Padborg is definitely not the most bucolic area of Denmark. Situated just north of the German border, less than a 10 minutes’ car ride from Flensburg, the town is dominated by industrial buildings and warehouses. One of those warehouses is used by Michael Peter Hansen, the owner and founder of Scandia Trading ApS – the company behind the sexshop.dk online shop. And while it may look rather inconspicuous from outside, this building is where a small team is working on the next chapter of Scandia Trading’s success story. The kind of story that can still be found in the online business now and then.
When Michael Peter Hansen started the company in September of 2012, he was only 23 years old. “What encouraged me was the fact that the market was small enough so you could compete as a newcomer, but at the same time big enough to be interesting from an economic point of view”, Michael says, describing the reasons behind his decision.
Of course, it was also a case of right place, right time. He was not happy with his job as a tax advisor, and then he found out that the owner of a brick and mortar store sold the domain sexshop.dk. Michael didn’t have any real experience with the adult industry or e-commerce, and there were already lots of adult online retailers in Denmark, but the big online shops that dominate the market in many other European countries are absent from the Danish marketplace, and while the country’s population of 5.6 million people limits the size of the market, the Danish are in the European top ten as far as GDP and per capita income are concerned. So the reasons to take a chance clearly outweighed the reasons not to, and Michael started his own online shop.
The first steps towards success
The domain name sexshop.dk proved a great help, especially in the early days, as Michael recounts: “Now, I could create an online shop under another address, but at the beginning, that name was really helpful in getting traffic to my site.” One aspect his work that he has always found extremely important is SEO, search engine optimisation. For every menu item, there is a description, and the user experience has been at the core of the shop’s design. Michael himself describes the look of sexshop.dk as playful – not too elegant, not too businesslike, but instead designed to appeal to a wide range of customers. But of course, the domain name and search engine optimisation have not been the only factors contributing to the quick success of the site.
There was much more: “Hard work, ambition, and great, dedicated people, both in the team and among those who helped from the outside”, Michael says. And in addition to that, knowing your customers is also extremely important. “Our customers expect discretion when they buy at our site.” Many of them shop on the internet because they would feel uncomfortable going to a walk-in adult store. But of course, they still have certain expectations. The price has to be right, and the products have to offer great quality and design.”
Customer support is vital
In Denmark, consumers expect to get their products in the mail the very next day, and that the retailer takes back a product if it is defective or if the buyer didn’t like it. Catering to these expectations would be impossible for a dropshipping retailer, as Michael adds. That’s also why he decided against that concept early on. His goal is customer satisfaction, and going by consumer feedback, he seems to be doing a pretty good job. The user ratings for sexshop.dk on Danish review site trustpilot are overwhelmingly positive, and the average rating is 9.3 out of 10. As Michael explains, this is all the more important because many consumers pay great attention to such ratings.
In order to further improve the site’s service, phone support is available throughout business hours so the shop visitors can ask any questions they may have about the product range. Another element that played a big role in the success of sexshop.dk in the Danish market is a collaboration with Extra Bladet, one of the biggest newspapers in the country. ”The editors are not afraid of sexual topics, and so we get to publish sex and relationship advice. That is great for our branding, naturally.” Given the team’s degree of commitment, it is not surprising that the concept turned out a resounding success.
Expansion on the home market and abroad
Three months ago, Michael invested in a bigger warehouse on the outskirts of the industrial area of Padborg – ironically, this warehouse had been owned by a former market leader in the Danish gay DVD market not so long ago – and he already has plans to expand beyond the borders of Denmark.
In the long run, he can definitely see being active in several other countries, but the first target markets for this expansion strategy are Germany and South Africa. The former is an obvious choice seeing as Germany is an immediate neighbour and only a few kilometres South from Padborn. “Its size alone makes this an interesting market. But of course, competition is much fiercer, and also, I didn’t expect to be faced with so many bureaucratic obstacles”, Michael says. But he won’t be deterred. To him, expansion is not just an option, it is the next logical step. sexshop.dk has the necessary know how and experience to be successful in other markets.
Most product descriptions for the German shop have already been compiled, the domain is secured, and the launch is scheduled for next year. His other target market, South Africa, is more of an experiment. “South Africa is an interesting market. There is an expanding middle class that is interested in our products, but at the same time, there are very few online shops for sex toys.” Soon, he will spend a month in the country to test the waters, talk to potential business partners, and set the stage for a successful site launch.
Two kinds of customers
But in spite of these expansion plans, the focus of sexshop.dk will remain on Denmark for the time being. To ensure continued success in his home market, Michael has done research among the customer base, and he has used this information to change the product range according to their preferences. “Roughly 65% of our customers are female”, he tells us. “But when it comes down to who actually uses the products ordered from our site, we feel that the ratio is more like 50/50. Men are more motivated to buy a gift for their wife or girlfriend at a shop that is appealing to women. They feel that this is the place where their partner would go looking for such a product.”
Apart from that, the sexshop.dk customers can be divided along another line: There are those who set great store by quality and are also ready to reach deeper into their pocket to get it; and there are those who mainly base their purchasing decision on the price. ”However, we see that customers who only look at the price at first tend to become more demanding as time goes by, so they also buy brand products after a while.”
What actually sells
Speaking of which, Michael emphasises that brands are very important in the Danish adult market. They definitely have an effect on the consumers. But what about the effect of Fifty Shades of Grey? Michael explains that he was not really impressed with the impact of the Fifty Shades movie. Sales did increase, but not in the way people had hoped for. “Bondage products have been selling better since the start of the movie, yes. You could call it a boom, but it is not really a big boom.” However, what’s more important than a short spike in demand is the lasting effect of the Fifty Shades phenomenon, in the industry and in society. Demand for bondage products has increased on a general level, also in Denmark. So of course, they are among the top-sellers at sexshop.dk as well. Other popular segments in the shop’s product range include anal toys, particularly for men, and the classics of the adult market: vibrators and lingerie.
The data obtained from the shop also guides Michael when it comes to picking new product for sexshop.dk. Current top-sellers indicate what kind of features he should look for in new additions, and popular categories and brands also provide important pointers. At the same time, products that simply won’t sell are systematically weeded out. Michael learned early in his career that this is a necessary step. “At the beginning, I added way too many products to my range. I learned my lesson, and today, I am much more target-oriented.”
Own brands don’t pay off for retailers
Currently, sexshop.dk offers 5500 products – none of them from private brands. We want to know if he ever thought about launching his own brand as so many trade members do, but Michael shakes his head. “That wouldn’t pay off for me. It may be much easier today than it was a few years ago, but the cost of starting a private brand would outweigh the potential profits for me. It’s not even the products that are so expensive, it’s the marketing costs.” But there are also other problems arising from the financial strain of producing a private brand: Michael feels that most retailers can’t afford thorough quality assurance. Therefore, a private brand was never really an option for him. He is happy with his producers and wholesalers and the support he gets from them. That said, he feels that the producers also need to be careful about what they sell. “Many companies try to sell the same product over and over again. The producers and distributors need to find their own way, their own signature. Mass-produced toys from China aren’t the answer.”
There’s success to be had if you follow your own concept, and sexshop.dk is a prime example of that. Without any outside investors, Michael has come a long way over the course of the past three years. It seems fitting that he based his online shop in Padborg. Due to its proximity to the German border, the town was once a centre for the sale of porn movies. The porn peddlers have disappeared. But the online business continues to boom.