Listen: Modern Merchant Podcast EP 4 – Adult Products

Below, you will find a transcript of the episode.

Austin Rose:

All right. Hey, everybody out there. Thanks for joining in on The Modern Merchant Podcast. My name is Austin, I’m the host of this podcast, and today’s going to be a really exciting one with the different companies that we have here, Inventory Source and Flxpoint and US Direct. We have a great relationship with a lot of the top adult distributors in this space. I have Ann, she’s the CEO of cnv.com and we work specifically with their sister company Sex Toy Club. Ann, thanks for joining in. I appreciate it.

Ann Houlihan:

Thank you for having me.

Austin Rose:

Yeah, absolutely. We’ve had a really good relationship for a while. I actually remember our first call probably a little over two years ago. I actually remember exactly where that was because myself and Travis, my CEO, we were super excited. We talked to Tay and you, you guys have been great ever since. Really to get us started, if you could give us a quick background about CNV, Sex Toy Club, all the companies that you guys have and a little background about yourself.

Ann Houlihan:

Sure. I’ve been with the CNV for 10 years now. I came from the institutional investment management world into adult products and technology, quite a transfer there And I love it. CNV has several market channels, one, which is our primary sextoyclub.com, which handles both wholesale and drop shipping for customers with websites outside of our platforms. We have adultshopping.com, which is simply our white label platform for people who don’t want to build their own website. They just want to market adult products on their own website and not handle any customer service or credit card processing or any of the other parts that go along with owning a website and doing your own distribution. With those platforms, we have our own affiliate sites, sextoy.com, which we’re very proud of, and it is our flagship for our affiliate programs.

Austin Rose:

Yeah, I always see that kind of in the adult spaces is the affiliate program side of things. I feel like that does really well with the parties, right? The different parties that the men and women do for the different sex toy adult products. I always feel like that’s a really interesting play there, because that kind of doesn’t really fall into the scope of what we do in regards to selling on  and having really your own business. I always feel like that’s a very interesting moment there in the sense of those different party companies, right? It’s like they do the affiliate approach? Do they own their own website? Do they actually sell their own products kind of side of things? That’s definitely a really interesting thing to kind of understand. Do you want to do the affiliate approach or do you want to actually start your own website? It sounds like you guys pretty much have everything for them.

Ann Houlihan:

Yeah, we do. We do. That’s why we do both. There’s advantages and disadvantages to either program. If you’re an expert marketer and that’s what you do, you drive traffic to websites who might be interested in just the affiliate program. If you want to control your profit, control every bit of the products that are sold and the focus of the site, you may be more inclined to go to Sex Toy Club and have more control over what you do.

Austin Rose:

Yeah. Yeah. That makes a lot of sense. Why don’t we let’s just start out kind of on that breath in regards to Sex Toy Club. Sex Toy Club is again, one of the biggest adult distributors and kind of aggregators of adult products. I mean, I think you guys are probably top three, maybe top five amount of subscriptions we have with Inventory Source. Definitely one of the most popular ones on our platform in regards to customers that want to integrate Sex Toy Club with their sales channels. What really sets you guys apart from all of the other distributors that are in this space?

Ann Houlihan:

I would say that it is our technology. The reason I say that is we have access to multiple warehouses. We have about eight actually. When you deal with us, you’re dealing with available inventory from many different sources. Of course, all of it is automated. The last thing anybody wants to do is have a website and then have to re input those orders into some other system. With Inventory Source and the Club, we have all of the APIs built in. Not only do you not have to worry about manual data entry, you also have access. This has been particularly important during this time because of the situation with the pandemic, different warehouses having different rules to be open, and we may have to limit orders to one warehouse because they have to close down for whatever reason. We have the same products available from other places so you don’t miss a beat. We’re on top of that. We’re small, we’re agile, we move orders and route orders quickly without having to move the Titanic from one direction to another.

