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To illustrate the accumulation of costs which go into the retail price, we have chosen to use a video Weaving a Rug and Home Masterpiece.  Disclosure:  I have known Rakeesh and Dolly Agarwal for 40 years.  I have tremendous respect for their knowledge of the rug weaving business from sheep to retail. 

This is the last  of a 5 Part Article on the Basics of Hand Knotted is a rewrite of one Leslie Stroh wrote for the 2nd Issue of Rug News Magazine in 1978.:   Part 1 Chinese Rugs, Part 2 Affordability, Part 3, Design, Part 4 Labor & Design, Part 5 Price at Retail.

Because of the Persian influence in the hand knotted rug process, we are using a standard for comparison of a particular construction from the Persian tradition of 11×11 or 121 knots per square inch. Knots per square inch is only relevant because the standard of piecework pay for rug weavers is 6,000 knots per day.

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There are five major categories of cost for producing a rug.

  1. Materials
  2. Labor
  3. Designing and Finishing
  4. Distribution
  5. Interest

Distribution  In addition to the normal costs of shipping and warehousing,  hand knotted, one-of-a-kind rugs have  the added costs of a service business.  Rugs were a product business for centuries because of a shortage of supply. Even though supply may now exceed overall demand, if the one of a kind special rug is on the East Coast, and the buyer who will buy that rug is on the West coast, there is a conundrum of how to match the special rug with the special buyer when s/he wants it.

Money is the reality of the hand knotted rug business. (The hand tufted and machine woven rug business have different problems, which is not the subject of this article, but they do impact the supply chain.)  Adjusting to those problems is at the heart of what the consumer sees available for sale at any one time.

If it takes one to two years to make a fine knotted rug, then the interest on the money invested is a significant cost factor. Producing the rug takes a year, and selling the rug takes 2-3 years.  Matching one rug with one buyer is not much different that an art gallery finding customers for their artists.

US Banks don’t lend money on rugs. Local interest rates where rugs are made are much higher than US rates. And the capital in any one rug may reflect 5 years from start to sale. Meanwhile the weaver has to eat every day.

Approximate  Retail Price for hand knotted rugs. (October, 2016)

9 x 12 Equivalent

Fine quality fine wool $10,000

Fine quality fine silk $15,000

Median price at vetted auction  – $10,000

Very fine quality – 9×12 to 10 x14 $50,000 to $80,000

 Over 12 x 15, 10 x 20

Very Fine Quality  – Six Figures

 Local Auction : needing no repairs, but no detailed description —  $10 to $ 20 per square foot for room sizes, plus at least $6 a foot to have it professionally cleaned. (minimums

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