How Lovehoney cleaned up in sex toys and grew to £60m turnover

Lovehoney's ecommerce story
Lovehoney
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In just 14 years a former journo and a some-time music producer have taken their idea for a female-friendly sex toys business from zero to £60m turnover – with more growth to come.

BusinessZone’s Christian Annesley caught up with Richard Longhurst to explore how he and Neal Slateford have carried the business from the ecommerce margins to the mainstream in quick time and disrupted an industry along the way. Read more from our The Disruptors profile series here.

Some marketplaces and industries are very competitive; some others aren’t. So it follows that one art to being successful in business, and growing rapidly with good profitability, is to go after a market opportunity where the space is wide open and ripe for disruption.

That’s where Lovehoney, the online sex toy retailer that today turns over £60m with healthy profit margins,  started from in April 2002. And Richard Longhurst, one of the two co-founders of the Bath-based business, is explicit about how and why the business took off.

“When we got underway there’s no doubt there was a massive gap in the market for a female-friendly online sex toys retailer and we soon learnt you could also stand out just through basic professionalism,” he says.

“In 2002, badly designed, technically incompetent, pornographic websites were competing in a market with a predominantly female customer base. And the more we studied it, the more obvious the opportunity looked.”

So Longhurst and his music producer friend Neal Slateford put in an initial £4,500 each to get started and ensured their small cash-pile worked hard for them.

“We got a friend to develop a website and another to design a logo, and then we bought £2,000 of stock. We had no idea what products to buy so we phoned a supplier and ordered three each of their 100 best-selling items – one to photograph out of its packaging and throw away, one to sell and the third one so we wouldn't immediately be out of stock. That was as far as the business plan went.”

Nought to 30

It might not sound much, but it turns out it was enough.

“We launched in April 2002 and within three months in we were getting 10 orders a day,” says Longhurst. “By December 2002 the flow of orders was up to 30 a day. So, within a year of launch, we could see that it was a goer and decided to dedicate all our time to running the business.”

The founders put in an initial £4,500 each to get started and ensured their small cash-pile worked hard for them.

How did the website pick up sales so quickly? As Longhurst says, it’s because, basic as it was, the competition was worse.

“They were all technically very poor. The sites didn’t function well and weren’t well-designed . Customer service was non-existent and there was no photography so you couldn’t see what you were buying. Plus the descriptions were also laughably weak.”

Something else in Lovehoney’s favour was that the business launch came shortly after a famous Sex & the City episode aired – “the one where Charlotte gets addicted to her rabbit”. And while it was obvious that such accessories were designed for the female market, the online competition wasn't marketing to women.

Scaling up

If the lack of viable competition gave Lovehoney a head-start compared with many other ecommerce niches the founders might have targeted, the fact that ecommerce itself was still an emerging area in 2002 also gave Longhurst and Slateford more than a fighting chance.

“It would be harder today to break into any ecommerce niche today, though clearly it’s still more than possible,” says Longhurst. “In 2016 broadband and mobile are part of our lives, and people are always online and willing to shop anywhere and at any time. That’s a great opportunity, of course, but the bar in ecommerce is set higher. And the customer's expectation of service and delivery is also a lot higher than it was.”

Overseas markets now account for about a fifth of Lovehoney's still-sky-rocketing revenues.

Lovehoney has kept on evolving, of course. Today it boasts 24/7 customer service – either phone or live chat. And it nowadays proceeds a lot less speculatively than it once did.

“For the most part, gone are the days of us taking a punt on something. We do a lot more research with individuals to find out what motivates them to buy, and  then we follow through.

“Web development is a big part of the picture too. For example, we recently rolled out a vibrator finder tool with a simple graphical interface. It’s made it a lot easier for customers to navigate their options, we’ve had good feedback on how well it works and sales have climbed,” says Longhurst.

The hiring challenge

For any high-growth business, keeping up with staffing needs is a significant challenge and Lovehoney is no different.

“Given our growth, at times we have been too slow to hire people,” admits Longhurst. “The business has grown so fast that it has often felt that we're playing catch-up. Happily, that's meant we've always been very profitable, and now we're in a strong position with cash reserves and no debt, so we can really invest for more growth. But finding the best people across all departments is an ongoing effort and you need to back it up with training too. All the heads of department are also working at development and training to keep the talent we have.”

To keep its foot on the pedal when it comes to developing talent, the company has even developed a sexual wellbeing qualification in collaboration with a local education provider, says Longhurst, as a way of formalising some of the learning needed to succeed in the business.

International opportunity

Lovehoney has grown in overseas markets in recent years, so that now those sales account for about a fifth of its still-sky-rocketing revenues. And Longhurst can’t resist being tongue-in-cheek about the reasons for that growth.

“Our key insight, when it comes to growing internationally, is that people in all countries have sex. Added to that, the internet goes everywhere. So we are well-placed!”

Ultimately we have the ambition to become the most-recognised sexual wellbeing brand in the world.

His more serious point is that growth in the business can in part come from the development of own-brand products, in a context where there are few brand names.

“It means that brands like Lovehoney, and the Fifty Shades of Grey branding for which we have had the licence, have real potential in tomorrow’s marketplace. We’ll try to build on that.”

And, Longhurst also adds that the international growth  has come from targeting key markets with dedicated websites – the US, Australia, France, Germany and a .eu address for a Europe-wide site. So far, the company can still fulfill all its orders from its Bath warehouse, although its postal arrangements are clever enough to make overseas sales appear to customers as if they are in-country deliveries.

The year ahead – and beyond

With annual growth running at about 20%, one of the main challenges for Lovehoney in the year ahead is keeping up with itself, says Longhurst.

“There are so many opportunities that we need to make sure we are making the right decisions and deploying our resources to maximum effect. It’s a nice challenge, I’ll admit, but it’s still a challenge. Ultimately we still have that ambition to become the most recognised sexual wellbeing brand in the world and we know we aren’t there yet.”

This content was produced in association with Lightspeed. Find out more about Lightspeed's single solution for your online and brick-and-mortar store to create a more consistent, omnichannel experience for customers.

Christian Annesley
Staff writer
BusinessZone
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