Inside Retail Weekly: Tell me about the Lovehoney site and how it began.
Rob Godwin: Lovehoney started in the UK in 2002 by Richard Longhurst and Neal Slateford. Their concept for Lovehoney was for it to be a non-pornographic site with no titillation and aimed at females and couples, which they felt was lacking in the marketplace. They launched Lovehoney from their spare room with a couple of thousand pounds’ worth of toys under the bed, and they opened their first warehouse that same year.
We had all been friends for a number of years and one day in 2012, we were having a drink at a trade show in LA and I said, ‘Why aren’t you doing something in Australia?’ Then Fifty Shades came along and Lovehoney won the global licence [for its products], so I launched it for Lovehoney in Australia and New Zealand and they launched it around the world.
Off the back of that, we launched the Australian site in 2016. We created a phone line; one staff member came over from Bath; and I was working from my spare room. Three months later, we got an office in West End, in Brisbane. Less than 12 months later, we moved into a bigger office and had seven staff. A year after that, we opened our own 2500sqm distribution centre in Eagle Farm. We’ve just taken on our 30th staff member.
IRW: How would you describe the past financial year for Lovehoney?
RG: The past year for the group has been exceptional, generating over £100 million in turnover. Our profits have risen 22 per cent to £11 million. For us, our growth territories are in Australia in the US, which are growing at 67 per cent – it’s just huge for us. We’ve got a brilliant team here that is coping with that increasing demand. From a growth perspective, we’ve been the main disruptor in the adult space, away from traditional retail stores and the more male-oriented sites. We’re leading the Australian marketplace. Happy days.
IRW: What do you think has led to that growth?
RG: The exceptional growth is really down to our core offer to customers. Everything we do is a positive customer experience, such as 24/7 customer service in our UK, US and Brisbane call centres. We deal with most people from the UK ringing at night and when the UK wakes up, they’re dealing with Australians. Customers are amazed that we’re available 24/7 and that we reply to all emails in under 40 minutes. We also have live chat.
If you’re in the throes of passion and you have a question, you don’t want to wait until business hours to ask a question, you want to know now!
But our greatest asset is our staff. We don’t have staff who sell. All we do is provide information to the customer to fulfil their journey, so we provide them with frequently asked questions, videos, we have over 240,000 reviews from customers and a five-star rating on Trust Pilot – all of those things help our customers make the right decision. We have a seamless transition from the phone, live chat or email to getting the right product.
That complements with our key partners, like Australia Post. We’re now their biggest retailer in northern Brisbane. We’re experimenting this year with new services with Australia Post – we’re their guinea pigs.
We’ve also expanded our express service by up to four million new customers this year and we were one of the first customers in Queensland to have expanded reach, which means we have different cutoffs during the day. So if you place an order with us at 5pm, we can get it to you in Sydney the next day. We tailor our operations to fit the customers. Our warehouse staff start later in the day and finish late at night. We get [our products onto] the last plane going into each capital city, so 94 per cent of Australia can receive their deliveries the next day. When you look at reports from Australia Post, people want next-day delivery. Thirty-seven per cent of all Australia Post orders are for next day, that’s why we can compete with other adult stores.
IRW: What’s on the agenda for the coming year?
RG: Our plans for 2019-20 are to continue our localisation with our fabulous marketing team. This year, we created a new commercial to tailor our offering to Australian, New Zealand and Asian customers. Part of what [PR and marketing executive] Natasha Neal and her team are doing is providing an intricate marketing plan, so we have above-the-line advertising, and free-to-air TV advertising, like our Turn On Australia campaign. We have radio adverts going on, dedicated PPC and social media. So from a marketing perspective, the plan is to grow that and finesse our offering so it’s bespoke to our Australian customer base.
We’re launching over 300 new products. We make most of our products and have licences like Fifty Shades, so we’ll continue that. We have new ranges from [high-profile sexologist] Tracey Cox; we have another new sexologist about to be announced; and we’re doing radio shows, so we’re only scratching the surface.
In our category, our demographic mirrors online fashion and accessories, and that’s grown 20 per cent in the last year. We want to build on that – 10 per cent of all retail is now done online. We see a massive opportunity because we are leading online retail for adult products and stores and that disparity [between on- and offline] is getting wider. We want to make that gap even bigger and take more market share this year.
IRW: Are new products a key element of differentiation for adult stores? Is that a big focus in the sector?
RG: I think it goes hand in hand with customer experience but also, it’s about how you advertise, the way you do it and price isn’t always the be-all and end-all. When it comes to delivery, we are ultra-boring. We deliver a boring brown box with no markings. Your neighbour or postman wouldn’t be able to tell what it was.
We advertise to real people. Lingerie is a massively competitive market, but it’s our biggest growth area and in that category, plus-size is the biggest growth area for us. Our whole approach is we want to advertise to real people. Our Turn on Australia campaign is all about positive body image and having a positive mindset. Having a good sexual life is about health and wellness. In our recent Sexual Happiness survey, 60 per cent said that if you have a positive sex life, you have a positive overall life.
While there are disruptors coming into the marketplace, if you can advertise in a positive way – and create a service to customers in a seamless way – that’s how you can grow the market share. While we do have competitors, we’re proud of what we sell and the way in which we sell it. We have an equal base of plus- and straight-size models – and our influencers are normal people who are normal sizes, like 12, 14 and 16.
[That approach to body diversity] should be the norm. We don’t make a big deal out of it, and I think it’s part of our subtle approach. We have same-sex couples, mixed-race couples, in our TV adverts. It’s the norm – and that’s what we try to convey in our advertising through social, TV, and how we present our products.
