conducted by New Horizons Marketing Inc. and reported in HFN.

In 2003 carpets and rugs controlled 68 percent of the U.S. flooring product market, down four points from 72 percent in 1997. Forecasts are for carpet to decline to 62 percent in 2009 due to the growth of other flooring choices like ceramic tile, laminate, vinyl, and wood. Wood flooring in particular doubled its flooring market share between 1997 and 2004, primarily at the expense of carpet. While continued erosion in carpet as a percentage of flooring by type was expected, researchers predict that carpet will fail to fall below 60 percent of the U.S. floor covering market.

Within the $14.2 billion carpet and rug industry, the main Census product categories in order of market size are tufted carpet and rugs, woven carpet and rugs, and other carpet and rugs. Tufted carpet and rugs dominates representing 95 percent. Tufted carpet and rugs were up 25 percent between 1997 and 2006 from $9.969 billion to $13.445 billion. Of this $13.445 billion in 2006, Census tracked product shipments based on whether the yarn fiber was nylon, polyester, or polypropylene. Figure 50 is a pie chart that shows percentages of each. Nylon dominated with 69 percent. Polypropylene is 16 percent and polyester is 11 percent. All other is 3 percent.

The Census Bureau series of reports titled Current Industrial Reports highlight changes in major carpet product categories between 2001 and 2006. Tufted nylon product shipments were up 17 percent between 2001 and 2006, from $7.8 billion to $9.4 billion. Tufted polypropylene—common name olefin—product shipments were up 18 percent between 2001 and 2006, from $1.8 billion to $2.2 billion. Tufted polyester—common name PET—product shipments were up 42 percent between 2001 and 2006, from $876 million to $1.5 billion.

Rug sales are sometimes discussed as a subcategory within the floor covering industry, the home furnishings industry, the textiles industry, and even the gift industry when it comes to welcome mats. The U.S. area and bath rug business totaled $2.7 billion in 2004, a 9 percent increase over 2003 according to a Floor Focus Magazine 2005 survey. The survey also reported that rug imports were up nearly 12 percent in 2004 over 2003, with India up nearly 20 percent. China, Pakistan and Turkey were other countries whose rugs showed strong growth as imports in the United States during this period. Turkey was up 41 percent. Based on research by HTF and cited in Home Textiles Today, the rug industry (defined as accent, scatter, and area rugs but not bath rugs) was worth $4.5 billion at retail in 2005.

KEY PRODUCERS/MANUFACTURERS

The top three U.S. manufacturers of carpeting are Shaw Industries, Inc., Mohawk Industries, Inc., and Beaulieu of America, in that order. Besides Shaw and Mohawk, who also make area rugs—which Beaulieu does not—Maples Industries is a top rug maker.

Shaw and Mohawk accounted for a hefty 71 percent of the carpet business. Shaw led with sales of $4.3 billion and a 38 percent market share. Mohawk was close behind with $3.8 billion in sales and a 33 percent market share. Beaulieu trailed at $1.1 billion and a 10 percent market share. Maple with its rug-only emphasis had $245 million in sales and a 10 percent market share. Sales estimates and market share figures are for 2004, the last year for which data on all four companies was available, based on material published in Floor Focus Magazine in May 2005. Each is profiled in alphabetical order.

Mohawk Industries, Inc.

Headquartered in Calhoun, Georgia, Mohawk is a diversified floor covering manufacturer with 34,000 employees. It designs, manufactures, and markets woven and tufted carpet, area rugs, and hard surface flooring products. Included in Mohawk carpet and rug brands are: Aladdin, Alexander Smith, American Olean, American Rug Craftsmen, American Weavers, Bigelow, Galaxy, Harbinger, Helios, Horizon, Image, Karastan, Lees Carpet, World, WundaWeve, Custom Weave, Mohawk, and Mohawk Home.

Karastan is top of the line and Mohawk Home is a value priced brand. For instance, a rug such as Empress Kirman from the Original Karastan collection is woven from fully worsted New Zealand wool and retails for around $1,199 in a 5 foot 9 inch by 9 foot format. From the Mohawk Select Passport collection, rugs made from a nylon yarn system that blends shades of color into multiple tones with an ultra-soft pile retail for $299 in 5 foot 3 inch by 7 foot 10 inch format.