Austin Rose:

Yeah. Yeah, and that’s a good point that you bring up because I know with myself having a really good relationship with Tay on your team and our partner support team working back and forth with your team is one, and I’m, I’m going to give you guys a good shout out, is you guys probably have one of the best customer service just in regards to responding to people. I mean, that’s like number one. I feel like a lot of distributors just lose so many resellers. It’s just they just don’t respond. It’s just kind of mind blowing in my opinion. That’s how you’re willing to lose customers, but one, you guys have good customer service and once you either started, or you finally figured out the technology side of things, everything just falls into place in a really good fashion.

Austin Rose:

Because I remember when we first got integrated with you guys, it was easy. It was seamless. You guys were very upfront with the data. You had the right data. We had to do some fun things with the different packages because I know you guys have different packages, but everything’s upfront in the API, especially with the feeds that you guys provide. It’s really been a seamless kind of plug and play on our end and has really kind of worked out, but kind of going to that first point of the different warehouses and then shutting down or pushing back orders or they’re still taking orders, but they’re not going to be fulfilled for weeks. Obviously, that’s something we’ve been dealing with with all of our partners, because we’re integrated with over 250, but you guys because you guys have those different warehouses.

Austin Rose:

I remember you guys were doing really well with some of the suppliers or sorry, some of the retailers that only have access to a few warehouses and being able to offer the other ones to make sure that they could sell. That was honestly one of the coolest things I’ve seen with our suppliers doing that.

Ann Houlihan:

Thank you.

Austin Rose:

Yeah, yeah, absolutely. It’s just kind of, it really makes you guys have that retention of retailers that want to keep selling and working with a partner like yourself because that’s honestly huge in having that type of relationship. How’s that going right now with the warehouses and COVID still being a thing?

Ann Houlihan:

Yeah. I’m glad you bring that up and thank you for all those nice things about us. We work really hard to maintain a really solid customer service and Tay is just outstanding. Yeah, the warehouses continue to have issues. The United States is not handling the pandemic in the same way that other countries have. We still are in a position where carriers are slow. The United States post office is having its own issues. I’m sure you’ve seen in the news, antique trucks and antiquated systems and no investment in infrastructure. Then you have Amazon being a major shipper and then they pulled their own fleet and went back to UPS. That tripled the load on UPS carriers within the United States, and the distributors continue to have issues maintaining their working environment, how many hours they can be open before they have to be shut down and disinfected, their costs have gone way up.

Ann Houlihan:

They’ve had to implement safety workstations with plexiglass and hand sanitizers and social distancing. They’re still a little slow. Although, we continue to monitor with them. We’re really in partnership with our warehouses and they tell us, they keep us informed how many hours behind them are in order. We try to maintain a 24-hour turnaround. If they can’t make that 24-hour turnaround, they let us know. I can manipulate order traffic enough to let them get caught up. Then I can switch traffic back to them. We rotate all of the orders around to these different warehouses in order to stay on top of our customer service, stay on top of our shipping guidelines, stay on top of 24-hour turnaround. It is a challenge for everyone, but I think we’ve done an incredible job so far.

Austin Rose:

Yeah. Yeah, and that’s kind of been the recurring theme of COVID and the pandemic is the  space. It’s such a win-lose situation right now. We’ve been doing great in the sense of people buying subscriptions and integrating, whether it’s with any of our different platforms, because obviously everything is … Everything before the pandemic was shifting online. Now, it’s just accelerated it even more and it’s been great for our software companies, but at the same time, us being in the space with different distributors that are just like, “We’ve got to shut down, we have to,” it’s kind of been a win-lose.

Austin Rose:

It’s kind of funny because some of the distributors will just get orders, on orders, on orders and the revenue just keeps coming in, and coming in, and coming in. But the fulfillment side is just so backed up. It’s like it’s not a win-win. It’s a win-lose the whole time. It’s definitely been an interesting waters to kind of navigate recently with our distributor partners and really with you guys, you guys seem to kind of be on, on top of things. What’s a status update you guys can give us right now? Are you still … Are all eight warehouses back, or are we kind of just at-

Ann Houlihan:

They are all back. They are all working. It does seem to come in cycles. Obviously, these warehouses are working with lots of folks and if they get a big order from somewhere else and it pulls some of their people, it’ll slow down a little bit. Like I said, we really stay on top of it. They’re all up and running 100%. They are all very busy. They are all in constant communication with us on their status. We’re ready at any moment, if they have a hiccup that they’ve got to stop orders for 24 hours and get caught up, we’re in a position to help them do that.

