It’s still three months until the end of the year, but EAN is already starting to get opinions and assessments regarding the development of the market in 2018. First to face our questions was Marcin Fröhlich, who is the owner and Managing Director of Polish distribution company PLAYROOM.
Marcin, looking back at the products and developments of 2018 so far, has it been a good year for the adult market? What is your verdict?
Marcin Fröhlich: It all depends on which products and new trends you are talking about. Generally speaking, I think that in 2018, the ideas were copied from the previous one or two years; it was not much of a year in terms of innovation. It was more about improving tried and tested products than having groundbreaking inventions. Nothing extraordinary emerged. It is a pity because as far as I can remember, nearly every manufacturer announced changes, novelties, groundbreaking products, and surprising innovations at eroFame in 2017. I can only deduce that the industry is stagnating.
Let’s talk about trends. More and more products give wide berth to traditional vibration technology, sex tech is still waiting for that big breakthrough moment, the male toy segment keeps growing at a rapid pace, there are still too many same products … Is that what it all boils down to?
There is no doubt that producers can cater to men’s needs too, and for this reason, so many of them have expanded their range of products intended for this group. It seems however, that this segment is awaiting a groundbreaking technology which, similar to touch-free stimulators, shocked the female-oriented market. Relying on tested products contributes to a stable growth but we need to remember that it is innovations that drive sales. When introducing products from other groups, producers make use of the power of their brands and consumers’ loyalty, but they do not create new needs. Every producer wishes to take the biggest market share in the adult market. To illustrate, a consumer who wants to buy a cock ring will surely choose the branded item he likes and trusts. But is it going to increase sales?
“Relying on tested products contributes to a stable growth but we need to remember that it is innovations that drive sales.”
In an EAN interview last year, we spoke about the erosion of the traditional supply chain. And looking around in the market, there are still lots of distributors that market their own brands/products, producers that sell directly to the consumers, and retailers that make forays into distribution to secure better margins, etc. So, has anything changed at all?
Every company (be it a producer or distributor) prioritises profits and aims to make them as high as possible. It is not surprising that producers try to reach consumers with their products directly, skipping traditional distribution channels. New technologies – and above all, the internet – have provided them with such opportunities. Nevertheless, I think only the biggest players on the market can afford to take such steps. It is already happening, and we need to get used to it.
Yet I am worried that producers tend to compete with other market participants in selling their products. Reducing prices for retail sales by producers or limiting sale channels is too much and will surely have a negative effect on business relations.
On the other hand, we also see more and more exclusive distribution deals. Just recently, SCALA entered into an exclusive agreement with CalExotics. Could this be the way the market is going? Do people want more control instead of a free-for-all?
In this particular case, the decision does not surprise me at all. Producers with such a vast offer benefit from accessing the local European market through one large distributor, in this case SCALA. I image there are few domestic distributors who invest in a company’s full range of products, especially if we are talking about such a large producer.
For producers with such a wide portfolio, it is definitely a good solution to have one exclusive main distributor and many sub-distributors. Yet, whether it is successful or not is dependent upon the retail price for consumers.
If the exclusive distributor can sell products at a good price to sub-distributors – this model may be effective.
But what is good for large players may turn out to be dangerous for smaller brands. Working with only one exclusive distributor may limit your access to markets and lead to an uncontrolled increase of retail prices, which arises from adding another element to the chain (sub-distributors).
In my opinion, the best idea is to establish exclusive distributors for specific markets.
Can this type of distribution accentuate or maybe even strengthen the position of distributors and wholesalers in the market, seeing how their role has been weakened by the erosion of the traditional supply chain?
I would not say distributors are doomed to failure. As we all know, the market hates emptiness. The fact that several producers decided to skip local distributors does not mean they are going to terminate their business. At present, there are so many products at the high technical level, offering quality comparable to business leaders. If a producer resigns from local distribution, they will be replaced by others who wish to use the channels and knowledge of the local distributor.
Of course, in order to have a comprehensive discussion about distribution, we also need to mention Amazon. Some are making more sales than ever thanks to Amazon, others consider the online shopping behemoth to be a giant danger to the adult market. What is your opinion?
Of course, we cannot neglect the role of Amazon in the global e-commerce market. I often say that there is no point in focusing on things we cannot influence, but it is advisable to have a close look at those we can control. Even if Amazon is not present in all markets, it will surely be at some point in the future. We have to acknowledge this and prepare for such a reality.
I don’t think Amazon has devastated the adult market. Consumers find the relations with sellers more and more important. They expect the seller to give them advice and approach them on a case-by-case basis – Amazon cannot assure that. I am truly satisfied to see that customers return to retail stores where they get professional advice and they also have the product at hand – there is no need to wait for delivery.
So, there is Amazon, the supply chain is coming apart, the market is swamped with products, competition is getting fiercer, often leading to price wars … In your opinion, what is the biggest problem the adult market is faced with?
As you said, there are many factors which make the adult business a difficult marketplace. I feel the problem is primarily restrictions related to the marketing of erotic products in new media. Facebook’s or Youtube’s policy is very strict and they show no sign of changing that anytime soon.
Another essential thing is the inflow of low-quality products. Consumers may feel lost and confused. Producers devote too little attention to education and advertisement in mass media.
“Producers devote too little attention to education and advertisement in mass media.”
Let’s talk about some recent developments: In June, we learned that Womanizer and We-Vibe have become one. Could this merger create a dominant force that throws the market off balance?
The merger of these big large players was surely a big surprise to us all. Both companies adopted different policies towards distributors and we still do not know details concerning the new united WOW Tech Group. For sure, this is the market leader now, with very innovative products in its portfolio.
Many believe that this merger will take the industry to a new level in terms of innovation, professionalisation, and market appeal – also regarding the potential of adult products in the mainstream. Is that forced euphoria or is there truth to these statements?
There is no doubt that WOW will present new innovative products. The current marketing strategies and scientific research of both these companies prove they are very professional. As I have already mentioned, both companies adopted different policies towards market players and we do not know the principles of the new group. I am convinced that we will see synergies and a reinforcement of the best qualities of both enterprises.
In other news, Lovehoney got an investor on board not too long ago. Will that remain a rarity, or are investors becoming more interested in the adult market? If so, is it that attracts them? The current growth or the potential for the future?
Lovehoney is an amazing company with great potential. Having an investor on board is a considerable achievement. And in fact indispensable for further growth. The big success of Lovehoney attracts investors who see the potential in their company and business, which is growing year by year. I think it is just the beginning and large investors will keep on focusing on adult industry.
Our industry is not that big, and as a result, there is an almost familial atmosphere to it. Are you afraid that an influx of investments from outside might change that?
Indeed, people in our business live almost like a family. We have known one another for many years and we know how to talk. Virtually all companies we cooperate with are known for their high corporate culture and total professionalism, so I don’t think any negative changes are to be expected. What I am worried about is the fact that people from the outside may not understand the nuances of selling adult products and the intricacies of selling erotic items in particular countries.