Report: Good Vibrations in Financial Straits

SAN FRANCISCO — Landmark adult retailer Good Vibrations has been blindsided by a drop in Internet sales and growing competition, as well as falling victim to changing Internet trends and Google’s shifting algorithms, according to a story posted Friday on SFGate.com.

Good Vibrations company officials told SFGate.com that company revenue for the year is likely to end up $3 million short of the $13.9 million they had projected.

They are seeking a $500,000 line-of-credit to buy inventory for the holiday season They also are seeking venture capital in the amounts of $1 million to $5 million to add retail stores in order to decrease dependence on web sales.

In many ways an innovator in the realm of adult retail, the 30-year-old, female-owned company operated for most of those years under a nontraditional business model, as a co-op, and espoused a philosophy of alternative sexuality and diversity.

Founder Joanie Blank created the concept of giving women “a clean, well-lighted place” to purchase sex toys and access educational information. The idea resonated with consumers, as well as other retailers who imitated their success.

Good Vibrations CEO Theresa Sparks said in the report that they had counted on total sales growing from $11.9 million last year to $13.9 million this year, generating a profit of $320,000. Instead, projected revenue for the fiscal year will be $10.5 million, a drop from last year.

Good Vibrations' plight was discovered after the decision was made to take an unusual approach to dealing with looming financial concerns. A “letter to friends” was posted on GoodVibes.com, explaining the progression of the company’s financial situation and extending a plea to potential investors.

“We wrote this letter to let people know, because many of our customers had come into the stores and asked us, and so we wanted to give people some background,” Good Vibes Education Program Manager and board member Charlie Glickman told XBIZ. “And, of course, we’re hoping that the letter might end up in front of the eyes of someone that’s in a position to come and help us out.”

A link to the letter was no longer posted on the site as of Friday morning.

Several factors were cited as having had a negative effect on the business.

“Some things are related to the sex toy industry. Some have to do with decisions by Google,” Glickman said.

Glickman explained that last November, Google shifted their algorithms prior to the 2006 holiday buying season, causing GoodVibes.com traffic to plummet during their busiest season. The company went from being on the first page of a Google search to the eighth page overnight.

Also in 2006, Good Vibrations converted from a co-operative business model to a corporation, while still attempting to retain the cultural philosophy that defined the company’s unique way of doing business.

The same year, the company’s image was redesigned with the intention of attracting more mainstream customers, and a new store was opened in Brookline, Mass., adding to the three Bay Area locations in the chain.

But the trends that allowed for business expansion may also have inspired increased competition. Mainstream acceptance of adult retailing created a larger marketplace for other brick-and-mortar and online vendors.

“In a way, this is a result of how successful Good Vibes has been for 30 years because we made it possible for many of the people that we’re now in competition with to exist. Some are former employees, but even people who weren’t,” Glickman said. “Now there are dozens of people and most of them are one-store locations, but we have those in cities that wouldn’t have been able to do that if Good Vibes had not opened in San Francisco.

“And there are websites popping up all over the place and are modeled, at least externally, on the Good Vibes structure in terms of education and accurate information and I can tell you, as far as I’m aware, none of them has the experience that Good Vibes has and certainly [none] of them has the background and connections in education that Good Vibes has,” he said.

“But they’re trying to present themselves as that because they’ve seen how successful that is. So, in a way, this is the result of our success and we have to change, in order to meet the changing environment.”

Reaction to the SFGate.com article was swift, as commentators logged on to voice opinions ranging from wonderment at how it was possible to lose money selling sex toys to arguments against the co-operative business model to suggestions that the city of San Francisco bail the company out of its financial trouble.

Taking a pragmatic view, business consultant Michael Doherty said in the article, “If you're a business and you need money, you don't want your competitors to know you need money. To me, this reeks of desperation.”

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