Mohawk Carpet Mills began in 1878 when four Shuttleworth brothers brought 14 second hand looms from England to Amsterdam, New York. After a 1920 merger with the nearby firm of McCleary, Wallin, and Crouse the name was changed to Mohawk Mills, Inc., derived from the Mohawk River Valley in eastern, upstate New York where Amsterdam is located.

In the 1950s Mohawk moved and constructed manufacturing facilities in Mississippi and South Carolina. In 1956 Mohawk merged with Alexander Smith, Inc., to form Mohasco Industries, the largest carpet manufacturer in the world. By 1989 Mohawk Carpet returned to its roots by purchasing the carpet manufacturing business from Mohasco. Mohawk grew to dominate the carpet and rug industry primarily through acquisitions: Horizon Industries in 1992; American Rug Craftsman and Karastan-Bigelow in 1993; Aladdin Mills in 1994; Galaxy Carpet Mills in 1995; certain assets from Diamond Carpet Mills in 1997; Newmark Rug Company, American Weavers & World Carpets/WundaWeve in 1998; Durkan Patterned Carpets and Image Industries in 1999; Alliance Pad in 2000; Dal-Tile and American Olean in 2001; and Lees Carpets in 2003.

Shaw Industries, Inc.

Based in Dalton, Georgia, Shaw leads in both textile and carpets and has 30,000 employees. Shaw got its start in 1946 when Clarence Shaw, father of CEO Robert E. Shaw and J.C. Shaw, bought Star Dye Company, expanded dramatically, and started finishing carpet as Star Finishing Company. In the late 1960s, Shaw acquired Philadelphia Carpet Company and Star Finishing moved into carpet manufacturing.

Shaw Industries, Inc., went public in 1971 with $43 million in sales and 900 employees. In 1972 Shaw became vertically integrated with the acquisition of its first yarn plant, following up with the acquisition of its first continuous dye plant in 1973. It gained 100 percent control of its yarn supply when it acquired six yarn spinning mills in 1983.

By 1985 Shaw was listed on the Fortune 500 with more than $500 million in sales and close to 5,000 employees. Shaw became further vertically integrated when it acquired Amoco's polypropylene fiber production facilities in 1992. The acquisition also made Shaw the largest producer of polypropylene fiber in the world. The move helped Shaw capitalize on the tremendous growth of Berber carpet, the trend that displaced shag carpeting as the fashionable new look in the 1990s.

Like Mohawk, Shaw grew through acquisitions: WestPoint-Pepperell Carpet and Rug Division gave it the Cabin Crafts and Stratton brands and added 40 percent to its sales volume in 1987; the Armstrong World Industries, Inc. flagship Evans & Black brands added 30 percent to its sales volume in 1989; Salem Carpet Mills, Inc., added 25 percent to its sales volume with the Salem and Sutton brands in 1992. Because area rugs grew in popularity during this period, in 1993 Shaw formed its Shaw Rugs division. For instance, a Shaw Living area rug from the collection designed in collaboration with outdoors artist Phillip Crowe is machine woven of olefin and retails at $379 in the 5 foot 5 inches by 7 foot 11 inches size.

Shaw positions itself as a low-cost provider of carpets, a factor in its 1998 merger with Queen Carpets. Renowned financier Warren E. Buffett acquired a majority of Shaw through his Berkshire Hathaway, Inc., holding company in 2001 and by 2002 owned 100 percent, ending Shaw's tenure as a public company. In 2003 Shaw purchased the north Georgia operations of the Dixie Group, acquiring such brands as Carriage Carpets, Bretlin, and Globaltex.

Beaulieu of America

Headquartered in Dalton, Georgia, Beaulieu of America was established in 1978 out of Beaulieu Belgium by Mieke and Carl Bouckaert. It began as a producer of polypropylene area rugs. Beaulieu became vertically integrated into yarn extrusion in 1981 and diversified into tufting carpet in 1984, establishing a factory in Chatsworth, Georgia. In 1987 Beaulieu increased its ability to produce nylon polymers and nylon yarns with the addition of a facility in Bridgeport, Alabama.

