Traditional chains of supply are breaking apart, online shops offer products a few cents above purchase price, and the number of products is growing and growing. So it’s no wonder the adult market feels a bit like an Old West town at times, where the quick draw wins and the sheriff is nowhere to be found. But how should the industry respond to this situation, and what are the consequences for producers, suppliers, and trade members?
So much has been said about the erosion of the traditional supply chain (producer-wholesaler-retailer) in the adult market and about its effects on the trade and industry. Whether this is a positive or a negative development us up to your personal opinion, but if you look at today’s market you might indeed get the impression that these are the Old West days of the adult market. What do I mean by that? Well, it’s quite simple: The lines between production, purchase, and retail are blurred to a degree where everybody is poaching in everybody else’s backyard. Everybody produces, everybody purchases from anyone and sells to anyone – without thinking about the others.
The competitive situation this results in is fierce, and the pressure in the market keeps growing and growing. To make matters more difficult, there is an enormous amount of products that want to be sold. And it’s no secret that many resort to lowering the prices in order to get those sales – which usually reduces the margin. And the margin is obviously what everybody depends on. All of this leads to unreasonably low prices and robs products of their real value. And when different business models and individual calculations collide in this tense situation where everybody fights over the consumers’ affection, well, then the proverbial horse has already bolted.
But as with so many things in life, there are exceptions. We talk to lots of retailers – brick and mortar or online segment – and it is becoming abundantly clear that there is also another way. There’s nary a retailer who doesn’t sing the praises of brands that offer a guaranteed margin and step protectively in front of the retail trade. Nary a retailer who isn’t happy that certain producers don’t sell their brands to the black sheep of the trade, but keep a jealous watch on who sells what, and at what price. And if they find that someone is not playing by the rules – i.e. that someone engages in price dumping – they take action to stop that. As a result, these trade members may no longer get products from said producers. You might argue that someone somewhere will still be willing to supply themwith the products in question, but the producers and brands also keep an eye on the activities of their partners in distribution and wholesaling – also in the interest of protecting distributors and wholesalers and their margins. And if you think, so what, a retailer can do with a few brands less on his shelves, you forget things like demand, brand recognition, the ever important product variety, etc.
Long story short, these producers don’t just throw more and more products at the market in hope of turning a profit; instead, they see to it that the value chain remains intact. So the goal has to be for all players in the market to pull in the same direction. Numerous positive examples show that (more) control over the market doesn’t have to be wishful thinking. But to achieve this goal, you need the right environment. The wild west has to be tamed.
It is perfectly understandable that every trade members wants to get the best-possible margin out of their products. It’s equally understandable that the customers want to spend as little money as possible. The two sides usually meet somewhere in the middle, and if they don’t, well, then the consumer has to look for a comparable product or a different retailer. This is what’s generally called the market economy.
I’m not going to bore you with talk of invisible hands that regulate things or the like. But ultimately, the situation is thus: In the marketplace, various needs meet various offers. Of course, not every wish can be fulfilled, and not every product will find a buyer, but this system is still preferable to an alternative of fixed prices, regulated conditions, and a rigid product range. Because if the producers had more control over the prices, there’s no guarantee how they’d use that power tomorrow. The same goes for the channels of distribution. Who wants to be completely and utterly at the mercy of their suppliers?
Of course, there are also good reasons for producers to keep a close eye on the prices at which their products are sold in stores – especially if they are creating luxury products – and to step in immediately when they come upon cases of price dumping. However, actually taking such steps isn’t easy; it requires a lot of work, and ultimately, taking action against every black sheep in the trade would affect the price. Which in turn would have negative effects for most producers in the adult industry.
Apart from that, you want the company with the best strategy, standards, and ideas to be able to reap the benefits of their work. Because, when the consumer is shopping for an adult product, the price is not the single-most important criterion. User experience, service and advice as well as after-sales service, information about the product, etc. – all those things come into play. Companies that try to push their products solely on the basis of price and neglect all other elements tend to disappear from the market quickly.
So, where some see an untamed wild west scenario when they look at the adult market, others see possibilities. The market is in constant flux, and ideally, there will be more consumers finding more products. Wanting to eliminate imbalances through stronger regulations – notwithstanding what those regulations look like or how and by whom they are implemented – would be counterproductive in the long run, and more often than not, it wouldn’t even be necessary.