Why Halloween Is Recession-Proof for Some Retailers
Halloween spending is expected to fall by roughly $1 billion this season, but sales at some stores may not be as dismal as originally thought.
Seventeen-year high commercial vacancy rates have allowed specialty retailers to increase their presence, scooping up high-traffic locations that landlords previously wouldn't dole out to temporary stores.
"The problem, historically, is that retailers or landlords who have space available don't like to tie up the space for a few months because you take it off the market," said Michael Burden, a principal with industry adviser Excess Space Retail Services. "Clients that used to not give any consideration for those type of users are not only giving consideration but are consummating transactions."
Spirit Halloween, for example, added nearly 100 more stores in 2009, taking its total to 723. Among these locations, 125 stand where bankrupted Circuit City and Linens 'N Things big boxes used to be.
Specialty retailers are also gobbling up surplus real estate from national pharmaceutical and office goods chains, which are the perfect size for the stores' abundant inventory, Burden said.
Ricky's NYC opened 28 Halloween-exclusive pop-up stores in the New York City area, up from the 10 it opens in a typical season. Though CEO Todd Kenig is still spending between $5,000 and $50,000 in rent at each location, he's getting a lot more for his money, he said.
Because of its more visible locations, Ricky's has maintained per-store sales figures comparable to this point in years past, Kenig said. Though it's been harder than usual to get customers to stop window-shopping and start opening their wallets, he predicts that with more locations open, sales will rise 20 percent on the year, he said.
"It's still a little early, but we haven't seen any decrease," Kenig said.
To prod customers along, his store is offering 30 percent discounts on more than 200 costumes, and it's replaced $100 costumes with price-point frocks, Kenig said. It's also offering a full line of costumes, masks and accessories.
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While that diverse inventory is what gives Halloween stores an edge over retailers such as Target or Wal-Mart , experts say it's also what makes them vulnerable.
It's counterintuitive for retailers to boost inventory levels during an economic environment that has forced so many to drastically cut back their supply. It's especially risky for specialty shops, given the increasing number of shoppers who are flocking to discount stores, said Abigail Marks, retail economist at CB Richard Ellis.
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Combined with factors such as a declining consumer mood — which unexpectedly dropped in October — and the National Retail Federation's prediction that individual Halloween spending will fall about 18 percent on the year, Marks said this will be one of the worst Halloweens retailers have seen.
"I don't see consumers running out and shopping for any sort of discretionary item right now," she said.
But Marilyn Torres, an interior designer with a 13-year-old daughter and 10-year-old son, said she doesn't have much choice. Her children's school holds an annual Halloween parade, and she refuses to send them without costumes.
Though she said she typically goes "all out" on Halloween, sometimes spending nearly $100 on costumes and accessories, she's looking to spend $30 or less this year. So instead of investing in a prepackaged, pricier outfit, she'll dress her son as a werewolf by cutting the fingers off a pair of gloves, sewing on false hair and painting his face brown.
"If it's something really difficult we can't make, we'll buy it here," said Torres as she visited a Ricky's store in Hoboken, N.J.
Even though consumers like Torres are spending less, she's an example of why Burden said Halloween is somewhat recession-proof — it's an important holiday for consumers and their families, and they'd rather cut back in other areas than completely eliminate the celebration.
That concept — paired with the fact that specialty stores are getting much more for their rent money — will allow Halloween stores to outperform what some analysts are expecting, he said.
"I think that ultimately, sales will be reported as being down year over year," he said. "But I do think that this particular niche will be doing just fine."
Burden stressed that even if stores don't push all their inventory, many of the costumes, accessories and decorations can be brought back the following season. Keeping that in mind, for those stores that can afford the space, it’s a unique opportunity for pop-up retailers to overcome a lousy economy.
"[It] is really a rare phenomenon, and I don't think we'll see it again once the economy gets back on its feet," Spirit CEO Tony Detzi said.
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