Recently, I was given an assignment at university to explore the external and internal environment of a firm of my choice. The essay analyses the sex product market with relation to the psychology of senior sex. It encompasses the neglect of older adults sexual activity, despite extensive amounts of research suggesting that sexual activity has no age limit.
Lovehoney was founded in 2002 and is one of the UK’s largest online retailers of erotic toys, lingerie and adult games; offering both private and third-party labels. Since then, Lovehoney has grown into a £120 million business (Forbes, 2018). This figure is shown to be sustainable as Lovehoney has had an annual sales growth of 30% in the last 3 years (Forbes, 2019). Globally, the sex toy market was worth £28.64 billion in 2019 and is predicated to be worth over £50 billion by 2026 (Statista, 2020). Furthermore, in 2014 sales soared from £8m to £23.6m following the release of the exclusive Fifty Shades of Grey range and growing social acceptance of adult toys. The soaring profits brought globalization opportunities. Increased investment in international expansion came in 2016 when Lovehoney received the Queen’s Award for Enterprise in International Trade for significant growth in international sales (Lovehoney.co.uk, 2015). Then in 2018, Telemos Capital acquired a majority stake in the business, leading Lovehoney into its next stage of international growth (Lovehoney.co.uk, 2019). Therefore, in 2019, Sarah Warby was appointed as the new CEO of Lovehoney and began globalizing their brand, with particular focus on the US, Australia and Europe; where sales are particularly prominent. Currently, Lovehoney has nine websites across Europe, North America and Australia and in 2019, Warby endorsed Lovehoney’s first pop-up store in London, which was a success; creating fruitful grounds for more stores.
Rapidly changing demographics have been identified as a megatrend by the public, private and third sector (Pollitt, 2015). Throughout this report, the Aging Population will be the demographic of focus. Countries with aging populations will face an increase in pressure in the relation to the provision of health and social care and meeting the demands of aging consumers. According to PwC (2019), the population of over 65’s will drastically increase, with 390 million more people over the age of 65 in 2030 than in 2015. Moreover, by 2050, the numbers of people over 60 are projected to double to over 2 billion (Adams et al, 2003). This research suggests that there will be a growing market for demands of older consumers in all markets.
Another social aspect to be considered is the increasing investment in research for the benefits of sexual activity in older generations (Gott and Hinchliff, 2003). Beckman et al (2008) found that “the current generation of 70 year olds may be more sexually active than previous generations”. Thus, there has been an influx of drug companies investing in sexual enhancement drugs (Katz and Marshall, 2003). This could be the result of social change whereby that older generations are becoming increasingly willing to embrace sexual experimentation through the use of sex toys; especially women (Fahs and Swank, 2013). Public opinion about adult toys has evolved to be generally more accepting due to the emergence of feminism and increased sales and demand of erotica; with particular regards to Fifty Shades of Grey (Comella, 2017). This suggests that adult toys specifically catering to the needs of older generations will grow in demand and thereby a great opportunity for Lovehoney (Rohleder and Swartz, 2012).
The internet bred fruitful grounds for the adult toy industry by enabling consumer discretion. However, with growing social change and demand for adult products, the 21st century has opened innovative doors for the sex toy industry, with increasing global technological investment in the multi-billion pound industry (Semans et al, 2002). Products such as life-like sex dolls and sex robots are being welcomed to market and companies are increasing using AI to diversify the market and to make adult products more accessible and affordable (Döring and Pöschl, 2018). Furthermore, ‘teledildonics’ is a growing trend and research shows that 15% of American’s, 12% of Brits and 10% of Australian’s use app controlled sex toys (Forbes, 2019). The increase in research and development (R&D) and online marketing is commodifying sex toys, thus reducing stigma and increasing individuals’ willingness to purchase (Daneback, Mansson and Ross, 2011). However, whilst there has been increasing interest in the sex toy industry, research has suggested that there are gaps in research regarding sexual products for differing age groups, abilities and sexes (Döring and Pöschl, 2018).
Due to Lovehoney’s global growth, they will be subject to global and individual countries and economic conditions. The current economic situation through Europe, the US and Australia is promising and stable. However, since the 2008 financial crash, global economic conditions have been capricious due to the subsequent decrease in GDP, employment and real wages (Lane and Milesi-Ferretti, 2017). Whilst another financial crash is unlikely, the effects of the crash are still rippling through generations. In theory, this suggests that due to the global decrease in disposable income, consumers will spend less on recreational items and activities. However, Díaz-Bustamante et al (2016) found that this assumption of a consumers’ rational thought process is often wrong as consumers are willing to spend more to ‘treat’ themselves. Despite the effects of the recession still being visible, global GDP is on the rise (De Loecker and Eeckhout, 2018).
