<a href="http://www.businessworld.in/news/business/internet/naughty-business-online/1166015/page-1.html" target="_blank">Businessworld (November 26, 2013)</a>

Naughty Business Online

Websites selling adult accessories allow India to come out of the closet


Delivery boy Ganesh’s work frequently takes him to Delhi university’s North Campus and adjoining areas. The last time he was there, among the dozens of branded packets in his sack was a black box. Unlike most of the packets that he carried, this one neither had the manufacturer’s logo nor an invoice with the product description. It was meant to be delivered to Arun, the addressee on the packet. 

Arun, who until recently used to shop for sex paraphernalia in Delhi’s Kamla Nagar market, has now traded the embarrassment and queasiness of shopping in seedy lanes and dimly-lit back rooms of shops with the comfort and anonymity of shopping online for adult products. He no longer needs to mouth the right code — ‘masala maal’ or ‘Chinese toys’, among others — for the salesman to conjure up dildos, role-play costumes, inflatable dolls, vibrators, edible lingerie and lubes that society (more than the law) proscribes. Nor does he have to be wary of the glares of bystanders. Earlier, he would quickly grab the first item that caught his fancy, and slip out of the shop. The milieu didn’t leave room to negotiate, leave alone check the quality of the product or its expiry date.

But thanks to the likes of Rahber Nazir, Samir Saraiya, Salim Rajan and around two dozen such entrepreneurs, Arun now orders adult products at e-tailers such as Thatspersonal, Kaamastra, IMbesharam and NVgals. More importantly, logistics firms such as Ganesh’s deliver them inconspicuously. What has attracted these entrepreneurs to launch such websites over the past 18 months is a pent-up demand and the lack of an organised (yet confidential) channel to buy or sell adult merchandise that includes fetish objects, sex toys, lubricants, aphrodisiacs and costumes. Estimated to be a Rs 1,800-2,000 crore industry in India, it is mostly restricted to the grey market. Only 10 per cent of it is online or legit. This, when the global market is to the tune of $30 billion-plus.

By going online, and thus enabling access from personal devices, these businesses have taken the awkwardness out of shopping for erotic goods. In fact, most players are seeing nearly 25-30 per cent of their traffic coming from mobile devices. Many others are investing in mobile apps on which orders can be placed.

Treading Cautiously
Though such websites have made it convenient for Indians to spice up their sex lives, adult product e-tailers are cautiously treading the thin line between legal and illegal sales. On the one hand the police raid places such as Delhi’s Palika Bazaar to clamp down on the sale of sex toys; on the other, the Web offers everything at a click. All thanks to the law, as spelt out under sections 292 and 293 of the Indian Penal Code, that prohibits any kind of buying, selling, advertising or possessing of items that are obscene. But it does not anywhere define obscenity, giving window for some to take advantage of it. While sites such as Kaamastra, Thatspersonal and more have stayed away from selling toys or enhancements, others like Tajsextoys, Masalatoys, IMbesharam continue to do so. Salim Rajan, with other founders of IMbesharam, spent nearly 14 months researching and meeting lawyers to figure out what can and cannot be sold in India. US-based IMbesharam, which went online in June 2013, sells everything from masturbators to male enhancements, but its counterparts stay away from many categories. The firm is confident that it is not on the wrong side of the law. “Anything that is visually obscene is not allowed. We look at minute things when it comes to display and hence I can say that we are well within the guidelines,” says Rajan. 

According to advocate Lekhesh Dholakia, nowhere does the law mention what is or isn’t legal. But it does state that anything that is obscene cannot be displayed. “Obscene is a very subjective term. What is obscene to you might not be obscene for me,” he says. Agrees Samir Saraiya, founder of Thatspersonal, who quit his job with Microsoft Singapore in 2010 to return to India. His portal offers adult lifestyle products, including innerwear for men and women, erotic costumes, games, lubricants, contraceptives, aphrodisiacs, and erotic literature, among others. The more ‘serious’ stuff — dolls, vibrators and dildos — are not available on the site. “It is only because of legal challenges,” explains Saraiya. “The law is silent on such products.” But he does not rule out introducing these products in future. 

“If you are careful about how these products are displayed, the law should have no objection to it,” says Dholakia. “But you have to ensure you are within the provisions of the IT (information technology) Act and IPC... Anything that appeals to the prurient or can corrupt minds is illegal,” he quotes the law. Thatspersonal gets around 7,000 unique visitors a day and has a conversion rate of 1-2 per cent. The average basket size is around Rs 2,000, with nearly 80 per cent of orders coming from men. “It is tough to figure out what is legal in this business and what is not,” says Nazir, who founded Kaamastra with Amit Batra. He too consulted a battery of lawyers before entering the space. Kaamastra, too, gets around 1,100 unique visitors a day and enjoys a healthy 800 orders a month, with an average basket size of Rs 1,500. Kaamastra went online in February 2013. It, too, stays away from sex toys. Items unique to it are ‘naked wear’, which includes belly and nipple jewels. Interestingly, over 40 per cent of all orders come from tier-2 and -3 markets. Again, while online sale of drugs such as Viagra are banned in India as it needs a prescription; their Ayurvedic counterparts are easily available on many websites. Entrepreneurs are unhappy that there have been no amendments to laws in this category. 

