Naughty But Nice

Sex shops: seedy, if not downright sinister; XXX signs plastered on blacked-out windows in shady neighborhoods; frequented mainly by men. When it comes to the flesh industry, Europe, for all its sophistication, wasn't much different from the U.S. Then along came Ann Summers, a British chain of sex emporiums, and things began to change. The 23 Ann Summers stores scattered across Britain are on main shopping streets and geared specifically to women. Brightly lighted and decorated in pastels, the shops manage to make the selling of erotic lingerie and sex aids seem more naughty than nasty. And 70% of Ann Summers' sales last year are estimated to have come from females. "We're the acceptable face of the sex industry," boasts Jacqueline Gold, managing director of the chain.

Women are a lucrative, if previously ignored, market for sex merchants. And Ann Summers--"a company run by women for women"--has successfully homed in using traditional grass-roots marketing techniques, mainly home-party sales. "We're exactly like Tupperware, but a bit more fun," explains Gold. Ann Summers hauled in $22.5 million for the year ending June 30, 1998. Seventy percent came from home-party sales (which include Internet and catalog purchases); the shops account for the rest. But that equation may soon change.

Not content with selling 400,000 vibrators a year in Britain, privately held Ann Summers has embarked on an aggressive expansion program. It is increasing the number of its British stores to 75 and pushing its Internet sales. In July it opened the first overseas Ann Summers shop, in Sydney, Australia. Earlier this month it opened a new two-story, 5,000-sq.-ft. store--complete with a coffee bar--on Dublin's fashionable O'Connell Street. And the firm plans to open outlets early next year in Tokyo and even Saudi Arabia. Gold is also keen to take her sex wares to America. She's had preliminary discussions with potential franchisees in New York and Florida. "We want to be in every major city in the world," Gold insists. The company is basing its expansion program on the shops, then hopes to introduce home parties and Net shopping as well.

Ann Summers is not the only European sex chain with international ambitions. Germany's Beate Uhse--which also takes an upmarket, Main Street approach to marketing erotic paraphernalia--stunned local financial markets in May when its initial public offering of 8.4 million shares was 63 times oversubscribed. It is now one of Germany's hottest stocks, trading in the $19 range. Beate Uhse is likewise expanding operations elsewhere in Europe and beyond. In September the company acquired a chain of 44 "erotic discount centers," plus a Dutch mail-order company that offers a full range of sex toys, videos and publications. The discount centers are all located in small towns in the Netherlands and neighboring countries; Beate Uhse shops are located in main shopping districts in larger cities. Beate recently launched retail websites in Austria and Switzerland.

Sex, of course, always sells. Pornography websites were among the first to turn a profit in e-commerce. So-called adult material accounts for 69% of the $1.5 billion worth of online content--services that can be downloaded, including music and games--in the U.S. and Western Europe, according to a May 1999 study by research firm Datamonitor. But taking sanitized sex to the masses--and particularly to women--has given purveyors of erotica an entirely new audience. "Taking the smut out of sex is a clever thing to do," says Michael Poyner, retailing expert with London consultants Credo Group.

And the Net provides a nearly perfect vehicle for reaching well-heeled customers with a taste for vinyl pushup bras or fur-lined handcuffs. Ann Summers got into Internet sales in the past two years and says its site ) averages a million hits a month. In August 1997 the company's monthly Internet sales stood at a mere $6,100; by last August the figure had climbed to $42,575. Beate Uhse expects online sales ) to hit $32.8 million this year.

Beate Uhse is the grandmother of safe sex in Europe, having opened her first sex shop in the northwestern town of Flensburg in 1962. At 79, she still heads the company's board. Unlike those of Ann Summers, only 30% of Beate Uhse sales are to women. "We are working on new concepts to bring more women into the shops, like including more lingerie," explains Ulrich Hulle, chief financial officer.

Beate likewise hasn't tried anything like the at-home parties that established Ann Summers' female client base. Ironically, the first two Ann Summers shops were opened in London in 1970 by Swinging '60s man-about-town Kim Caborn-Waterfield, an actor who squired the now deceased blond bombshell Diana Dors. Caborn-Waterfield envisioned a chain of sex supermarkets patterned after Beate Uhse's. The shops were bought a year later by Gold Group International, whose holdings include a number of British soft-porn magazines and which is owned by managing director Gold's father and uncle. It was the woman of the family who came up with the innovative sales strategy. After joining the family business in 1979, Gold, 39, attended a home-sales party for a line of clothing and decided erotic goods could be sold to women the same way. She was soon running Ann Summers. Gold began with eight women "party planners" and now employs more than 7,500 people in that role. (Of her 332 full-time staff members and executives, 95% are women.) Each year 2.3 million women attend Ann Summers parties.