In 1990 Beaulieu continued its vertical integration with the addition of another new facility in Bridgeport, Alabama, for the extrusion of polypropylene staple fiber. Like Mohawk and Shaw, Beaulieu grew through acquisitions of companies like Conquest Carpet Mills, Interloom, Coronet Industries, Grass More, D&W Carpets, Marglen Industries, Columbus Carpet Mills, Peerless Carpet Corporation, Princeton Rugs, and American Polycraft.

Its acquisition of Coronet and Peerless in 1980 helped establish Beaulieu of Canada. Beaulieu had 8,500 employees in the United States and Canada. Its acquisition of Sterling Carpet Mills helped establish Beaulieu of Australia in 1995 where, in addition to making rugs, it extrudes bulked continuous filament polypropylene and nylon fibers. In 2002 Beaulieu of America decided to concentrate strictly on carpet, and sold its rugs and hard surfaces divisions.

Maple Industries

Maple is a family affair. Founded in 1928 by John Maple, it remains privately held. Maple is a leading U.S. manufacturer of tufted accent and area rugs. In 1966 Maple opened a 30,000 square foot factory and then doubled its factory size in 1969. In the 1970s Maple innovated a three color cross-dyed process for its rugs. In the 1980s Maple introduced the first bulk continuous fiber nylon rugs for use in the bathroom, started using state-of-the-art computerized dyeing and computerized tufting, and pioneered the use of olefin accent rugs that could be machine washed. In the early 1990s Maple doubled the size of its New York City showroom and opened its own yarn mill.

Maple reported a compound annual growth rate of 17.5 percent between 1994 and 2004. Maple grew organically by investing at least 90 percent of its profits into capital improvements. Between 1997 and 2004 it invested over $35 million in its manufacturing facil-ity in Scottsboro, Alabama, in both expansions and new equipment so that it led technological innovations in the industry. In 2000 Maple expanded its factory to a total of 500,000 square feet. Between 2000 and 2004 Maple grew enough to warrant the 2004 doubling of its factory space from the 500,000 square feet it built out in 2000 to over one million square feet. It spent $6 million on the 2004 expansion. Maple does not try to be all things to all segments in the floor covering industry. It concentrates on manufacturing tufted rugs.

Others

Nourison Rug Corp., a maker of carpet and rugs, opened a 305,000 square foot plant in Calhoun, Georgia, in June 2007. Initially it will make carpet and later rugs and bath products at the plant, which has the latest cutting and finishing equipment to produce roll runners and rugs, already averaging 30 to 50 cuts of roll runners per day. The company has the ability to expand the building with another 420,000 square feet when it is needed.

MATERIALS & SUPPLY CHAIN LOGISTICS

U.S. carpet and rug makers had shipments of $14.2 billion in 2002 and spent more than half—56 percent—that amount on the materials it consumes in the manufacturing process. In 2002 manufacturers spent $7.9 billion on materials, up 15 percent from $6.7 billion in 1997. Since most of the materials it consumes are petroleum derived, it is difficult for the carpet and rug industry to control costs.

Most of the $7.9 billion spent on materials was for nylon. More than half (61%) was spent purchasing nylon. In 2002 spending on nylon totaled $4.8 billion, up 20 percent from $3.8 billion in 1997.

Besides nylon, carpet and rug makers need materials to produce backing. In 2002 spending on backing was its next largest expenditure after nylon. Industry wide expenditures for backing materials, which are divided into primary and secondary backing materials, were $931 million. Primary backing materials are mostly polypropylene based. Secondary backing materials are mostly woven and nonwoven manmade materials, but also include jute, foam/rubber/latex, and plastics like vinyl and polyurethane.

Besides expenditures for highly valued nylon and all important backing materials, the next largest categories of materials expenditures are polyester and polypropylene. In 2002 total spending on polyester was $719 million and spending on polypropylene was $689 million.

