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August 25, 2016

Retail Chains Take Stock of Promising Trends

This article originally ran in the August issue of AVN magazine. To take the pulse of the adult retail industry in mid-2016, AVN solicited diagnoses from executives at six of the top retail chains: Adam & Eve, Castle Megastores, Good Vibrations, Hustler Hollywood, Lion’s Den and the Pleasure Chest. Among topics discussed were mainstreaming, supply and demand, product trends and concerns about the future. The general consensus is that everyone seems to be doing really well, despite what some see as a surfeit of product. The most heartening trend is the evolving customer profile. “Retail stores are much more couples-friendly, a trend that’s been going on for three years,” according to Adam & Eve’s Dave Keegan, who is general manager of the retail division. “We are seeing more and more couples walking into our stores every day,” says Philip Del Rio, Hustler Hollywood’s vice president of retail operations. “That said, we see a lot of customers looking for toys they can use together or alone.” What’s encouraging for Keegan is seeing markets open up in the more conservative states as pleasure products continue to widen their appeal. “The more you see them in, say, CVS stores, the easier it is to convince local authorities that these are mainstream products. It provides better arguments.” Adam & Eve just opened a store in Gatlinburg, Tennessee, their first in that state, as well as a new one in Wichita Falls, Texas, a territory where they’ve always been strong. “We’re not there yet,” Keegan cautions, but there is a growing trend for adult stores being viewed as more mainstream. “We’re opening three to 10 stores a year. The operators are happy.” And competition from online sales? He shrugs. “Stores will always carry more product that what is offered online.” One thing seems clear and that is that adult retail is no longer primarily about DVDs. With Adam & Eve, says Keegan, “DVDs are down to 4 percent of inventory.” He expects that percentage to hold for the next five years, decreasing to no less than 3 percent. He asserts, “People will still by buying DVDs.” Hustler’s Del Rio agrees. “People will always buy DVDs in my opinion, but the inventory and the footprint has to be relative to the demand. I see a lot of retailers out there still merchandising 30-40 percent of their floors with DVDs and it boggles my mind. I know DVDs can’t be contributing 40 percent of their business. We inventory and merchandise our stores according to what the customers want to see and experience. We are increasing our inventory of toys and lingerie. Those two categories go hand in hand for us.” The Pleasure Chest stores have a somewhat different perspective. Victor Tobar, the chain’s national buying and merchandising manager, says, “Because of how internet-focused the video market has become, it’s interesting to see how people are shopping for DVDs and what they’re looking for in our stores. We’re definitely not carrying fewer titles, but we are focusing more on shopping trends, to try to keep our stock relevant to what our customers are looking for.” For the Lion’s Den chain, according to Senior Vice President Mark L. Miller, “Adult toys, fetish, lingerie, lubes/lotions, smoking accessories and stimulants are all leading growth categories for the Lion’s Den stores. We also continue to have a very strong DVD business.” Adam & Eve’s Keegan places pleasure product sales at 65-70 percent, soft goods around 30 percent. “Soft goods [includes lingerie, games, jewelry, perfume, hosiery, shoes] 35 to 90 percent. Lingerie: 60 percent hanging, 40 percent boxed. The percentage of boxes has increased because they’re of a higher quality than they used to be.” Pleasure products in stores, he says, “go from a low of 10 percent to a high of 35 percent, in most stores about 25 percent.”       Here’s what’s trending at the Pleasure Chest, where, according to Tobar, “there’s always a customer who’s looking for every toy we carry.” He says that “new takes” on classics, “like the Rechargeable Magic Wand and the new Fleshlight Quickshot and Ice products are most popular this season. The We-Vibe Nova offers a new spin on the classic rabbit-style toy, and that’s also gaining popularity at our stores. “Our customers are also gravitating more and more toward our kink sections, with light bondage and impact toys seeing an uptick. New innovations like the bVibe rimming plug and the Womanizer Pro are also expanding the possibilities of sex-toy play, and they’re really popular at the Pleasure Chest right now.” The Womanizer—“a big new trend”—is also galvanizing sales at Adam & Eve stores, according to Keegan. In the future he looks to the area of virtual reality for the next big thing. At Good Vibrations, says Executive Vice President Jackie Rednour-Bruckman, trends involve “body-safe materials, new Pleasure Works Firm Core Silicone dildos (dual density), Consent and Sex Positive culture, no body shaming! “Way fewer physical DVDs, but we have our own digital feminist porn site called GoodVibrationsVOD.com. We feature sex education movies at some of the stores, especially our Pleasure Ed line that features How To on topics like fellatio, cunnilingus and female ejaculation.” Mark Franks, CEO of the Castle Megastore chain, sums up his take on today’s market in one word: over-saturation. The Castle chain, he says, “has 16 stores with 145,000 feet of retail space—and there’s no place to put all the product.” “People are making similar products, hundreds of the same things already on the market. It’s just like the video business 10 years ago. They can’t sell their products in