The adult industry faces increasing pressure on profit margins due to rising manufacturing and operating costs, necessitating a reevaluation of pricing strategies and a clearer understanding of financial metrics. Industry stakeholders, including manufacturers, distributors, and retailers, are urged to engage in more transparent conversations about pricing models to ensure sustainable business operations.

The Evolving Pricing Landscape

Mersy Love, co-owner and co-founder of Bodacious Afterhours, highlighted on October 23, 2026, that manufacturers’ suggested retail price (MSRP) no longer aligns with the actual costs of operating a business. This misalignment is attributed to rising manufacturing costs and living expenses. A discussion about the current industry pricing landscape, potential adjustments, and how companies can make an impact is necessary.

MSRP, also known as list price or recommended retail price, provides retailers with a starting point and can help maintain consistent pricing across various sales channels, including stores, chains, and e-commerce sites. Consistency benefits both shoppers and suppliers by offering customers a reference point for market value and limiting dramatic price differences that could confuse consumers or undermine retail partners. However, a suggested price does not guarantee a sustainable profit for every seller.

Brick-and-mortar operators incur expenses that online-only sellers may not bear to the same extent. These costs include rent, utilities, floor staff, insurance, fixtures, shrink, and local compliance costs, which vary by market but have generally increased. Retailers cannot evaluate an item solely by comparing wholesale cost with MSRP; the total cost of selling it must be accounted for. For example, if a retailer buys an item for $50 and sells it for $100, the markup on cost is 100%, while the gross margin is 50%. Neither figure includes overhead. Confusing these terms can lead owners to believe a product is more profitable than it is. Many companies and storefront owners struggle with limited financial knowledge, making it difficult to identify where profits are lost. Retailers can no longer depend on the profit margins that worked 20 years ago due to rising business costs.

A storefront requiring a higher gross margin to cover service and occupancy costs may struggle to match the prices of a leaner e-commerce operation. While in-store education, product demonstrations, and relationship-building can create value and long-term loyalty, shoppers may prioritize lower prices during a difficult economy.

Strategies for a Sustainable Model

Industry standards need to evolve when the economics supporting them change. Brands and distributors can begin by assessing whether MSRP provides sufficient room for different retail models to operate sustainably. They can also provide retailers with clearer notice of cost changes, avoid undercutting partners through direct-to-consumer promotions, and offer pricing structures that reflect volume, freight, and import costs.

Retailers also have responsibilities, including calculating gross margin by item, accounting for landed costs, and monitoring how labor, rent, and discounts affect net profit. A product that appears strong in a simple wholesale-to-retail comparison may perform poorly after freight, duties, promotions, credit card fees, and staff time are included. This analysis should occur at the category and SKU levels. Fast-turning products can justify a different margin target than items that occupy shelf space for months. Retailers should also measure the cost of markdowns, loyalty offers, and free shipping rather than treating them as invisible marketing expenses. The goal is not to raise every price but to understand which prices support the business and which erode it.

Mersy Love's visit to API Expo in Shanghai deepened understanding of product cost and development, leading to direct work with factories and brands. Comparing these costs with distributor pricing revealed significant differences. While direct sourcing is not suitable for every store, as distributors provide consolidation, smaller order quantities, domestic inventory, credit, service, and reduced importing complexity, the comparison highlights the need for transparency about the value added at each stage.

These are turbulent times for factories, brands, distributors, online sellers, and brick-and-mortar retailers, with shifting costs and tariffs, cautious consumers, and ongoing product introductions and partnerships. This pressure creates an opportunity to reconsider habits that no longer serve the full channel. A stronger pricing model requires shared definitions and better data. Brands should understand the cost of operating a physical store, retailers should know the margin and net contribution for every category, and distributors should explain the services reflected in their pricing. When each side understands the economics more clearly, conversations about MSRP become less adversarial and more useful.

Regular pricing reviews can keep these conversations grounded. Retailers can bring sell-through, landed cost, and promotional data to supplier meetings, while suppliers can explain production, packaging, and freight pressures. This evidence creates room for practical responses, such as revised suggested prices, improved case-pack options, freight thresholds, or channel-specific promotions. Change can be uncomfortable, but the industry cannot protect independent retail by ignoring the numbers. Sustainable stores need pricing that supports knowledgeable staff, thoughtful merchandising, and customer service.

Operating Margin as a Key Metric

Retailers are being squeezed by rising costs while consumers expect seamless service across physical, digital, and social channels. To maintain customer relationships, retailers are building AI-powered shopping agents and immersive digital experiences inside stores. Retailers are increasingly looking to operating margin to fund these initiatives. Traditional efforts to improve margins, such as across-the-board cost-cutting, are losing effectiveness. Instead, retailers need to focus on opportunities across the operating model to address structural costs.

While gross margin can signal a strong brand or unique products that allow for premium pricing, operating margin is a better indicator of management’s ability to control costs and generate sales. It accounts for operational costs, including rent, labor, technology, and marketing, which can reduce a 50% gross margin to single digits. The pressure on operating margins continues to build.

Size inclusivity is also emerging as a margin strategy. While often framed in terms of brand values like representation and inclusion, size range has become a commercial lever that can cut returns, boost loyalty, and protect margins. In the UK, approximately 30% of online fashion purchases are returned annually, with poor fit being the primary reason. This issue is more prevalent among women, with nearly 13% citing poor fit as a regular reason for returns, compared to 7% of men. Bracketing, where 62% of shoppers order multiple sizes intending to keep one, adds to reverse-logistics costs, which can swallow the margin on the sale that does stick. Industry estimates place the value of returned online purchases at roughly one-fifth of everything sold globally.

Key Facts

  • Mersy Love, co-owner of Bodacious Afterhours, noted that MSRP no longer aligns with business operating costs as of October 23, 2026.
  • Rising manufacturing costs and living expenses contribute to the misalignment between MSRP and actual business costs.
  • Brick-and-mortar retailers incur significant expenses like rent, utilities, and staff that online-only sellers may not.
  • Confusing markup and gross margin can lead retailers to overestimate product profitability.
  • Operating margin, which accounts for operational costs, is a key indicator of a company's ability to control costs and generate sales.
  • Size inclusivity is a commercial lever that can reduce returns and protect margins, particularly in online retail.