Superstitious souls might be worried that a year ending in 13 may be a harbinger of bad luck for retail success. But it could be a very good year if retail pros are prepared for what’s shaping up to be a volatile marketplace in 2013.
Front line professionals from every corner of the market agree that although sales are up and economic prospects have been better than years past, competition is fierce — especially in the online space — and that means merchandising pros must be sharper than ever.
Price deflation, driven by online sales, has led to intense competition as local competition has now turned to global competition. —Michael Bassett CEO, Calvista Australia
According to “Sex Toy Dave” Levine, if you’re a small fish in the online retail space you need to be even more diligent about your plans for 2013.
“The big online retailers are pulling away from the small. I remember when someone could take our data feed and throw it into an open source shopping cart and compete with us. Now they would also need tens of thousands of dollars to pay good programmers to get their conversion rate on the site to be anywhere near ours. You need sophisticated sort and search algorithms, you need widgets like ‘people who bought also bought,’ and you need to make sure you site looks great on tablets, phones, and desktops,” Levine advises.
He also says that online retailers must “multi-variate” test every customer facing launch. “It’s shocking how often ‘upgrades’ lose in a split test to what we already had. Sometimes it’s bugs in the new version and sometimes it’s just that our ‘great idea’ was actually not so great. And if you don’t have enough traffic to do that testing I don’t know how you can really get your site up to where it needs to be,” Levine says.
But the tech savvy is only part of the success equation. Now more than ever a new generation of consumers is changing the way retailers are doing business and in 2013 will present new challenges according to Castle Megastore CEO Mark Franks.
The long-time pro explains that the new consumers are not coming into retail locations to purchase or rent DVDs, but are using free tube sites or streaming services. And they’re now quite comfortable buying other products online. “To cultivate and retain this new generation of consumers will require much more than just putting products on the shelf. Only the best operators will be successful. Products and services that used to be strictly available by and through adult retailers have been discovered by large main line retailers both brick and mortar and e-commerce,” Franks says.
Retailers have discovered the old adage, “every man for himself,” Franks says, and notes that even manufacturers are competing with retailers for the share of the consumer market. Good Vibrations’ Joel Kaminsky agrees that retailers must beef up technology and adds that brick and mortar mainstream giants are also jumping into the adult products market, making 2013’s retail challenges even more daunting.
Kaminsky points out that while it’s great that mainstream retail goliaths such as Amazon, Target, Walmart, Walgreens, Trojan, Brookstone, and others have taken a bit of the stigma of “adult” out of these products by their selling adult toys, at the same time, their jumping into the retail arena has threatened margin and profit as many of them discount MSRPs.
A proponent of the impending importance of honing cutting edge technology, Kaminsky says, “The opportunities that lie out there for retailers are for those that have the ability to take advantage of mobile commerce as well as adjusting their inventories to conform and mirror what today’s buyers are seeking. The Internet has educated and allowed customers to do research… not just on price, but on quality and customer service through social media and review sites such as Yelp.”
Customizing technology for consumers is definitely on the list of Bonnie Feingold, President and CEO of Honey’s Place. She says her company has prepared for 2013 by making huge improvements in its internal structures and in streamlining processes that encompass technology.
Last fall, the company launched its e-commerce platform; Build the Store that it said would change the online retail landscape. The program offers customers the opportunity to create and operate their own adult toy store with minimal overhead and maximum profits. Site owners have flexibility and control over the functionality of their online retail portal allowing them to customize categories, edit products, choose manufacturers, set the pricing, and add their own products.
“This is a program that I am so proud of and eager to see what our customers can achieve with this type of tool at their disposal. Build the Store is going to change the online retail landscape for all of our customers. The capabilities of the program are endless so there will be a lot of new and profitable things happening for our customers. All of these improvements and additions to our company are going to equal opportunities and growth for the Honey’s Place properties over the next year,” Feingold predicts.
Even if your site is top-notch, traffic was, and still is the Holy Grail for 2013.
