Suppliers, Retailers Press for Better Margins

New York — Despite price deflation which continues to erode sales dollars, if not volume; and lately a withering of disposable income as consumers pay higher prices for gas and heating their homes, making home fashions a highly deferrable purchase; sales of bedding products managed to hold their own last year, if just barely, with sales at retail edging up by 1.8%, to an estimated $8.45 billion from $8.3 billion in 2004.

At least on paper, sales made a gain. But with the rate of inflation in 2005 pegged at 2.68%, the bedding business may actually have contracted slightly, with the 1.2% increase in sales lagging more than a percentage point behind the uptick in inflation.

That's not to say that all the news was bad last year, even if it felt like it. And for every product category that lost ground last year, another one made gains. In fact, in this year's HTT Bedding Report, five categories increased their sales — comforters in various configurations, bed pillows, bedspreads/coverlets, blankets and mattress pads — while five others slowed down — sheets, duvets, decorative pillows, quilts and throws.

In a substantial makeover in methodology, this year's HTT Bedding Report takes a different slant on comforters, producing a surprising result. In prior years, the Bedding Report created two sub-sets: comforters sold singly, and as part of a bed-in-a-bag set. This year, recognizing the popularity at retail of bundling products together to increase sales dollars, the Bedding Report looks at comforters sold singly, as it always has; and a new subset combines bed-in-a-bag and comforter sets, in which a comforter is packed with shams, skirts, anything but a sheet.

And guess what? Bundling things together produces results. When sales of comforters and bed-in-a-bag were combined in 2004, the result was retail sales of an estimated $2.16 billion. But add together sales of comforters, bed-in-a-bag and comforter sets, and the sales dollars jump up by 21.3%, to $2.62 billion. The difference is in those shams and ancillary products that are packaged as part of the comforter set, and which might never have been sold at all if they weren't packaged with a comforter.

As it has in years past, unrelenting price deflation took its toll on the top line for retailers and suppliers alike as stores continued to rely on reverse auctions, and suppliers kept dropping their prices, even at the risk of losing money, just to hold on to shelf space.

But something else started to happen during the second half of the year. On an encouraging note, suppliers and stores alike started talking trade-up product, higher prices and margin expansion. Anecdotally, several suppliers said that retailers have approached them asking for ways to get price points and margins up at retail.

Notably, down and fashion comforter suppliers report better goods and the top of the line doing well. And earlier this year, Loren Sweet, ceo of Brentwood Originals, the dominant decorative pillow producer, with $171 million in 2005 sales, reported: “Some retailers are now asking us what we can do to get back up to $29 from the $19 they drove it down to. They're asking us to come up with the product to justify the higher price point. With any luck, we could be seeing an end to rampant deflation. That's encouraging to me, but it's probably easier to accomplish in decorative product” than with a commodity item.