Since such a high percentage of the raw materials used in the carpet and rug industry are derived from petroleum products—with the exception of comparatively small amounts of wool, silk, jute, and dyes—the top three carpet makers announced price increases effective June 2007. Shaw, for example, raised prices 5 to 6 percent because, as it told Floor Covering Weekly, "worldwide demand is driving costs on propylene, benzene, paraxylene and other raw materials impacting all carpet costs," and it received notice of increases from all its nylon, polyester, propylene, and latex suppliers. Mohawk raised prices 4 to 6 percent. Beaulieu increased prices 6 percent. The price of benzene, a key ingredient in the manufacture of nylon, increased 28 percent in the first five months of 2007 according to the May 14, 2007 issue of Floor Covering Weekly.

Since so many of the materials consumed in the carpet and rug industry are petroleum derived and cost control measures are difficult to implement, carpet and rug makers turned to recycling as a means of gaining control over costs related to petroleum derived raw materials. Mohawk, for example, owns a polyester recycling facility in Summerville, Georgia, known as Image. The facility recycles the long-chain synthetic polymer known as polyethylene terephthalate from carbonated soft drink and water bottles. Bottles are sorted, ground into fine chips, and then cleaned. Ground chips are melted, extruded into fiber, and spun into staple carpet yarn. Mohawk reports that plastic beverage bottles are made with top quality polyethylene terephthalate as required by the U.S. Food & Drug Administration, so its recycled spun polyester is superior to lower grades used by other makers.

Mohawk is one of the largest plastics recyclers in America. It has kept approximately 21 billion plastic bottles out of landfills since it acquired Image in 1999. Image recycles 3 billion bottles per year or 25 percent of all bottles collected in North America. The Image plant produces approximately 160 million pounds of recycled polyester spun fiber per year. Mohawk donated its EverStrand polyester carpet, made from fiber spun from recycled plastic bottles at Image, for the backstage celebrity greenroom at the 79th annual Academy Awards in 2007.

Shaw, too, is involved with recycling. It collects and recycles carpet nationwide and expects to collect 300 million pounds annually, the equivalent of a 12 foot roll of carpet more than 10,000 miles long. It has partnered with recycling companies to establish a collection network across the country. It uses the carpet at its Evergreen nylon recycling facility in Augusta, Georgia, to produce nylon 6, the raw material used to make nylon fiber.

DISTRIBUTION CHANNEL

The distribution channel for rugs and carpets is characterized by: (1) specialty/independent flooring stores, (2) home centers/building materials centers, and (3) building contractors. In April 2007, Floor Focus Magazine reported in detail on the distribution channel for over $54 billion of retail flooring—ceramic tile, carpet, laminate, vinyl, and wood—sold in the United States in 2006. Specialty/independent flooring stores led with 35 percent of retail sales. Home centers/building materials centers accounted for 24 percent. Reflecting the growing influence of the big box stores, Home Depot and Lowe's accounted for 16 percent of that 24 percent.

Floor Focus Magazine examined the total 2006 $54 billion retail flooring distribution channel in depth by breaking the industry into three distinct segments which it defined as the consumer residential replacement segment, the builder new residential segment, and the commercial mainstreet segment. A fourth segment called commercial-specified is a unique distribution channel handled by special distributors known as contract dealers.

In the consumer residential replacement segment, specialty/independent flooring stores led the distribution channel with 45 percent. Home centers/building materials centers accounted for 36 percent of retail sales. Home Depot and Lowe's accounted for 26 percent of that 36 percent.

In the builder new residential segment, specialty/independent flooring stores accounted for 38 percent of all flooring dollar sales, while building flooring contractors led the channel with 47 percent. Within the builder new residential segment, home centers/building materials centers accounted for 12 percent of retail sales. A shakeup in this segment occurred in July 2007 when Home Depot sold HD Supply, the largest builder flooring contractor in the country. In 2006 that firm alone accounted for 7 percent of all flooring sold to U.S. builders.

In the commercial main street segment, specialty/independent flooring stores once again led the channel with 38 percent of all flooring dollar sales, while home centers/building materials centers accounted for 20 percent.

The commercial-specified segment is somewhat different. Firms called contractors or contract dealers control 87 percent of flooring dollar sales in that sector. Other emerging nontraditional distribution channels are shop at home retailers.

