“Companies should enjoy this period and make hay while the sun shines.”

As we invited Samir Saraiya, the founder and head of ThatsPersonal.com, to take a look back at the year 2020 with EAN, it was pretty obvious that corona would play a big role in our year-in-review interview. After all, the pandemic had a major impact on the international sex toy market. However, that impact wasn’t all bad as more and more people claim that our industry is actually one of the winners of the crisis. In our conversation, Samir gives his take on the current state of affairs. 

We cannot avoid starting this interview with corona. What effect has the corona crisis had on our industry? How has the pandemic changed the market? 

Samir Saraiya: The corona crisis has helped increase the demand for pleasure products globally as there has been a ‘consumer reprioritisation’ of disposable income. Consumers are now spending money based on their immediate needs and available choices for comfort and happiness and this has resulted in a greater splurge towards home and home entertainment instead of travel, bars, restaurants, events, etc.

This demand has helped e-commerce leapfrog over physical stores since those have faced challenges relating to fears of the virus, resulting in lower footfalls. This change in consumer buying habits will be long-term, and there will be a marked increase in the ratio of pleasure products sold online compared to offline. 

On the supply side, the world including China has sustained production and the global logistics have bolstered trade. This has supported the rising demand and stabilised pricing. 

Overall, the economic implications surrounding the corona crisis will be felt the world over, and the pleasure product industry has gained substantially during this crisis. Companies should enjoy this period and make hay while the sun shines. 

What lessons should our industry take away from the past few months? Do long-established business models in this market need to be rethought, changed or adapted? 

Samir: The traditional supply chain has been eroded over the years. The big game changer this year has been the increase in e-com sales, which is here to stay. The industry is a natural fit for e-commerce as the online shopping experience solves customer issues like privacy. 

Companies are now getting more focused on the direct-to-consumer (D2C) channel as it offers the highest margin structure and also creates some level of brand loyalty. In order for this channel to be effective, companies need to invest in online marketing and branding, which encompasses digital content, ratings, reviews, etc. Those are the new sales tools.

While traditional retail stores will continue to have a role to play, that role will shrink and so will the number of outlets as it would be difficult to compete with the economic advantages of the e-com world.

On a separate note, one of the big changes relates to the way and style of doing business. With travel restrictions in places, the Industry has not just adapted to the environment but actually flourished. Virtual meetings and product trainings have been very effective in reducing the need to travel. Social media has helped the industry stay together and keep relationships strong.

It seems that the turnover and sales figures of many companies in our market have reached impressive heights during the months of the corona crisis. Increased consumer demand for sex toys is generally cited as the main reason for this success. So, is the International sex toy market a winner of the crisis? 

Samir: Yes, the international pleasure product industry is one of several industries that have been clear winners. This could be witnessed across the globe with USA, Europe and many other countries showing a sharp rise, including Asia and India. 

The shift in consumer priorities has brought in new customers, especially in the mass market segment and entry level products. The existing set of customers have evolved and are open to try new, different and more expensive products. The niche categories have also grown, albeit at a lower relative rate. The overall industry growth trajectory has increased steeply and will continue to increase before plateauing over time. 

And now the billion-dollar question: is the market for sex toys crisis-proof? Could it also cope with a long and serious recession of the global economy? 

Samir: Yes, the impact of a recession is lower in the pleasure product Industry and the recovery has always been faster. During difficult financial periods, consumers would shift their purchases to achieving happiness and deriving pleasure at lower costs, and this category is an obvious choice. 

Most segments of the industry are relatively crisis-proof and can sustain a long recession. However, the luxury segment would be affected, similar to other industries. 

Many product categories are maturing towards a mainline FMCG consumer durables and hygiene category, and this growth momentum will continue as these products are ingrained into our daily lives. In terms of fads, there will probably be some fads which may come and go like romance products and BDSM. 

However, while the macro-economic factors may look optimistic, the Industry will continue to face business cycles due to various issues like oversupply, competition, and government-related policies.

Has the corona crisis accelerated the mainstreaming of sex toys? After all the willingness to buy sex toys has gone up, especially during the lockdown period, and interest in topics such as sexual wellness has also grown rapidly… 

Samir: The mainstreaming of sex toys has picked up over the past few years. The covid crisis has not substantially impacted this momentum and there is still a long road ahead.

On the positive side, there has definitely been a growth in consumer demand, with people being more open to the topic of sex and sexual wellness. Brands have developed products that cater to various mass and niche segments. Government bodies have introduced product certifications that have resulted in greater consumer trust. Brands have also redesigned their packaging and softer categories have achieved a basic level of omni-channel retail acceptance. Furthermore, the industry has initiated various marketing and communication campaigns across mainline media, especially social media, to create awareness and increase consumer interest. 

In the online world, Amazon has led the charge and has been able to bring in new customers who ordinarily would not visit specialty adult online or retail stores.

However, the mainstream offline retailers have been slow to respond. There are still challenges due to age-related factors when it comes to displaying products, resulting in negligible point of sales (POS) materials or prominent shelf space. From a consumer standpoint, interested shoppers would be more inclined towards specialty adult stores to meet their needs. 

Overall, this positive momentum has helped the industry achieve record growth rates in the past decade, but the best is yet to come.

The erosion of the traditional supply chain, oversupply, price wars, piracy, the giant Amazon… times change, but the problems remain the same. Will this also be the case in 2021? Has the corona crisis accelerated the problems mentioned above or has it even revealed new ones – for example the overdependence on China? 

Samir: Most of the factors above relate to the changing business environment experienced by many global industries. These problems need to be addressed as creative solutions are the key to the future. 