Austin Rose:

Yeah. That’s a good point. Okay, so let’s shift this conversation a little bit just because I can’t tell you how many podcasts or webinars it’s just been COVID, COVID, COVID, and there is one thing that I find interesting kind of in the adult space and obviously, we work with lots and lots of adult retailers and suppliers. How are you guys keeping it, I want to say fresh, but like bringing in new products, bringing in something new? Like what we’ve seen with certain suppliers that we’ve worked with, they’re trying to dabble into a new type of niche. We’ve seen CBD getting introduced to certain adult catalogs. We’ve seen some other stuff getting used to it. We’ve seen people that have just been in the adult toy industry and then now they’re starting to get into maybe the lingerie side of things. What have you guys been seeing in the adult industry, whether that be your different warehouses or what you guys currently do to kind of keep up with the fresh?

Ann Houlihan:

Sure. Yeah. CBD is actually quite a push right now. A lot of lubes, lotion products, CBD and hemp. The Earthly Body has been around for a long time, but there are more coming into space. Green Roads is new within the last several months. We’re also seeing a lot more in very timely additions in the app for related toys and play time. You don’t have to be in the same location as your partner. We actually have products that you can manage on your cell phone or your smartphone with your partner being somewhere else in the world. It is obvious, we have for a long time, been advertising and focusing on long distance relationships with service men and women and other people away from home and cross country relationships with one in New York and one in San Francisco and the industry has moved along and kept up with that technology. We’re offering a lot of app-controlled products now, which is kind of exciting.

Austin Rose:

Yeah. Yeah. I’ve never heard of that to be honest. It’s interesting to see how certain people can adapt to like what’s going on. That’s almost a genius idea just with travel bans and anything travel-related. Obviously, there’s always going to be service members across the street or across the street, across the country or across the globe. Obviously, a majority of them are married and things like that. That’s really interesting that you guys are kind of keeping with the times there. Has there been anything else in the adult industry besides the products themselves that you’ve seen either like shifting or new things going on that people might not know of in the works?

Ann Houlihan:

No. I think mainly the shift in the industry is the normalization of adult pleasure products. We used to be very taboo and we are now much more available, open. You can find some of the basic products at your local drug store. You won’t find all of the types of products that we carry, certainly, but it is more normalized. It is. For people going into starting their own sites, using inventory stores, working through us to transmit orders, they don’t have to worry about credit card processors and things of that nature that used to be very restrictive on our industry and no longer is a problem.

Austin Rose:

Yeah, so you guys have been seeing payment processors being a little bit, or is it more so you’re seeing more companies coming out that are friendly? Like for instance, we’ve been getting a lot of CBD questions and CBD suppliers coming through, and we know with the likes of, I think Stripe and Auth Net and some of the other processors are a little bit constrictive when it comes to that, but we’ve seen people like Square, Square Payments is like, “Yeah. You’re allowed to do CBD sales. Oh, and you can do cannabis sales as well.” I’m wondering if is it new companies or some of these companies just kind of get with the times now with [crosstalk 00:17:37]?

Ann Houlihan:

I think the old standby company is still having a problem with CBD, but they’re fine with adult products. These things take a little time. Once the, what would I call them? The industry benchmark with processors accept products, all the rest fall in line to remain competitive.

