Wednesday, July 14, 2010

Bucks County Oriental Rug Store, Brandon Oriental Rugs - www.BrandonRugs.com - Shares Wall Street Journal Article Recognizing the Potential for a Rug Collector's Market Developing


In a two page article published Friday June 18, 2010 ( http://online.wsj.com/article/SB10001424052748704198004575310643634857392.html#project%3DSLIDESHOW08%26s%3DSB10001424052748704289504575312930546723568%26articleTabs%3Darticle ) the Wall Street Journal recognized that there is expanding interest and demand for handmade rugs in the United States and elsewhere.

In an article informative to both novices and experts, Kelly Crow reviews the history of fine rugs; recent international auction results (including the record $9.6 million paid at Christies this spring for the rug above); points of interest for potential buyers; and stories of collectors engaged in passionate quests to locate special pieces to expand or complete their collections.

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Saturday, July 3, 2010

CHALLENGES / OPPORTUNITIES FOR RUG-COLLECTORS, DESIGNERS, AND THOSE SEEKING TO ACQUIRE REAL HANDMADE RUGS

    The upheaval in the global economy due to war and threats of war (failed diplomacy), natural and man-made disasters, and resource reallocation (energy, labor, capital) have had a definite impact on the market for and marketing of handmade oriental rugs. A number of these global issues merit the attention and appreciation of rug-collectors when making decisions about potential acquisitions (what and when to buy).

1) Threat of a new embargo on trade with Iran  [this "threat" has now been realized]

While the lack of a coherent foreign policy in the Obama administration (at least from the standpoint of one that clearly benefits the United States) makes prediction of when, or if, a new trade embargo with Iran will be imposed, the buzz among rug importers IS that an embargo is certain. Along with that assessment is the assurance that (unlike the leaky embargo of the 1980's and 1990's which saw large shipments of Iranian rugs entering the USA from Canada and elsewhere) the embargo will be airtight.

What this means is that inventories can't be replaced, and rug dealers will take a protective strategy with existing inventories. Prices which are at historical lows presently won't be going lower, and likely will start going higher (soon and quickly). If the model of the last embargo is an indication, prices will likely quadruple on any rug within a year or two of any embargo declaration.

Speculators can definitely benefit short-term from the uncertainties. Fence-sitters will definitely pay for delays in purchases. Collectors; those with an appreciation for Iranian rugs of any kind; and designers looking to garner the lasting appreciation of clients spared the regret of missed opportunities in the acquisition of fine rugs should all begin developing plans to seize the day before it is night.

2) "The Pinch" (A Perfect Storm)

The embargo on trade with Iran mentioned above [which now is in effect] is just one facet of many converging factors which pose significant challenges for the oriental rug business, and for those interested in acquiring the products offered by handmade rug businesses. A brief enumeration of these challenges follows:

* Monetary policy in the USA threatens inflation. Devaluation of greenbacks increases the cost of foreign goods purchased with them.

* Related to monetary policy, but also impacted by numerous other factors, the cost of oil has significantly increased transport costs from the Middle East and Asia to the USA.

* Economic development in the rug-making countries (especially India) has depleted the labor pool of skilled weavers as those individuals seek more lucrative opportunities.

* Loss of large numbers of weavers to other industries has had the concomitant effects of diminished rug production and supply; inability to meet demand for new product or to satisfy demand in a timely manner; and higher wages for remaining workers. This also means higher prices for handmade rugs in the USA.

* The economic downturn in the USA (and the directly related problem of credit-worthiness) has adversely impacted international trade in rugs due to more stringent credit requirements. While most rug-importers are credit worthy, the banks that extend credit are unable or unwilling to extend it due to the system shock they've suffered in recent years. Liberal payment arrangements between producers and importers that were the norm prior to the economic meltdown are no longer possible. Uncertainty of repayment has made producers more insistent on full payment in advance. This had made rug importers reluctant to order anything other than sure-sellers, or rugs for which they have advance orders. Either way, significantly fewer rugs are being produced than were being made prior to the crisis.

* Rug-weavers lost to other industries are NOT likely to return to rug making (ARE NOT returning to rug-making) as the economy recovers.

All of the above -- and spin-off effects -- promise increasing scarcity of handmade rugs into the future. The same factors promise a seller's market for those sellers that survive with product to sell into that scarcity.