While many are hesitant to publicly propagate the idea that sales are falling, chatter within the industry is undeniable. Concern may not yet have turned into panic, though the pressure to find alternate revenue streams is mounting not only for production companies and distributors, but also for retailers. Already stung by online outlets, the pinch is starting to hurt. What’s a store to do?
FACING THE PROBLEM
“I just got back from ANE [Adult Novelty Expo] and all the retailers were talking about the fact that DVD sales are down,” said Theresa Flynt, Hustler Hollywood’s vice president of licensing. “Everybody is concerned about two things right now: declining DVD sales and the economy.”
If solving the problem was as easy as creating a section for novelties or stocking lingerie, there wouldn’t be a problem. No one doubts that some stores will close their doors, but even with a decrease in brick-and-mortar competition, some basic facts remain: Between more modern delivery systems and the demise of the most core adult product, challenging times are at hand.
“I don’t want to be rude, but I can’t believe that all these people that run these businesses just figured out that DVD was going to be a declining market,” Castle Megastore owner Mark Franks said. “We knew that four or five years ago with digital coming out and so forth. I took Castle over five years ago and I immediately started making significant investments and expanding all my departments — toys, novelties, lingerie, everything.”
A word that came up again and again in conversations with retailers was diversification. While most said they have reined in the DVD titles they stock, choosing to stick with the proven and the popular, many have increased their non-DVD inventory in an attempt to maintain sales numbers as the discs fall out of favor with increasingly technologically savvy consumers.
“We concentrate on keeping up the number of people coming through the door,” Debra Peterson, marketing director at the Fairvilla chain in Florida, said. “We look at all of our departments and see how our stock is doing. We’re very fortunate that it’s always been very diverse. We have always had apparel and fantasywear. Halloween really taught us a lesson, making sure you have costuming and things like that. There are parties going on all the time, plus there are people that just want to introduce a fantasy into the bedroom. We have edgy party supplies, all of those things are very important to the overall makeup in our stores.”
Peterson said the stores’ salespeople are trained to make the most of each customer that walks in the door and the stores are meant to be interactive to help serve this purpose. Flynt said the Hustler Hollywood stores, which she calls a “date destination,” concentrates on stocking items that customers would rather not purchase over the Internet.
“If you have a brick-and-mortar store, you have to think about what people want to buy in person and what might be an impulse buy,” she said. “If a girl wants a vibrator, she’s probably going to want to buy it in person rather than over the Internet, because you can touch it and feel it and it doesn’t look the same on the Internet as it does in person.”
Flynt said she doesn’t believe most women preplan vibrator needs and when they decide they need one they don’t want to “order it two-day express.” The same can be said for couples, who often enjoy the retail experience together.
“The same is true when it comes to lingerie,” Flynt said. “If a girl has a date and she’s looking for cute new panties and a bra, she wants to go out and buy them today. A girl wants to feel the quality of the lace and the product.”
This appetite for further diversifying inventory has opened the door for novelty companies new and old. While traditionally it has been the distributors that have dealt with retailers, manufacturers like Topco are closing the gap. Not only are they sending representatives out to stores to meet with staff to educate them on the products, they also offer plan-agrams and promotional items for in-store events.
‘When the stores do events or have a special party or something like that, we have promotional items that we can provide to them, gift bags and things of that nature,” said Desiree Duffie, Topco’s director of marketing and public relations. “We’ll send our salespeople out to show off the products and explain things. We try to assist the retailers as far as educating the customers.”
Franks said that stocking decisions are based on the kind of shoppers a store wants to attract. A store with peep booths is going to bring in a different clientele than a store catering to couples.
“Whatever type of business you’re in, you carry products that are made to attract a certain type of customer, and you have to profile that customer,” Franks said. “You have to decide who you are and who you want to be and what kind of customer you want to attract, then you have to create a retail experience that caters to that customer. Our stores cater to women and couples already. We have a bridal department, we do a big costume business, bath products — you have to diversify your product mix and develop that, and develop a new type of customer.”
No one is ready to give up on DVDs just yet. Blu-ray has offered some hope, though the impact has yet to be felt because the hardware is still too expensive to spur significant disc sales. Still, some like Dave Stevenson, who owns the Big Picture DVD Superstore in upstate New York, don’t carry and have no plans to carry adult items other than DVDs — and yet are still ringing up record numbers.
He credits lower prices and incentive programs (i.e., buy three get one free, trades) as well as a massive new release section available both for rental and purchase.
“We’ve coped with the sales situation by having really good prices,” Stevenson said. “Our price point is a little bit lower than it used to be, and we also have rental. We try to bring in a lot of new releases because we think that draws people into the store.”
He said that while adult product consists of only 35 percent of his store’s stock, it accounts for 70 percent of the sales and rental dollars.
‘I think most retailers are having trouble because they refuse to make some of the changes that we’ve made,” he said. “They refuse to lower their prices or they think that making a high percentage of profit is more important than taking in the dollars. They don’t change very easily and I think that’s a big mistake.”
Peterson said Fairvilla recently revamped its DVD departments. While the actual space has dropped slightly, they are far from writing off DVDs altogether.
“We still give a lot of face value to our DVD department, but the way we are merchandising them has been significantly different,” she said. “Film studios are highlighted, a lot of the titles are faced out, working with displays, things that make the department more appealing to the consumer, drawing them in.”
Franks said he is careful not to stock “junk” — catalog and comp titles, saying it brings the level of a store down while training customers to buy cheap stuff. As a result, DVD numbers in Castle stores are holding steady.
“We’re expanding the other departments, but DVDs aren’t going to just go away overnight,” he said. “I think we still have probably three years of good sales and even five years until it’s gone. There are a lot of people I know in this business that I don’t think are going to make it in the long term.”