Austin Rose:

Yeah. Yeah. They have to, I mean, I don’t see why they wouldn’t, especially with everything going online now. Yeah, that kind of leads me into, again, going online. One of the topics that I feel like it’s brought up a lot just in space, I mean, it could be this podcast, it could be webinars that we’ve done. It’s webinars I’ve seen. It’s the pandemic accelerating it. It’s really the brick and mortar that is going online. All of the different shops, obviously with, I don’t have much experience in this realm, but I feel like in the novelty section or the novelty adult products, it’s kind of a … At least what I think it is, is it used to be more of a brick and mortar type of sell, right? It’s more of the you and the couple, or you and the couple go into the store to see what you want, either look at it, feel it, or whatever it may be, not just hoping you buy something online that’s really expensive and hope it is exactly what you want. What is it?

Ann Houlihan:

[crosstalk 00:19:01].

Austin Rose:

Yeah, so what have you seen kind of in a shift of brick and mortars going online and maybe some good things, bad things?

Ann Houlihan:

Sure. I’m involved in an industry group that is loosely affiliated as an industry kind of driver. What I notice and what I know both anecdotally and statistically is that brick and mortar stores have long been afraid of an online presence. They didn’t want to lose sales in their stores. Having them understand that a website is simply an extension of what’s available in their stores. They still provide the actual one-on-one education customer service assistance that people need with these products. A vibrator used to be $45 and it was just a piece of plastic with a battery. Nowadays these are expensive products. They last a long time and they have very specific uses and functions. There’s a lot of education that goes into the store environment that they don’t believe is available online.

Ann Houlihan:

Making that transition to it’s an extension of your store and going with a platform like Shopify or any of these others, and going through Inventory Source, they actually have the ability to keep their pricing in line with their in-store pricing. This has long been an issue for brick and mortar stores as the online pricing was so much lower than what they were able to charge in their stores. We’ve kind of evolved past the option, the single option to multiple options, allowing them to keep that online presence, but tie it into the events that their stores … A lot of brick and mortar stores have regular events, education, parties, fashion shows, all kinds of different things. This gives them an opportunity to control their audience a little more. I think obviously, getting back to COVID, this has been … I’ve been pushing them to, “Please let us help you get online, stay engaged with your customers, so when you open back up, they’ll be there for you.”

Austin Rose:

Yeah, and they have to do it now. I mean, if you’re not doing it now, then you better do it now because if you’re struggling through everything you have to. That’s an awesome point that you bring up too, and it’s almost what I’ve seen and what we’ve talked about a lot is you’re just adding to what your experience already is. How many brick and mortar stores are out there? How many small businesses are out there that are always looking for the next competitive advantage? The next thing they have to do to stay relevant, because a lot of companies plateau or go down or things don’t work out, a pandemic happens out of nowhere and then you have to shut the doors. The big thing that we’ve always talked about, and I feel like this message just doesn’t get across very often is, you’re just adding more to your business, regardless of if it’s online or in a brick and mortar store.

Austin Rose:

If I own a brick and mortar store, regardless, I mean, it could be just the size of my office right here, or a massive store. You could still offer tens of thousands of more products on your website just by plugging in a Sex Toy Club or any type of distributor. Then if you market that, not just obviously online and social media and do all that, but if you do it in your store too, where you could have maybe we’ve seen people like to … Some of our customers do like a tablet experience.

Ann Houlihan:

That’s exactly what we tell them. You put a tablet on the counter, don’t have it in your size, in the store. Let’s see what happens if we have it online. Yep. We sure do. Let’s get it ordered, check them out, send to their house or send back to the store.

Austin Rose:

Yeah, yeah, and then that fulfillment is like, “Oh, well, there’s drop shipping,” and you have all these suppliers that are totally okay with drop shipping, but once one person says the word drop ship, it’s kind of like, oh man, those are for small business, Chinese, Oberlo type of things. It’s like, no, it’s a type of fulfillment strategy. It’s not a business model. It’s not an app that you just download, and that’s just what drop shipping is. It’s just, no, it’s just a different type of fulfillment.

Ann Houlihan:

Yes, exactly.