While the Big Box stores have a growing influence on the market—Home Depot and Lowe's have a combined 3,325 U.S. stores—specialty/independent flooring stores led the distribution channel overall, controlling 35 percent of the total $54 billion retail flooring market. Specialty/independent flooring stores also led the distribution channel for residential replacement flooring with 45 percent of this important segment of the market. The position of the specialty/independent flooring stores within the distribution channel was strengthened in part by Abbey Carpet and Carpet One.

Abbey Carpet has 620 dealer franchises. In 2007 it changed its name to Abbey Carpet and Floor, reflecting the shift in the U.S. floor covering industry where the market share of carpet is diminishing due to the growth of other flooring choices like ceramic tile, laminate, and wood. Abbey also launched a new business called Abbey Floors at Home in direct response to the success of Empire Home Services, the shop at home retailer that grew from a $30 million local Chicago business in the 1990s to a $500 million national business by the middle of the first decade of the twenty-first century. Empire spends in the neighborhood of $10 million per year on its local television commercials that promise next day delivery on carpet and other flooring.

Carpet One started in 1985 as a 13 member co-operative in Atlanta, Georgia. By 2005 it had more than 1,000 stores that collectively sold $3.3 billion of flooring. The co-op was established to offer a helping hand to specialty/independent flooring stores tired of being dwarfed by the giants. The powerful co-op Carpet One is the single most important retail entity in carpet, giving it the muscle to negotiate prices and products with industry leaders Mohawk and Shaw.

Mohawk and Shaw dominate the flooring industry, together accounting for a sizeable 71 percent of the carpet business. Mohawk and Shaw each own distribution systems. Mohawk owns one of the largest distribution companies in America with a fleet of hundreds of trucks. Shaw created its own trucking subsidiary in 1982. By the turn of the current century it had close to 30 distribution centers.

A traditional distribution channel within the sizeable carpet and rug industry is the trade show. These include the International Rug Market in Atlanta, Georgia, the annual Surfaces show in Las Vegas, Nevada, and the Las Vegas Furniture Market show, also in Nevada. At the trade shows, the major players try to out-do one another with lavish parties and huge showrooms.

Rug sales are sometimes discussed as a category within the floor covering industry, the home furnishings industry, the textiles industry, and even the gift industry when it comes to welcome mats. For rugs, department stores are the largest distribution channel with a 25 percent share. Home centers/building materials centers were the second largest distribution channel with 16 percent.

KEY USERS

Key users of carpeting are those involved in either the process of updating the interior design of residential and commercial properties or those involved in building new such structures. The updated interior can be part of a remodeling or redecorating project. Other key users include large national or regional homebuilders such as D.R. Horton, the largest homebuilder in the United States, and Toll Brothers, the leading builder of luxury homes.

ADJACENT MARKETS

Remodeling, redecorating, and home improvement spending is an adjacent market to carpeting. The market for residential remodeling is driven by home values. As the value of a home increases, the owner's ability to obtain financing for home improvements generally increases as well. According to the U.S. Census Bureau, the U.S. median home value rose 32 percent from 2000 to 2005. This boom fueled consumer spending and much of that spending was for home improvements, including remodeling and redecorating to update the interior design. In 2006 and 2007 home prices dropped for the first time in years. Moody's Investors Service estimated that median existing home prices fell on average by 3.6 percent in the first half of 2007, and as much as 20 percent in some markets, notably the Detroit, Michigan, market.

New construction is another adjacent market to carpeting. Recognizing that new house construction drives carpet sales, in 1992 Shaw launched Home Foundations, a carpet program targeted at builders. The U.S. housing market was at record levels during the 2002 through 2005 period, buoyed by low interest rates and flexible lending practices. Housing starts—new residential construction—as well as sales of existing housing both set records during this period.

The market for wood flooring is also adjacent to carpet. The wood flooring market on a whole is dwarfed by the carpet and rug industry. U.S. wood flooring shipments represent 10 percent of the total value of U.S. shipments of rugs and carpets; in 2002 the Census Bureau reported wood flooring industry shipments of $1.56 billion compared to $11.75 billion for rugs and carpets. Forecasts were for carpet shipments to decline relative to other flooring choices like ceramic tile, laminate, vinyl, and wood. For instance, wood flooring doubled its market share at the expense of carpet between 1997 and 2004.

