August 15, 2024
Photo by Adi Goldstein on unsplash
Is Party City on the Right Track Post-Bankruptcy?
Party City has been on a tumultuous roller coaster in recent years that led it to file for Chapter 11 bankruptcy in January 2023 due to factors like global supply chain uncertainty, COVID-19 economic pressures, and the 2019 helium shortage. The retailer had to close over 30 underperforming stores after filing, according to Business Insider.
It exited from bankruptcy in September 2023 with approximately 800 stores remaining and its debt load reduced by nearly $1 billion.
A few days ago, Party City Holdings Inc. announced the appointment of Barry Litwin as its new president and CEO. Litwin, who previously led Global Industrial Company and Adorama, is known for his expertise in business growth and operational efficiency. He is tasked with enhancing the company’s financial performance and market position now that it has emerged from bankruptcy with a significantly reduced debt and a streamlined store portfolio, leveraging his experience in driving revenue and profit growth.
Chairman Bob Hull expressed strong confidence in Litwin’s ability to advance Party City in the company’s press release, citing his successful track record and people-focused leadership style. After exiting bankruptcy, Party City is now focused on rebuilding and positioning itself for future success. The company plans to capitalize on its restructured capital base and increasing consumer interest in celebrations as it moves forward with new store formats and expanded seasonal offerings.
The retailer held a special Halloween event on Aug. 15 for customers “to experience their favorite character costumes in person and enjoy kid-friendly activities” and also to gain “priority access to this season’s most coveted Halloween trends, including Party City exclusive costumes.” During the event, customers received 31% off their entire purchase in stores.
In February 2024, Party City also launched a new store format that has quickly gained traction following successful pilot tests. The revamped design features an enhanced balloon shopping experience with a dedicated service area and introduces two distinct “birthday worlds” within each store — one tailored for kids’ birthdays and another for general celebrations. This layout replaces traditional aisles with themed mini-shops, making it easier for customers to find everything they need for their celebrations.
Party City’s Gaithersburg, Maryland, store was its first newly redesigned location, and it opened to the public on May 25, followed by a Pensacola, Florida, location in May and a Princeton, New Jersey, store in June.
“We have moved away from the traditional aisle experience and have developed two birthday worlds within each store. One is dedicated to kids’ birthdays, and one for general birthday celebrations. These are complete mini-shops, with everything brought together in one place — this makes it easy for the customer to find everything they need and to hopefully discover a few surprises and fun ideas to add to their celebration along the way.”
Dion Miliaresis, VP of merchandising at Party City, via The U.S. Sun
The new format also allows Party City to test and introduce new products, particularly those related to children’s celebrations, and it features dynamic merchandising and an updated queue experience. Positive customer feedback has prompted the retailer to accelerate the rollout of this format, with plans to introduce it in several more locations nationwide this year.
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Mohamed Amer, PhD
CEO & Strategic Board Advisor, Strategy Doctor
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
Jamie Tenser
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
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Discussion Questions
How might Party City’s new “birthday worlds” format influence consumer expectations and set new standards in thematic retail experiences?
With Barry Litwin’s recent appointment as CEO and Party City’s emergence from bankruptcy, what strategies should the company pursue to rebuild its market position and achieve sustainable growth?
In light of Party City’s recent challenges and store innovations, how can experiential retail concepts be used to enhance customer loyalty and adapt to changing market conditions?
Poll
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Bankruptcy bought Party City some breathing space, mostly because it reduced the company’s enormous debt load and ditched a swathe of unprofitable stores. However, it did not resolve all of the chain’s issues. On the retail side, these still include the incursion of generalists like Target and Amazon into the party supply space, the ever upward rise of Spirit Halloween, and a more price sensitive consumer that continues to cut back. Party City has a wholesale and supply element to its business, but this was traditionally much smaller than retail. All that said, it is good that the chain has new leadership with turnaround experience.
Oh, I just wrote a very long screed and for whatever reason, the system erased it. So, long story short, the party supply business doesn’t scale very well. The only thing that got it close was merging with the supplier (Amscan) so that the profits could be shared,
The idea of having everything you need for a juvenile birthday party in one place is how we used to do it when I was CIO of a different chain that PC eventually ate. Adult birthday is relatively inconsequential. Juvenile birthday and Halloween are the big guys.
The last thing to say is that our company had the merchandise arrayed in this “new” way. A consultant brought in said this was all wrong and changed it to the party city racetrack style. He also bankrupted us, but that’s clearly a story for another day.
If it couldn’t scale after getting verticalization, this isn’t gonna help. It’s the ultimate in shuffling deck chairs. The pandemic had to be brutal, but consumers just have too many options. Halloween pop-ups and of course, buying party supplies online.
Long story short, the franchise model is better for the party supply business. It’s what I call a “sweat business…” which is to say the manager/owner has to be willing to put in way more work than a poorly paid manager is.
So no, I am not hopeful.
One hates to be a downer – particularly regarding a company who is – theoreticaily, at least – dedicated to having fun but….(1) what have they done to correct the reason(s) they went bankrupt? (2) What are they doing that can’t be easily imitated? Come up with some good answers, and I’ll celebrate, until then….
The poll here reveals the challenge. Party City is not a retail concept that invites frequent re-patronage. Even families with small children may make 2 – 4 visits per year? Not a great formula for loyalty.
With competitors like Walmart, Target, Amazon selling similar products and Chuck-e-Cheese and its ilk offering turn-key kiddie parties, I’m afraid this makes it kinda hard to scale.