Well, it is not just selling of toys alone that are questionable. Even while nearly 60 per cent of the Internet searches in India are around adult content, porn sites and videos are banned in the nation. But log on to some of these websites and you will find forums giving you all the required information on which sex videos to watch and where.

Customs clearances are another worry. If you have visited Amsterdam’s red light district, Rossebuurt, or Bangkok’s Patpong district and shopped for some of those sinful products, carrying them along might not be an issue when you enter Indian waters. But the same product, if imported for re-selling, creates roadblocks for entrepreneurs in the category. “When we started importing these products, customs personnel used to look at us with blank faces. No one had ever done this in India before and the officials had no idea what was legal and what was not,” says Saraiya. “We still struggle to convince customs officers to clear items like edible body paint.” Explains Nazir: “Such problems crop up due to ignorance and because people are not aware of what can be categorised as a toy and what cannot.”

The Opportunity
However, these hurdles don’t seem to be pulling down these entrepreneurs’ zeal. They continue to see an opportunity in the sex paraphernalia market. The maturation of e-commerce and the increasing mobile penetration are expected to boost the growth of the organised erotica market. Growing at nearly 40-45 per cent annually, this marketplace is fast shedding its earlier image of being ‘grey’ and ‘sleazy’. Also, that 80 per cent of Internet consumers are in the age bracket of 18-45 years — the most sexually active — works to the advantage of online sellers of adult products.

This is what pulled Saraiya into the game. “In 2011 everyone was getting into e-commerce... I was late and hence wanted to pick a category that no one else was doing,” he says. After some research, he realised India lacked a platform for sex accessories. In January 2013, he launched Thatspersonal. Rajan, too, feels the time is right for such businesses here. “Indians have become more mature and bold. And you can see this change even in Bollywood movies,” he says. He sees a lot of traction for hot lingerie and intimate shaving creams on his website. “There is high demand for quality brands and it is hard to find them in India under one roof.” 

Not relying on just the products on offer to attract clicks, IMbesharam signed on porn actor Sunny Leone as brand ambassador. Started in June 2013 by Rajan, Raj Armani and Maninder Singh, the US-based firm ships only to India. The website gets close to 5,000 unique visitors a day, with a conversion rate of 2 per cent and an average basket size of Rs 4,500. The founders have invested over $500,000 in the business so far and are expected to break even in a year. According to experts, after contraceptives, role-play costumes and sexy lingerie contribute the most to the adult products market in India. “Indians are gradually opening up to their sexual desires and are ready to experiment with new ideas in the bedroom,” says Nazir.

Similarly, Saraiya’s Thatspersonal sees big numbers with edible underwear for men. He attributes this to a growing gay population in the country. There are quite a few products targeted at the gay community and they’re doing well too. The surge in demand for lingerie and role-play costumes inspired Abhishek Gupta and college classmate Monika Talwar to launch NVgals.com in February 2013. Gupta caters to 15-20 orders a day, with an average basket size of Rs 1,500-2000. He imports most products from China. Unlike other e-tail categories, adult products enjoy a healthy margin of 30-40 per cent. Nine-month-old Kaamastra is already a profit-making company. Others are not far from breaking even.

Attracting Investors

The biggest challenge for entrepreneurs in this genre is to arouse and sustain investor interest. “Funding is difficult as foreign investors have restrictions and mandates around investing in restricted categories,” says Nazir. When investors do show interest, they often raise questions with respect to scalability, advertising and restrictions around accessing these websites from servers in offices, airports and other public spaces. Thatspersonal, which has managed to pull in some angel money, intentionally kept away from being categorised as an adult products website; instead, it went with the personal products tag. “Investors have certain boundaries they can operate in. Things like gambling and adult products are a strict no-no,” Saraiya explains. Also, the fact that most items in this category are imported and involve stocking and warehousing makes foreign investors stay away because of the FDI laws in India. FDI investments are only allowed for marketplaces in e-commerce.

Advertising remains a challenge too. The laws around advertising and portrayal of adult products are very strict and hence expansion becomes restricted. According to Dholakia, companies have to be extra cautious in advertising adult products as the law pertains more to the portrayal of the products and less to buying, selling, or being in possession of them. 
- See more at: http://www.businessworld.in/news/business/internet/naughty-business-online/1166015/page-1.html#sthash.m1LWCQRx.dpuf
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