The pleasure product industry has grown rapidly in the past few years, however, many of the large individual companies have not grown at the same pace. Companies have failed to prepare themselves to combat these difficulties by creating entry barriers or consumer brands rather than helping deflect the oversupply in the market that is supporting price wars for commodity products.

The pleasure product industry has an abnormal dependence on China and while this has helped with product supply and price competitiveness, it has led to other challenges including piracy, counterfeit products, intellectual property infringement, and products of suspect quality. 

Few companies have actually started rethinking their manufacturing strategy and looking for options outside of China. Most of those are opting for their home countries due to lack of available choices. I believe the ‘China plus One’ model will propel Companies to look at one alternate manufacturing hub outside China. 

This will lead to an opportunity for established manufactures in developing countries (outside China) to jump in and provide this industry with a strong manufacturing option – provided they can achieve the necessary trust and guarantee product quality, competitive pricing, and the strong legal structures that gives comfort to Western companies. 

The giant Amazon continues to disrupt many global industries, including the pleasure product industry. Amazon provides a great shopping experience and has set the bar high for consumer e-commerce. The scale, efficiency, and class of their operation are making them stronger by the day, and companies have no option but to play under their rules. In order to compete, they are working towards controlling supply on Amazon or going direct-to-consumer (D2C) which will be the new mantra over the next few years. Over time, the D2C channel will provide the best business value.

The past years have often been described as a ‘Wild West’ phase, given that there was no longer a clear distinction between the activities of manufacturers, distributors, wholesalers, and retailers. Now, we see more and more exclusive distribution agreements and more stringent distribution strategies; it almost seems as if ‘there was a new sheriff in town to keep order’. Or is that impression deceiving? 

Samir: Companies are navigating the obstacles in front of them and trying to create a path to success. As market dynamics are constantly changing, companies are regularly evaluating creative solutions to come out ahead.

Just over a decade ago, there was a more structured eco-system with companies falling into one of the main slots: manufacturer, distributor wholesaler, and retailer. However, the business environment changed, in large part due to a scramble for better margins, coupled with greater flexibility for companies to dabble in more than one slot. The ecosystem turned into the ‘Wild West’, with companies working across multiple slots and a few putting their fingers in all pies. Those who did this well created stronger companies and those who stagnated soon realised that their partners had turned into competitors. 

Over the past few years, we see another gradual shift where companies are realising their core competencies and the difficulties that go along with wearing multiple hats. Some decided to focus on their strengths and revert to fewer, but stronger and deeper partnerships, opting for strategic exclusivity and mutual benefits. This has helped companies control the supply chain and maintain prices and margin levels which are sustainable in the long run.

Over time, and with the gradual opening up of mainstream retailing, the landscape will change again as retail slots are taken up by the well-established pharmacies, supermarkets, and large-format retail stores. This will restrict entry to just a select set of brands and those brands who gain entry will benefit greatly in years to come.

Which new products have had the biggest impact this year? 

Samir: The industry has not seen any game changing products so far this year. The uncertainty has resulted in the cancellation of many trade shows, and as a result, the visibility of new innovative products has taken a back seat. We hope that 2021 will be a better year for product innovation and big bang launches. 

What have been the trends of the year? Have previous buzzwords such as sex toys for men, sex tech, couple’s toys etc. been replaced by others like – for example – inclusion? 

Samir: The buzzwords continue to play out as the year has witnessed growth across a number of different segments, but no particular segment has really stood out. Men’s toys continue to grow, but that category still waits for the big breakthrough hit. Similarly, sex tech has been around for the past few years, but we have not seen any ground-breaking products for the mass market. There is a buzz around ‘Inclusion’, but this is more centred on the US market, where brands design products around gender equality and sexual orientation.

A few years ago, there was talk of a changing of the guard in the vibrator segment when more and more new products focused on other modes of stimulation. Today, however, the majority of new products on the market still ‘vibrate’. Does this mean that those new technologies have been less disruptive than expected? 

Samir: Vibration continues to be the core technology for sex toys, and I don’t see that changing any time soon. In the past few years, we have seen various manufacturers launch products focusing on different technologies like airflow, suction, electro stimulation, oscillation, and heat. Additionally, there has been an increasing number of hybrid products that offer a mix of different technologies and give the customer the flexibility of choosing their preferred mode of stimulation. 

These newer technologies have helped create category niches and give consumers the opportunity to try something unique and different. 

Those technology innovations are expanding the market and I believe we are in the early days of their product lifecycle, so we may see a greater level of disruption in the years to come. 

Even though the pandemic is still dominating the headlines and nobody knows how long we will have to deal with it, what do you predict for the future of our market? 

Samir: The outlook is very promising given the market expansion witnessed in 2020. My top predictions are:

  1. Supply will keep up with demand and the Industry will see a lot of new entrants that will further expand the market size with their creativity and solutions. 
  2. There will be a higher level of market segmentation, and existing niches will grow substantially. Consumer expectations will increase correspondingly, which will lead to companies specialising in specific categories and leaving out others. 
  3. Brands will have manufacturing options besides China and the most promising geographies would be South Asia and Eastern Europe.
  4. There will be a positive change in the retail landscape as mainstream retailers will be more interested to experiment with a small range of softer pleasure products. 
  5. Online will keep growing and Amazon will be the clear winner with the largest range and most competitive pricing. 
  6. Many brands will grow direct-to-consumer channels which offer the best consumer value proposition and this will be their tool of choice to fight the Amazon onslaught. 
  7. Companies that don’t adapt to this change will lose relevance in the years to come and find it increasing hard to catch up to their competitors.