From rugs to riches


dba RUG & HOME
Headquarters: Asheville CEO: Rakesh Agarwal Employees: 55 Founded: 1995 Projected 2009 revenue: $15 million Business: Home-goods retailer

Customers assume that retailing depends on creative selling. But it really turns on shrewd buying, Rakesh Agarwal says. A retailer who buys the right goods at the right price can make a plump profit. One who buys badly risks excess inventory, markdowns and even bankruptcy, no matter how many people shop in his store.

Agarwal and his wife, Dolly, have built Rug & Home, a seller of rugs and other home goods, into a regional chain by being savvy — and, at times, intrepid — purchasers. In their early years as retailers, Rakesh would trek to such unstable countries as Iran, Pakistan and Afghanistan to hunt down carpets. Dealing through brokers in New York and London cost too much, preventing the Agarwals from offering prices they believed could broaden the appeal of exotic rugs. Today, Rug & Home has a store in its hometown, another in Gaffney, S.C., and a third scheduled to open early next year in Kannapolis. Rugs account for about 80% of sales.

The Agarwals — Rakesh is 55, and Dolly, 49 — are unlikely merchants. He trained as an engineer at India’s leading technology university. She was reared to be a mom and housewife. A career misstep altered their plans. Like many educated young Indians, he wanted to come to the U.S. In 1985, he accepted a job as production manager for a Hendersonville rug maker. In India, the $12,000 annual salary sounded kingly. With a wife and child to support, he could barely make rent. His wife went to work for The World of Clothing Inc., running the retailer’s fledgling rug department. After getting off work, he would help out. They would tuck in their daughter, Aanchal, atop a pile of rugs to sleep until they quit for the night. World of Clothing eventually hired him, and over a decade, the Agarwals built the department’s sales to $11 million a year. The store drew customers from 100 miles. The lure: low prices and easy access. It was open every day, often until 11 p.m. Americans, the Agarwals realized, would drive for a deal.

In 1995, they opened a store in Asheville in partnership with their boss to sell art and home furnishings. They soon bought out their partner and returned to rugs. With Rakesh’s experience in making rugs, their expertise selling them and their ties to India — a major source of handmade carpets — they had a competitive edge, especially since they were comfortable dealing directly with weavers in the developing world. As time passed, his relationships enabled them to subtly alter products to suit their customers’ tastes. “Americans want clean, open designs, not a hodgepodge,” he says. “I’d tell the makers to let the design breathe.” Young Americans, particularly, prefer colors besides the reds and blues that dominate classic Oriental designs. “They don’t want the rugs that their parents had.”

Heeding their experience at World of Clothing, the Agarwals have strived to draw more than just local customers. They advertise heavily on TV and in regional publications such as Southern Living. In 1998, they picked their second location strategically: Gaffney, with its outlets and access off Interstate 85, attracts shoppers from across the Southeast. The Kannapolis store will be similarly sited near I-85 and closer to Charlotte. The former Target store they bought there is large enough to accommodate a warehouse as well. That should enable further expansion — if that’s what Aanchal wants.

Now 26, she’s Rug & Home’s chief operating officer. After graduating from UNC Wilmington, she committed herself to running the business someday — growing up, she wasn’t sure she wanted to — and her parents are trying to let her do so. Dolly has cut her hours. Rakesh, who has no hobbies and rarely takes time off, admits he’s having a tougher time: “I am trying to take a back seat.”

— Tim Gray