RESEARCH & DEVELOPMENT

Research and development on the part of the Carpet and Rug Institute resulted in the Carpet America Recovery Effort. The goal of Carpet America Recovery Effort is to divert 27 to 34 percent of used carpet from landfills by 2012. The Effort emerged in 2002 as a result of a Memorandum of Understanding for Carpet Stewardship, a national agreement signed by members of the carpet industry, representatives of state governments, the U.S. Environmental Protection Agency, and nongovernmental organizations.

To reach its goal of diverting up to 34 percent of used carpet from landfills by 2012, Carpet America Recovery Effort fosters market solutions and helps expand the used carpet collection infrastructure. It added 24 U.S. reclamation sites in 2006, building on its 16 preexisting collections site for a 2006 total of 30. Its June 2007 newsletter announced a total of 52 collection sites. Half of U.S. states have carpet reclamation facilities.

Carpet America Recovery Effort reported at its 2007 annual meeting that a total of 261 million pounds of used carpet was diverted from landfills in 2006. A decade earlier almost no carpet was diverted. The 2006 accomplishment represents a 16 percent increase in diversion over the previous year. In 2005, 225 million pounds were diverted, an increase of 108 percent over 2004. Of the 225 million pounds collected in 2005, 86 percent was recycled, while the rest was burned for energy.

It is anticipated that diversion for waste to energy will decrease as demand for recycled material increases. Used carpet can be reused in three ways. It can be used as carpet, generally as backing material or padding. It can be turned into something else such as composite lumber for use as decking, railroad ties, and marine timbers. Lastly it can be burned as fuel, with a Btu (British thermal unit) value by weight approximately the same as coal.

Recycled carpet is generally commercial and involves circumstances where the cost to haul used carpet to the reclamation facility is less than the landfill disposal fee. Often used carpet goes to a sorter where the backing is removed and fibers separated. The sorter sends it to a processor, where the material is cleaned and broken down so that it is pure and usable. Processors sell to manufacturers. Some businesses cover all three processes, such as LA Fibers, the largest carpet recycler in the world.

Interest in recycling carpet—a product consisting primarily of nylon—grew as oil prices increased. The year 2007 was pivotal. Reflecting the increased demand for the nylon in carpet, Shaw re-opened its Evergreen nylon recycling plant in Augusta, Georgia, which had been idled for almost five years due to lack of demand.

Evergreen was built in 1999 to reduce nylon to caprolactam, its raw material, and then make new nylon from the broken down elements with negligible loss. Shaw acquired 50 percent of Evergreen in its 2005 purchase of Honeywell's fiber business, then bought DSM Industries' 50 percent share of the plant in 2006. Shaw re-opened the plant in 2007 due to increased raw material costs and a marketplace with a better understanding of the value of recycled materials.

Since the plant operates as a sorter and a processor, Evergreen has to collect close to 300 million pounds of carpet to get 100 million pounds of nylon. Shaw gets double duty out of its trucking subsidiary that hauls new carpet out and reclaimed carpet it picks up from its dealers back to Georgia, the world capital of carpet. Its initial goal is to produce 30 million pounds of caprolactam annually, which will yield about the same volume of nylon fiber. Evergreen has a capacity of 100 million pounds. All of the nylon produced at Evergreen will be used by Shaw to make nylon carpet.

CURRENT TRENDS

The industry keeps up with fashion and interior design trends. It introduces new colors, patterns, and textures of carpets and rugs every year to keep up with trends. Wool is a style and trend setter that other fibers are used to copy. For that reason, the Wools of New Zealand annual carpet and rug color forecast is eagerly awaited. Its 2008 international carpet and rug color forecast is called The Colour of Wine-Fine Living for a Fine Palette. Colors for the 2008 palette for wool carpets were inspired by the art of viticulture. Colors were derived from vineyard landscapes, the various varieties of grapes, and the finest wines of New Zealand. Its collection of New Vintage Carpets for the Connoisseur includes new soft shades of white that were not cold and clinical, but rather both warm and welcoming, as well as funky and futuristic.