Austin Rose:

Yeah, and if you want to keep it at a competitive advantage, like having that added to all your different assortments, especially you bring up a good point, kind of in the lingerie side, the color, the size. You might not want to carry all those colors and all those sizes in your store because that’s more money you got to put up front. Why not offer it on your website? That’s where obviously a relationship between us and you guys, even with our new Flxpoint platform, Flxpoint actually does help integrate your POS system too. You can actually have everything together to make sure that you’re reporting correctly as well. That’s kind of a big drive that we’ve seen, and that’s awesome that you guys … We’re in the same boat, right? We’re in the same boat, professing that, teaching that. I just feel like I’m with you. I feel like sometimes the conversation or that message just never gets across or nobody’s talking about it and that’s why we’re here, right?

Ann Houlihan:

Yes. That’s been our push for some time, both in the affiliate program and in the club program to get your store online. We don’t want to take away your business. We want to expand your business.

Austin Rose:

Mm-hmm (affirmative). Definitely, definitely. A lot of good points there. We are coming up right out of our 30 minutes from when we started and obviously the podcast, we like to keep it around 30 minutes. Anything else you want to say, Ann? Any tips for the retailers out there, anything with the services you guys offer?

Ann Houlihan:

Sure. The demand is there. People want our products. We all have to be mindful of making sure that they have a way to get to the products easily for the customer and safely for the store. Every trick in the book is what we have to use now. If it’s brick and mortar, you offer curbside, pickup. If it is a physical store and you maintain social distancing and require a mask, there’s a lot of work you have to do to keep the store safe, follow the procedures, stay on top of it, get online, whether it’s through us or someone else, but you’ve got to make your products available. People want them, people are home, they’re working from home. It gives them something to do besides watch TV.

Austin Rose:

I am in that all of just browsing online or that very convenient buy now button on Amazon, that I am just a sucker for pressing and we’re all there. I mean, yeah, everybody’s online, everybody’s at home, so it makes a lot of sense, especially for the adult industry. If everybody’s home, there’s probably some stuff happening at home where adult products would come into play. Obviously, that kind of makes sense in this pandemic again, the whole-

Ann Houlihan:

If they’re alone or together, we’ve got something for you.

Austin Rose:

Exactly, exactly. Pandemic brings up some good things for a lot of people.

Ann Houlihan:

Bringing people closer together.

Austin Rose:

Exactly, so yeah. I mean, that’s about it. The only question I have for you is where’s the puppy at? Where’s the big puppy at?

Ann Houlihan:

Oh, he ran off to go play with his partner. He’s forsaken, here he comes. Come here, Buddy. Tipping tapping.

Austin Rose:

I heard him. I heard a little squeaking going on in the background.

Ann Houlihan:

Here he is.

Austin Rose:

There he is. That’s a big puppy.

Ann Houlihan:

Hello.

Austin Rose:

Yeah, that’s the last thing with working from home is the new coworkers that we have. Mine’s somewhere far away.

Ann Houlihan:

I rotate which one is employee of the month.

Austin Rose:

Yep, exactly, but one of them always is, right?

Ann Houlihan:

Right.

Austin Rose:

The best. All right, Ann. Well, thanks for joining. I appreciate it. I think we talked about some just really great things that could get across to both of our networks.

Ann Houlihan:

Thank you.

Austin Rose:

Last bit here is obviously, you guys have great customer service, always keeping us informed, any technical questions come through me or I go to you guys and we’re always solving it on top of our stuff. I can’t tell you how much more we appreciate the relationship and partnership that we have with you guys.

Ann Houlihan:

I feel the same about you. We appreciate you a lot, and like I said, Tay is awesome.

Austin Rose:

Yeah. She’s been crushing it. Got to give the shout out to Tay.

Ann Houlihan:

Absolutely.

Austin Rose:

All right, well thank you so much, Ann, and thanks for everybody listening in and watching it on the podcast. Obviously, stay tuned for any of the next episodes coming up on this should be out on our blog in the Modern Merchant and flxpoint.com, as well as our YouTube channel. Everybody stay on top of that. Thanks again, Ann, and see you guys on the next one. Bye.

Ann Houlihan:

Thank you, Austin. Bye-bye.