The Would-Be Amazon of Sex Toys Became the Radio Shack Instead

With Sex and the CityFifty Shades of Grey, and Comedy Central’s Broad City helping catapult sex toys out of the bedroom and into the mainstream, Germany’s Beate Uhse AG—a publicly traded company that a decade ago was Europe’s biggest retailer of erotica—was poised to become its industry’s Amazon or Netflix. After the company filed for insolvency on Dec. 15, it looks more like Radio Shack.

In 1962, Beate Uhse, one of a handful of female pilots in Germany’s World War II Luftwaffe, opened what she called the world’s first sex shop, the Institute for Marital Hygiene, in the northern German town of Flensburg. The enterprise revolutionized the sex lives of European baby boomers with condoms, lingerie, and how-to books, eventually growing to more than 300 outlets. The company went public on the Frankfurt Stock Exchange in 1999, intending to use the proceeds to expand abroad and invest in internet sales. The shares—each certificate featured photos of scantily clad women—were 64 times oversubscribed. A joke at the time held that more Germans knew who Beate Uhse was than Chancellor Helmut Kohl, and retail investors bought into the company’s story, helping the stock almost quadruple in the first three days of trading, to €28.20 ($33.32).

The honeymoon was short, as Beate Uhse failed to shake off its image as an operator of adult film cubicles in dodgy neighborhoods. With physical stores and websites lacking consistency in marketing, web sales were disappointing. And the company underestimated the impact of free internet porn, which depressed revenue from its profitable DVD business. Instead of pushing harder online, Beate Uhse invested in unsuccessful gimmicks such as 3D porn.

In the early 2000s management considered buying a condom maker and the publisher of Penthouse but stopped when it became clear rescuing the troubled companies would be costly. A defective sprinkler at a Dutch warehouse caused millions of euros in damage in 2006. And an effort a decade ago to create female-focused shops failed to meet sales expectations. “Beate Uhse veered off the success path because it stuck too long to its old business model,” says Michael Specht, who in April took over as chief executive officer. “It’s been a big challenge to continue the company’s rich tradition in a modern, digital form.”

Revenue has been on a long slide since peaking at €285 million in 2005, and the shares have bounced along in penny-stock territory for almost a decade. After the collapse in December of talks on restructuring €30 million in debt, Beate Uhse filed for insolvency with self-administration (similar to Chapter 11 in the U.S.), though Specht says its main units will continue to operate as usual. To get back on track, Beate Uhse has in recent years closed scores of stores, dropped its print catalog to emphasize online sales, and revamped its logo, with a script font replaced by a simple “bu,” for “be you”—a call to freely express sexual desire. “We’re optimistic we can turn around the company as a whole,” Specht says.

Beate Uhse’s stumbles have created an opening for younger rivals that make buying vibrators seem cool by catering to couples and women, staging Tupperware-style home shopping parties, and designing websites that position their wares as health-care products. Founded in 2006, Eis says it’s Germany’s leading online erotica shop, with 7.7 million customers, drawn in by a TV ad campaign featuring cheerful hipster women against a pastel-tinted background. Amorelie has doubled sales every year since 2014 and is now profitable, thanks to products such as a €130 Advent Calendar, with 24 toys including a vibrating penis ring, a “spank me” paddle, and lemongrass-scented bath salt. The company, which in 2015 was bought by German television juggernaut ProSiebenSat.1 Media SE, plans to expand beyond the five European countries where it operates, and in July it started selling in the 2,000 outlets of a German drugstore chain. “Traditional sex toy shops focused on single men, and the shopping experience felt very uncomfortable,” says Amorelie CEO Lea-Sophie Cramer, a 30-year-old who often takes her toddler to work. “We’re positioning ourselves more like a fashion brand.”

The global sex toy market will expand about 7 percent a year, to $30 billion in 2020, researcher Technavio predicts. Beate Uhse faces a growing range of rivals including—of course— Inc., which now sells vibrators, fur-lined handcuffs, and other sex toys. With many potential customers still put off by the industry’s raunchy reputation, vendors must project an image “that is progressive, inclusive, positive, socially conscious, and approachable to all,” Technavio analysts said in an October report.

Specht says he can tap into that trend with more Beate Uhse-branded toys and a redesign of its stores. New outlets, such as a revamped two-story shop in central Berlin, aim to attract the kind of customers who have been turning to Amorelie, with a minimalist look that includes golden mannequins in the windows and lubricants and vibrators displayed on austere marble blocks inside. “The market has much more potential, so we see good growth opportunities,” Specht says. With its colorful history, “Beate Uhse is unique in the industry.”