One key thing for our site is all the content is our own. We take our own photos, we write our own reviews and nearly all our products have videos – but it’s not a sales video from a manufacturer. It’s a video from our sexologist, describing the product features. It’s not, ‘You have to buy this for X, Y and Z’. We focus on our customers and the education is for them. They’re intelligent, they come to our site, we let them go on their own journey and make their own decision. Our return rate is tiny because of the amount of information we give them before making a purchasing decision.
IRW: Tell me about Lovehoney’s return policies and the Sex Toy Happiness Promise.
RG: Lovehoney customers can return any unopened, unused or unworn product with its packaging or tags intact to us within 30 days of receiving it for a full refund or exchange. When you create a Lovehoney account, you qualify for our one-year product guarantee, so if anything goes wrong with your product, we’ll replace it for up to a year after purchase.
Lovehoney account holders also qualify for our Sex Toy Happiness Promise. If you’re not completely happy with a sex toy you have bought from Lovehoney, let us know why within 30 days of receiving it and we’ll replace it with one that we think will work for you up to the value of what you spent – free of charge! We go the extra inch to make our customers happy.
IRW: You’ve been in this sector for some time now. How has the industry changed?
RG: There have been considerable changes in our industry over the last 15 years. The most interesting and compelling change has been the evolution of adult products into the mainstream retail environment. A consumer is no longer challenged with a negative and confronting retail experience.
Adult retail has grown up from the basement shops and poorly designed and presented products into great customer experiences online. Today, adult-product consumers can experience first-class customer service, confidence in their purchasing of quality products, thousands of reviews from like-minded consumers, products fit for purpose and next-day delivery. Their retail journey has evolved into a pleasurable experience, with excitement and confidence in the products they have invested in, just as you would expect from buying a product from Apple, Showpo or Lust. Adult products are now sold in a mainstream retail way.
Another important shift has been from a predominantly male customer base to a much higher female audience, especially online. This has evolved alongside the change in retail environment, with much less focus on porn and more inclusive product offerings and marketing. The industry is moving away from the ‘dirty little secret’ mindset and becoming much more accepted on a global scale.
There is still a long way to go in opening up conversations around sex and normalising sex, which is one of our key objectives, but it’s certainly heading in the right direction.
IRW: A big part of Lovehoney’s focus is on uni students.
RG: Students are a growing market for us because going to uni is a rite of passage. They’re going away to university, although a lot are staying at home and that affects their buying patterns. We tailor our content for students, so we have a dedicated newsletter for them, a blog called The O Spot. We have a forum on our site and we have a key partnership with UniDays, as they provide dedicated discounts for specific user groups. We have a year’s worth of calendar events with UniDays for our students – there’s an offer every single week or month and different promotions like when it’s O Week and mid-year intake.
We want to understand their buying patterns and what they’re buying and when we did the Sexual Happiness Survey with 3000 people around the globe, we found that for uni students silent vibrators are among the top five sellers. Lingerie is also a massive seller.
Our approach to uni students is that sexual health is vital, specifically when they’re at their experimental age and potentially having more partners, but there is equal emphasis on sexual happiness and wellbeing. You can be still safe but have a positive sex life by utilising adult toys.
IRW: What are some of the challenges for retailers in the adult sector?
RG: Innovation and trying to stay up with the latest trends. There are literally tens of thousands of products coming to the marketplace every year, so what product do you chose? We’re fortunate we sell over 4000 products and a lot of them are our own, so we have that exclusivity. So in terms of innovation, we’re ahead in the industry. Because we do make our own product, we are also competitive on price, so it’s a win-win.
We’re very fortunate working with Womanizer in developing our own unique product just for Lovehoney. We’ve had to fly stock in from the UK to keep us going until our next sea freight arrives.
Because we launch our own products, we can stay ahead of the curve and that’s where a lot of stores are limited in terms of budget. They have to choose from a vast range of product, but we have so much data, we can narrow down what will be our good sellers the majority of the time. We’re using data analysis and we’re data-driven.
The other major challenge the industry faces is staffing – really good staff are so rare. Having run the biggest bricks-and-mortar retail chain in Australia, I had 160 staff, and the hardest thing was keeping and recruiting good staff because if they’re any good, they’ll get poached.
Our staff retention is excellent – we’re very proud of our workplace culture. We work our backsides off, but we have a lot of fun every day and there are dogs in the office. There’s a fair bit of banter that flies around the office.
As a company, we live and breathe our core values, not only in a customer-facing capacity, but it also resonates in both our personal lives and from managers to employees.
Another challenge is changing the retail industry’s perceptions of our business. Lovehoney was a finalist in the ORIA awards with Kogan and Showpo and that’s what we compare ourselves to. But the industry perception has a long way to evolve. By a lot of topline advertising on Foxtel, we can show people that having a positive adult life is a positive thing.
Our co-founders Richard and Neal got the Queen’s Enterprise Award last year. That’s cool! They went to Buckingham Palace. It was brilliant. We were so proud.
Also, from a local perspective, Australia Post did a tour of office and we met group chief operating officer Bob Black. They asked if they could do a video of us. You’ll see on LinkedIn, their website and social channels that Australia Post has done a short film on their relationship with Lovehoney. So the oldest company in Australia is doing a business video with the number one adult product retailer! We’re very honoured.
It highlights to the business community and the general public that we are normal – what we provide is a great product and service at an excellent price.