stores so they start selling them anywhere they can, online, at Amazon.com. … It’s the worst trend and it’s going to get even worse.” Franks compares it to porn in the 1990s, “when you could sell everything you made. Over-supply of product: in those days the market could take it. But it turned in the late ’90s. Video guys jumped into the toy business. “There is too much repetitive product being made that the market cannot absorb. Everything looks the same, butt-plugs, cocks, etc., all coming from the same factories—hundreds of the same things already on the market. There’s a need for more unique product. “People are fishing in the same pond. It’s beginning to shake out. Customers are smarter these days. People can’t buy what they can’t sell.” Still, he concludes, “Castle Megastores are doing very well. Our business is very strong. We’re not a discounter, we know what to carry—things that any good retailer would do.” Hustler Hollywood’s Del Rio echoes Franks’ concerns. “Hustler is looking for innovation and quality because that is what our customer is looking for. We are all tired of the same stuff in a different package.   “I think our good vendors know this, especially after the last couple of years, and they are no longer hitting the market with hundreds of ‘new’ items per season or at every show. The reality was that none of these ‘new’ items were innovative. Now the brands seem to be releasing fewer items each season but focusing on true innovation. In other words, quality over quantity.” “We’ve tried to remain flexible with our inventory,” says Lion’s Den’s Miller. “That flexibility allows us to increase and decrease items within categories to match seasonality and the ever-changing tastes of our customers. We’ve also learned to allow for some individuality among the stores as well. With 45 stores in 23 states, preferences and trends differ greatly. As a result, our purchasing department and operations leadership work together to make sure that each store has exactly what it needs, when it needs it.” There is unanimous agreement that the way to prosperity for any retail outlet lies in good customer service. Says Castle Megastore’s Franks, “Customers go to where they get the best service. Coming into an adult store customers want to be treated like coming into any store.” At Good Vibrations outreach is created “with trusted information, quality products, excellent customer service, loyalty programs, and special fun events, receptions and workshops.” For the Hustler Hollywood chain, “First-class customer service is our retention strategy. We see a lot of repeat customers in our stores and it’s because they enjoy the experience. If they don’t enjoy the experience they won’t come back. It’s as simple as that, in my opinion. We also like to offer monthly or bi-monthly (depending on the store) workshops. This really helps us continue to connect with our customers. Again though this is still about the experience. In terms of new customers we are getting more involved in digital, mobile, and social marketing.” In the Lion’s Den stores, “We introduced our customers to a loyalty program in late 2014. It has been a tremendous success for us. The loyalty program has allowed us to get a glimpse of who our most frequent customers are and the factors that drive them to make a visit to our stores. We hope to expand that program in the years to come. “As for reaching new customers, we have numerous marketing initiatives under way to catch the attention of as many folks as possible. Those programs range from the traditional outdoor and electronic campaigns to geo-targeted digital efforts.” What do retailers want from manufacturers and distributors? Good Vibrations’ Rednour-Bruckman is blunt: “Good margins and MSRPs held, and not selling to multiple online distributors who eventually denigrate the brand and confuse customers.” Looking to the future, Rednour-Bruckman voices some common concerns. “From a brick and mortar perspective, the biggest obstacle is always zoning ordinances and landlords with stigma and shame around sexual health. But that’s always been. I guess the biggest ‘concern’ I have is dealing with regulations and legislations against our industry … I don’t want a government entity telling us what constitutes safe sex. “I prefer that information come as recommendations and not as requirements from medical professionals. It’s completely on par with how I feel about the government mandating women what to do with their bodies and reproductive health care choices. I love that the adult industry is mostly based in California and don’t want to lose it to, say, Nevada or Florida.” Lion’s Den’s Miller asserts, “We work hard to maintain the relationships and partnerships we have with the industry’s best manufacturers and distributors. They are critical for our success now and into the future. We are all trying to be creative to figure out how we can work together to insure long-term success for everyone in the industry. That cooperation and innovation are the only way we can achieve a bright future for the industry. “I know it’s a cliché,” Miller concludes, “but we try to only concern ourselves with the things we can control. We have been a heavily regulated and scrutinized industry since our inception. Confronting the issues and challenges that are placed in front of us on a daily basis and providing industry leadership in overcoming those issues and challenges will continue to be a priority for the Lion’s Den. “Upholding the rights that all of us enjoy, through defending the First Amendment, will always be a force driving us to make the decisions we make and the actions we take.”

 
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