Lovehoney--a story of tech, sex and retail

Lovehoney.co.uk has gone from bedroom business to a £16 million turnover in 10 years. Last month it was subject of a Channel 4 documentary, which followed the company’s employees as they went about their daily duties. Here, founder Richard Longhurst gives his personal view from behind the scenes:

Can you remember the first sale you had on your website? That frisson of excitement that “Hey! This thing actually works!” I can remember our first order on Lovehoney.co.uk—we had to go to the post office to buy an envelope to send it out in. It took us six days to get our second order. The day following the broadcast of More Sex Please We’re British, Channel 4’s fly-on-the-wall documentary about Lovehoney, orders were coming in at a rate of every 5 seconds.

When we launched Lovehoney back in 2002, my friend Neal Slateford and I knew we wanted to start an ecommerce business but didn’t know what to sell. I added an adult stores section to an online shopping directory I was running and noticed that existing sites in the market were technically poor, badly designed, badly merchandised and offering poor customer service.

Then I saw that they were offering up to 25 percent commission on referred sales. Lightbulb moment: if these companies could afford to pay 25 percent commission, how much money were they making? Must be a product with a great margin—this would be our market.

We started Lovehoney with a £9,000 investment and own it 50-50 between us with no debt or other investors. We’ve grown organically and didn’t take much money at all out of the business for the first couple of years; boot-strapped all the way.

We decided early on that we would do all technical development in-house. A lack of cash, a distrust of agencies and a detailed knowledge of what we thought needed to be done enabled us to get up and running at little cost. We now have 75 staff at our warehouse and office in Bath and ship about 50,000 orders a month. The website will never be finished, we’re always testing, tweaking and updating.

Last November we bought Coco de Mer, the luxury erotic retailer that was in need of investment, enthusiasm and reinvigoration. Coco de Mer lives in a world apart from Lovehoney; fashion, luxury and erotica. This was a steep learning curve for a group of internet nerds like us who had never run a shop before, much less one operating in such a rarefied atmosphere.

With a tired boutique in Covent Garden and a website that, confusingly, made it nigh-on impossible to check out, Coco de Mer had struggled to generate the sales to match its image. But what the business did have in spades was a fantastic brand name and dedicated, knowledgeable and talented staff; that was what we were buying into.

It’s our job to make the business realise its potential; we started by getting the basics in place. We brought the fulfilment from the shop’s basement to Lovehoney’s warehouse in Bath, threw away the existing website and relaunched it on our in-house system. We now have a website that works—but needs a lot more development—products that are in stock, and despatch and customer service levels that match the brand’s high-end promise.

The boutique literally needed a lick of paint and some reorganisation; perhaps having hardcore bondage gear on a table just inside the door wasn’t the best way to welcome customers into the store. Price tags on everything would be nice too. Maybe some information to explain what these weird-shaped sex toys do. Or whether what you’re looking at is actually for sale. As Neal said in the documentary: “It’s part art gallery, part museum. With a till.”

Expansion plans
Six months in and Coco de Mer is now set to grow. New product ranges are in development and we’re about to bring back the hugely popular in-store educational sex salons. It’s too early to think about opening more stores because we need to lavish attention on the Covent Garden boutique and make sure it’s the perfect embodiment of the brand. But when that’s right, it’s a brand that can travel and will travel far.

As if all that wasn’t enough to be going on with, we’ve decided to have a go at America too. Lovehoney.com launched in October 2011, just before we got distracted by this Coco de Mer business. It does a great job of pretending to be a US website—all prices and special offers are in dollars, you get free shipping and free returns to our warehouse in Dallas.

It does okay, but the biggest thing we’ve learned is that it’s not going to grow itself. Lovehoney.com needs, and is about to get, dedicate resource, in the form of people on the ground, if it’s to reach its potential in the US as Lovehoney’s UK site has done.

All the things that we take for granted on Lovehoney.co.uk—blogging, PR, SEO, offers, lead generation, email campaigns, social media, competitions—need to be done on Lovehoney.com. We need to recruit hard and fast here and in the US.

We chose to go to the US before Europe because it’s a bigger market and we already have some brand recognition there. We’ve been selling products to the trade for several years. There’s also less of a language barrier in the US compared to Europe.

People often ask us what our exit strategy is. Neal and I don’t have one and won’t have one while we’re having so much fun in this business—tech, sex, retail—and still have such a long to-do list. With recession, euro traumas and much uncertainty, it would be easy to wait for it all to blow over. But there are excitement and opportunities out there.

As entrepreneur, marketer and best-selling author Seth Godin said, this is the chance of a lifetime, go!