However, even with a growing market, instability in economic conditions caused by political factors such as Brexit could affect the success of UK based retailers through uncertain trade deals and decreasing GDP. If a soft Brexit were to occur, then the UK will continue with tariff-free trading with the EU’s single market though continued membership of the European Economic Area. However, if it was a hard-Brexit, the UK will lose its rights to participate in the single market under World Trade Organisation laws (Steinberg, 2019). Brexit could negatively affect Lovehoney’s international trades through trade barriers, which would increase their costs and decrease their ability of globalization. Whilst the outcome of Brexit is still uncertain, Lovehoney during the financial crash, remained financially stable, with an increased profit of 20% between 2008 and 2009 (Beta.companieshouse.gov.uk). This suggests that during a period of economic hardship, Lovehoney will prevail. This was supported by Fan (2015), who found that during the financial crisis, the fastest growing market was the female market for adult toys.
Lovehoney obtains a variety of strengths that has increased their attainability of increasing their global market share. This includes a strong online presence and exceptional brand reputation and as they redesigned the way people, especially women, can shop for sex products (Hewson, 2018). High-street adult toy stores are renowned for having an unabashed attitude towards sex, which can often dissuade consumers who are unfamiliar with sex products (Keesling, 2005). In contrast, Lovehoney’s brand values are centralized around an inclusive, female friendly customer base, making sex products a commodity through normalizing the shopping experience.
However, Lovehoney falls victim to the variability in consumer demand which makes them vulnerable to changes in consumer spending patterns (Beta.companieshouse.gov.uk, 2019). However, in 2010, Lovehoney implemented Learning Search, Conversion Optimizer and SLI’s solution for multivariate research of site features and navigation pages. This allowed Lovehoney to identify consumer searches to identify shopping trends, enabling them to market more effectively.
The growth rate of the sex product industry is promising and offers opportunities for Lovehoney to grow internationally and invest in R&D to further exploring their consumers’ needs (Julier, 2019). On the other hand, one weakness identified was the varied consumer base. Whilst this could be considered a weakness, it’s also an opportunity for Lovehoney to embrace the emergence of acquisitions through R&D programs to be inclusive of all its consumers. As aforementioned, older adults are currently neglected in the sex product industry, despite being one of the fastest growing sectors and research suggesting their sustained levels of sexual interest and activity (Freak-Poli et al., 2017). Therefore, one opportunity to be explored could be entering niche markets, with untapped potential.
In addition, Lovehoney have established partnerships such as the collaboration with Fifty Shades of Grey. This was a strategic move for Lovehoney as research has suggested that the Fifty Shades trilogy has increased visibility and acceptability around sex products (Martin, 2013). In 2016, Lovehoney saw turnover growing 29% to £58 million; much attributed to the release of their 50 Shades of Grey range (Lovehoney.co.uk, 2016). This has aided Lovehoney’s financial position and has given them significant competitive advantage through reputable partnerships and increased brand awareness. The partnership has made Lovehoney a household name; setting the scene for more possible reputable partnerships.
The macro environment currently highlights many threats for Lovehoney due to the turbulence of the sex product industries environment. For example, barriers to entry of the adult toy market are currently low, however with increasing investment and technological advancements, barriers will increasingly grow due to more expensive products being welcomed to market (Galaitsi et al., 2019). This is a threat as whilst Lovehoney’s capital is healthy, it isn’t as established as international companies such as Amazon, who have considerable amounts of capital to invest in products (Tou et al., 2019).
However, the sex product industry is currently relatively homogeneous, with companies creating easily imitable products consistently (Curtis, 2004). For example, Amazon undercut Lovehoney by charging a lower price for replicated products from the Fifty Shades of Grey range (Döring and Pöschl, 2018). Thereby, evidence suggests that other factors such as the brands values and customer relations are key factors in remaining competitive; in which Lovehoney specializes in (Foss and Knudsen, 2003). This suggests that Lovehoney needs to actively monitor their innovation to suit customer needs and sustain their outstanding customer service position to establish a consistent competitive advantage.
As aforementioned, the instability of the economy as a result of Brexit could threaten Lovehoney’s ability to grow as GDP could decrease due to non-tariff barriers, thereby consumers will have less disposable income (Dhingra et al., 2017). However, during the financial crash Lovehoney’s revenues remained stable. Arguably, this suggests that during periods of significant economic turndown, Lovehoney’s revenues will remain relatively inelastic. Moreover, the Office for Budget Responsibility predicated that “public spending will increase from 33.6% to 37.8% between 2020 and 2065”; this is due to greater workforce participation by older adults ages 50+ (Assets.publishing.service.gov.uk, 2020). Arguably this suggests that consumers will have increased disposable incomes, thus increasing buying power and the marginal propensity to consume.
To conclude, vast evidence suggests the benefits of sex for all adults, so why are we neglecting it in the sex industry? The market for older generation sex toys is currently neglected, but researchers and firms are investing more than ever into toys that suit all the things that might come with age. In mainstream media, things such as "age should never stop you" and "age is just a number" is commonly marketed, whilst ignoring one of the most primal and normal human behaviours. But luckily, TV shows such as "Grace and Frankie" (amazing btw), shows the life of two senior women who start a dildo company upon realising that current marketed toys didn't meet their needs. Everyone at some stage will reach age maturity and we shouldn't have to wait until then to notice that sexual health and sexual happiness for the older generation is basically non existent! Lovehoney are amazing for custom designing toys, so if you have an idea for a toy, SEND IT IN!
(References upon request)