Halloween Retailing: A Boo-ming Business

Consumers spend more than $8 billion per year on candy, costumes and Halloween home décor—and it’s providing a real “treat” for temporary retailers.

It wasn’t long ago that the average family bought a few bags of Halloween candy, a pumpkin to carve, and created some basic costumes for the kids. Fast forward to 2013, Mom and Dad are just as likely to get dressed up as the kids, consumers are buying pet costumes in record numbers and elaborate Halloween décor adorns houses across America.

Last year, the NRF (National Retail Federation) estimated that 71 percent of American households celebrated the holiday compared to only 52 percent seven years ago.

Growing consumer demand and the number of retail vacancies are fueling growth in the number of pop-up Halloween stores. According to IBIS World, a research firm in Santa Monica, CA., the number of Halloween pop-up stores have grown steadily at a rate of 8 percent a year since 2005. In 2010, the number rose to 15 percent when a large number of permanent retailers such as Circuit City and Linens ‘n Things closed their doors, creating more space.

Temporary retailing
Masquerade1-copyWhile vacancy rates have been decreasing over the last year, there are still real estate opportunities in the marketplace. Ann Sullivan, director at Spirit Halloween Superstores, commented about the availability of pop-up store locations for 2013, “We were still able to find enough inventory to get space this year. However, I would anticipate it getting more difficult next year.” She added, “Permanent leasing is doing much better. Stores such as five Below are expanding, so this will impact available space in the market.”

Heidi Cardall, senior director, specialty retail at CBL & Associates, agrees. She says that the number of Halloween pop-up store deals that CBL signed this year compared to last year is down because there was less space to accommodate them. “More permanent retailers are leasing space and more temporary retailers are signing year-round deals,” Cardall says. In addition, Halloween pop-up stores require, on average 4,000 sq. ft. of space, and CBL didn’t have as many of those locations available. Cardall does believe that Halloween retailers can add a lot to a shopping center due to the exciting use of space and the variety they add to the tenant mix.

Spirited growth
Spirit Halloween, the oldest and largest temporary Halloween pop-up store company, entered the marketplace 30 years ago. This year, they will have 1,050 stores in their portfolio, 750 corporate locations and 300 consignment operators. They have an unusual business structure for their consignees. In a nutshell, here’s how their business opportunity works: retailers don’t pre-pay for inventory. Instead, retail entrepreneurs pay a $25,000 deposit and in exchange they receive enough inventory to stock their entire Halloween pop-up store. As part of their agreement, they also must agree to use the Spirit Halloween POS system and credit processing system. Spirit Halloween keeps a percentage of the credit transactions throughout the season, which is applied to the total cost of inventory, so in essence, the retailer is paying down their inventory costs gradually, instead of up front. In addition, whatever inventory does not sell by the end of the season, as long as it’s still packaged and in good condition, the retailer can ship back to Spirit Halloween for a merchandise credit. Sullivan explains, “This way retailers don’t have to fund all of the inventory in advance and they don’t have to carry inventory over to next year either.”

One of the advantages for retailers of working with Spirit Halloween is that consignees will benefit from the broad range of costumes they develop. According to Lisa Barr, senior director of Spirit Halloween, “What makes [Spirit] stores so special is our breadth and depth of costumes. Among one of the many things we do to ensure uniqueness is working with licensed partners to come up with exclusive costumes and accessories that you can’t find anywhere else.” For example, this year Barr predicts that their Walking Dead Rick Grimes and Teddy Bear Girl costumes will be a huge hit.

Pop-up success
Spirit3-copyThere are other players in the Halloween pop-up retail space. Joe Purifico, CEO of Masquerade, LLC, operating under the name Halloween Adventure, has secured 50 pop-up Halloween stores this season. Purifico, a 25-year industry veteran attributes his long-term success to: “Great employees, great costumes, and great locations.” He explains that great employees are really the most important asset, because you can have great locations and inventory but without your team, you won’t have store sales. Purifico added, we’re very lucky, “Many of our employees come back year after year.” When asked about his prediction for this year’s Halloween sales he says, “If the weather cooperates we’ll have a great season.” Purifico’s sales were greatly impacted by weather over the last two years because all his locations are in the Northeast—last year Hurricane Sandy hit and the year before a Nor’easter brought unwanted snow, thus shortening the eight-week selling season.

When asked about his strategy for competing against the big-box stores, he says, “Location is a key element. We look for high visibility, high profile locations.” He also has a thorough marketing plan in place. He says, “Our most successful marketing strategy is billboard advertising. We look for high profile locations to promote our stores.”

Another element that helps Halloween pop-up stores compete is that they offer customers something experiential while in big-box stores the space allocated to Halloween is limited. Every year, Spirit Halloween creates designated destinations within the store that are themed. This year, many of the stores will have a haunted house and an insane asylum. Barr says, “Customers can come in and interact with our store displays. Our goal is to provide a unique shopping experience.”

Trendy tricks
In terms of Halloween trends, Purifico said it’s a little too early to tell if there is a specific costume that will be a huge holiday hit, but he adds, “I predict this year to be a more eclectic season since there wasn’t a dominant blockbuster movie hit.” Purifico prefers years like this since it’s impossible to replenish costumes during the season. He says that it’s better for retailers when the buy is generic across the board because it’s easier to send your customers home with a costume.

One of the broader Halloween trends is for a larger range of different age consumers to dress up. Notably Moms and Dads dress up in much larger numbers than ever before. Barr says, “Halloween has gone beyond trick-or-treating. Halloween is a celebration and it’s no longer just for kids. It’s a holiday where kids and adults can live out fantasies and have some fun.” Purifico explained, “And with younger adults, they want to look the best they can for adult Halloween costume parties. This trend is also helping sales.” Jonathan Erwin, an organizer for the Halloween & Party Expo, a Halloween tradeshow, added, “It’s an adult event, a teen event, a family event. The retailers who understand this are cashing in. In contrast, the retailers who just grab a few items at a gift or general merchandise show in order to have something Halloween-ish in their stores are missing sales—lots of sales.”

Purifico pointed out another trend that is driving sales is that couples are dressing up in complementary or matching themed costumes. For example, he might sell a flapper costume to the woman and a gangster costume to the man, or partners might both want to dress up as M&Ms.

Halloween home décor is also continuing to grow. Purifico explains, “There is no other holiday that compares in terms of outdoor decorating.” However, according to Erwin, “If you really want to be in the Halloween business, you need to do so in a comprehensive way. Adding a few gift items or decorations won’t cut it because the consumer won’t think of you for their Halloween purchases unless you make a statement.”

Future growth
When asked about some of the challenges of Halloween retailing, Purifico explained that the Internet is a factor. However, the vast number of customers still want to try costumes on before buying them, “and that’s a distinct advantage of a brick-and-mortar store,” Joe says. He also adds, “my staff can take customers by the hand and help them find a complete look, from a costume to accessories and customers can try them on in our dressing rooms before leaving the store to ensure a proper fit.”

Purifico is also adding retail technology to aid the sales process. In the past if a customer went into the store and a specific costume was sold out, they left empty handed. However, today, the sales team can access additional online inventory through a consumer website that Purifico also operates. All employees have been trained on how to place orders online. As an added benefit, there is no delivery charge. This is helping capture additional sales that would not have been made in the past.

While competition has been steadily increasing over the years, both Spirit Halloween and Halloween Adventure believe there is room in the market for additional growth—great news for entrepreneurs looking to get into this market. The future for this category is all treats and hardly any tricks!