One industry trend is to offer coordinated products. Carpet makers are offering coordinated runners and area rugs. A consumer can purchase roll runners for stairs and area rugs that match newly installed carpeting. This allows consumers to coordinate carpet with other rugs in the house. Some manufacturers are taking this cross-category coordination one step further and include woven bedspreads, tapestries, pillows, throws, and window blinds.

Another industry trend is licensing agreements. Shaw Living led the licensing charge, with products for almost every type of consumer—from children to golf fans—through licensing agreements with Kathy Ireland, Mary-Kate and Ashley Olsen, Jack Nicklaus, Tommy Bahama, and many others. In October 2006 Shaw showed new rug designs for its licensed Tommy Bahama Collection called Squared Away.

TARGET MARKETS & SEGMENTATION

Mohawk and Shaw target young consumers with lower priced products with plans to capture loyalty and eventually move them into the higher end. Karastan, owned by Mohawk, introduced its Studio Collection of area rugs in synthetic materials—an area it normally eschewed—with the idea that early lower price point purchases will lead the consumer to aspire to eventually owning its high-end products. Shaw took a similar approach with its mary-kateandashley collection. The collection initially targeted the juvenile market with bright and fun rugs. In 2005 it unveiled six new designs that target not only young adults but anyone interested in a fashionable new rug.

Manufacturers target commercial carpet segments like corporate, hospitality, education, and retail. The commercial segment is active because carpet has a well-recognized 5 to 7 year life span so it must be replaced relatively often.

Carpet companies target commercial carpet segments with modular carpet tiles. Modular carpet allows damaged or stained carpet tiles to be replaced quickly and cost-effectively, resulting in a better overall appearance and the ability to maintain an always-clean appearance. Because carpet tiles are not sold in rolls they are less flexible with a firmer backing material, making them better wearing. Shaw debuted its Create Your Own Designer Rug carpet tile line at the April 2007 textiles market in New York. The solid carpet tiles are available in 12 different colors.

Retail and grocery stores, lifestyle centers, enclosed shopping malls, and the education sector generally are all targeted as potential users of modular carpet. Teachers prefer carpet on classroom floors because it absorbs noise, making for quieter classrooms. Makers predict the education sector will be one of the fastest growing markets for modular carpet according to a 2005 survey by Floor Focus magazine.

RELATED ASSOCIATIONS & ORGANIZATIONS

American Fiber Manufacturers Association, http://www.fibersource.com

Carpet America Recovery Effort, http://www.carpetrecovery.org/index.php

The Carpet and Rug Institute, http://www.carpet-rug.org

Oriental Rug Importers Association, http://www.oria.org

World Floor Covering Association, http://www.wfca.org

BIBLIOGRAPHY

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――――――. "Expo Design Alters Rug Mix: Retailer Heeds Customers' Calls for Roll Runners and Larger Area Rugs." Home Textiles Today. 8 January 2007, 10.

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Frank O'Neill. "Distribution Evolution." Floor Focus Magazine. April 2007.

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Helm, Darius. Focus 100 Retail. November 2006. Available from 〈http://floordaily.net/focus_article.aspx?article=9985〉.

"Homebuilder Sentiment Hammered." Focus 100 Retail. 17 July 2007. Available from 〈http://floordaily.net/newsarticle.aspx?article=10848〉.

Mancini, Rosamaria. "A Tween and Hungry Look: Manufacturers are Tailoring their Products to Reach both Young and Old." HFN The Weekly Newspaper for the Home Furnishing Network. 8 August 2005, 30.

――――――. "Carpet Tiles are Again Flying Off the Shelves." HFN The Weekly Newspaper for the Home Furnishing Network. 6 June 2005, 16.

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"Mohawk Closing Tufting Operations at Lavender Drive." Floor Covering Weekly. 4 June 2007.

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Quail, Jennifer. "The Polypropylene Paradox: Synthetic Rugs Helped Alter the Marketplace, but Economic Factors are Keeping Wool in the Loop." HFN The Weekly Newspaper for the Home Furnishing Network. 13 December 2004, 36.

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Torcivia, Santo. "The Home Center Challenge." Floor Focus Magazine. April 2007.

see also Resilient Floor Coverings, Vacuum Cleaners, Wood Flooring