Levine points out that SEO is no longer about just “getting links” but more about original content that’s properly presented. “Google used to just ignore problems where as now they penalize. Bad links are not just ignored, but hurt you, and most people don’t even know how to spot bad links. I recently talked to several bloggers about taking bad links down. They didn’t even know that sponsored links need a ‘no follow’ tag or that more than one link in a product review for example looks spammy. Most of the people linking to us appear as spam simply because the bloggers didn’t have proper HTML code. One blogger had more than 600,000 links to us due to poor site design, but Google looked at that as spam,” Levine says.
But having a good handle on technology in 2013 isn’t enough. Retailers must also think globally.
Calvista Australia CEO Michael Bassett says retailers are conducting business in a time of relentless change, primarily driven by the digital revolution that’s affected not only adult, but also organizations worldwide with brands and products requiring sales and communication to distinct markets.
“Price deflation, driven by online sales, has led to intense competition as local competition has now turned to global competition,” Bassett says. He notes that overseas retailers that offer free freight and very low pricing are targeting the Australian consumer. Countries like Australia, geographically remote from manufacturing and with high labor costs and costs of living, cannot currently compete with such power and pricing.
“In order to survive and succeed in the distribution of products to retailers, Calvista has to be as lean, fast, efficient and high tech as possible. Fast to market, competitive pricing, high fulfillment rates, superior product selection, exclusive brands, data feeds, drop shipping, a competent and slick sales team which understands the changing demands of retailers, digital asset management with digital imagery for online propagation, cutting edge B2B websites — these are all tools and assets requiring constant tuning and development at Calvista,” Bassett says.
But what about brick and mortar retailers in your own back yard? Will consumers continue to physically walk into a shop to buy an adult product?
Bassett believes so, but he says stores will have to offer an experience that is distinct from the online shop. Kaminsky agrees and says brick and mortar stores will find themselves in direct competition online with many of the manufacturers they represent.
One brick and mortar retail chain that’s optimistic and “walks the walk” is the Adam & Eve Retail Stores. President Bob Christian believes that 2013 will be a good year based on economic improvement that he says has already demonstrated increased buying. More people are now comfortable spending in a bit more relaxed manner again, according to Christian, and this should continue. He hopes and believes that the mainstream attention adult products are getting via national TV, radio and print ads by Trojan, J&J and Adam & Eve itself will continue to drive more new customers to all of retail’s doors.
“There are growing numbers of new toy, novelty and lube/lotion products entering the market, so this is both a challenge and a great opportunity to get interesting and different products in stores,” Christian points out. “Challenging because there are so many to choose from, and important to get some items that is special or unique to your business. Opportunity because competition enables you to get some good pricing to improve margins, and a variety of products to differentiate yourself to your customers.”
Of course Adam & Eve has a robust online presence as well as physical stores, but even with that one-two punch, getting an edge on competition will still be key.
Bassett describes the coming year as another fast paced year, but to succeed it’s “game on, all bets are off and all options are open.”
Franks believes the savvy retailer must be aware of new competitors that have already redefined the way business is done. “Amazon has announced its plan for same day delivery on orders,” Franks notes.
Christian agrees. He says the industry should be watching the experimentation going on with one-day delivery by many retailers. “It started with online companies like Amazon, but now Target, Walmart and Macy’s have announced they are trying this in select markets as well,” Christian says.
And don’t forget product markups. Levine says he sees manufacturers starting to get a handle on pricing. Some are instituting MSRP or MAP pricing and enforcing it. “Many manufacturers are successfully controlling prices on the web and Amazon,” Levine notes. “Success here tells me the race to the bottom in pricing may be over. Again, this hurts the small guy who was winning with the 5 percent profit on Amazon but now can’t get distribution as the bigger guys control supply and get bigger margins.”
But Feingold points out that in the last six months sales for Honey’s Place highend adult toys, like products from LELO and JOPEN, have increased tremendously and that the buying public seems to be telling the industry that they are willing to spend more money for an item if it is made well, looks luxurious and offers an outstanding warranty.
The executive believes 2013 will bring new trends and opportunity. “Customers are willing to invest more for longer lasting, higher quality items. If this continues, I think more and more manufacturers will develop high-end lines to complement their current offerings,” Feingold says.