Beate Uhse CFO Forecasts 'Big Shakeout' in Euro Sex Shop Biz

HAMBURG, Germany - Otto Christian Lindemann, the chief financial officer of German sex shop chain Beate Uhse, has predicted a "big shakeout" in Europe's adult retail market.

"Europe has thousands of sex shops, most of them strongly dependent on DVDs," Lindemann said in a recent interview with Reuters. "Many of them will not survive."

Ranked as the world's largest sex retailer by revenue, Beate Uhse saw its sales decline in 2006 for the first time following a long period of growth. The company operates approximately 330 sex shops in 11 countries, with mail-order operations in nine.

Lindemenn said that Beate Uhse hopes to compensate for the recent drop in DVD sales by revamping its stores with a stronger focus on "lifestyle" products for women and couples. The chain is investing $7 million this year in store renovations.

Porn accounts for an estimated 35 percent of sales in Beate Uhse stores, and Lindemann expects that percentage to decline as online porn replaces DVDs. Newer stores in the chain have divided floor space into four sections: massage oils and lubricants and a lingerie boutique are closer to the front, with hardcore DVDs and heavy-duty bondage gear pushed to the back.

As part of its push to women and couples, Beate Uhse is selling "love bags" with "lubricants, vibrators, body paint, chocolate, champagne and CDs of erotic stories." The chain plans to expand its brand with licensed Beate Uhse energy drinks, beer and wine.

Lindemann characterized 2007 as "a year of transition."

"At the end of the day, whatever new direction we take, we want to earn money," he said. "Selling erotica is different than selling porn. And we are going to do it right."