When a retail chain like Party City emerges from bankruptcy and earns a new lease on life, it is always a positive development. Having new leadership is also a good thing, especially when it comes from someone with successful turnaround experience such as Barry Litwin.
Barry Litwin previously led transformative changes at Office Depot, where he successfully revitalized the company’s e-commerce platform and streamlined operations. He also played a crucial role in driving growth at Systemax, helping the company pivot towards more profitable segments. His track record makes him well-equipped to steer Party City toward a prosperous future.
However, Party City’s greatest challenges are still to come. It is not clear whether their “birthday worlds” concept will resonate, as it is unproven and untested. By now, many former Party City customers have shifted to mass merchandisers such as Target, and Party City must win back those customers.
To regain lost customers, Party City should focus on enhancing its online presence with user-friendly features and personalized shopping experiences. Additionally, they could offer exclusive promotions and discounts to lure back former customers. Collaborating with popular influencers to showcase their products and hosting themed events could also help reestablish their brand appeal.
Rebuilding in a fringe category during a recession or pre-recession will be another challenge. Furthermore, suppliers are often reluctant to work with a company that owed them a great deal of money prior to going bankrupt. Since previous debts were not paid, it takes time to rebuild trust, and many businesses that emerge from bankruptcy often struggle and go under, again.
Rebuilding supplier relationships will be crucial for Party City’s long-term success. Establishing transparent communication and consistent payment schedules can help regain supplier trust. Additionally, offering favorable terms and demonstrating a commitment to standardized business practices will be essential in mending these vital partnerships. – Db
New formats and layouts organized around the birthday event will generate buzz and excitement, which is good. The crux of the problem is that these events are only once a year, so as currently designed, it’s an infrequent purchase for the birthday organizer with little incentive for recurrent visits. Store location and demographic projections must be perfect for mining each trade area. Yet, solid one-stop shopping like Walmart or Target and the annual pop-up shops around Halloween exacerbate the competitive landscape.
Optimism and new leadership with turnaround experience are necessary, but more is needed to make this a viable model. There’s always a chance, but it’s a more difficult feat in the party space.
It’s very difficult to devise paths to success here. With Target, Walmart, and Amazon having very credible offerings in this space, consumers are happy to include party supplies in their regular trips to these retailers. The rare party needs for most people make it difficult to imagine there is enough demand in the market for a dedicated store with the amount of space they have.
I like turning some of the stores into birthday destinations to make them experiential, but overall, I just don’t know if specialty in this category makes sense anymore. Consumers can get everything Party City sells in so many other places that are more convenient because they’re shopping those stores for other categories anyway. I think a close eye is going to have to be taken to the assortment to determine how Party City can gain relevancy again.
Party City should put itself or its assets up for sale and spare everyone the agony of watching it slowly become (again) financially unviable.
Why so negative? Birthrates are down, people have less $ to spend on birthday parties due to inflation, etc.
The final nail in this particular retail coffin will be when larger stores like Target or WalMart start to set up an aisle or two with similar merchandise.
Despite Party City’s efforts to reinvent itself post-bankruptcy, including the appointment of new CEO Barry Litwin and the introduction of new store formats, the company’s long-term success remains doubtful. The fundamental challenges that led to its bankruptcy persist: intense competition from mass retailers like Target, Walmart, and Amazon, which offer similar products as part of broader shopping experiences; the seasonal nature of its business, particularly reliant on Halloween and infrequent birthday celebrations; and changing consumer behaviors exacerbated by the pandemic and economic pressures. The new store format, while potentially engaging, doesn’t address the core issue of infrequent customer visits. Additionally, rebuilding supplier trust after bankruptcy and scaling a business model that inherently doesn’t lend itself well to frequent patronage poses significant hurdles. With consumers increasingly price-sensitive and having numerous alternatives for party supplies, including online options, Party City’s niche may continue to shrink, making it difficult to sustain a large brick-and-mortar presence in the long run.
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Bankruptcy bought Party City some breathing space, mostly because it reduced the company’s enormous debt load and ditched a swathe of unprofitable stores. However, it did not resolve all of the chain’s issues. On the retail side, these still include the incursion of generalists like Target and Amazon into the party supply space, the ever upward rise of Spirit Halloween, and a more price sensitive consumer that continues to cut back. Party City has a wholesale and supply element to its business, but this was traditionally much smaller than retail. All that said, it is good that the chain has new leadership with turnaround experience.
Oh, I just wrote a very long screed and for whatever reason, the system erased it. So, long story short, the party supply business doesn’t scale very well. The only thing that got it close was merging with the supplier (Amscan) so that the profits could be shared,
The idea of having everything you need for a juvenile birthday party in one place is how we used to do it when I was CIO of a different chain that PC eventually ate. Adult birthday is relatively inconsequential. Juvenile birthday and Halloween are the big guys.
The last thing to say is that our company had the merchandise arrayed in this “new” way. A consultant brought in said this was all wrong and changed it to the party city racetrack style. He also bankrupted us, but that’s clearly a story for another day.
If it couldn’t scale after getting verticalization, this isn’t gonna help. It’s the ultimate in shuffling deck chairs. The pandemic had to be brutal, but consumers just have too many options. Halloween pop-ups and of course, buying party supplies online.
Long story short, the franchise model is better for the party supply business. It’s what I call a “sweat business…” which is to say the manager/owner has to be willing to put in way more work than a poorly paid manager is.
So no, I am not hopeful.
One hates to be a downer – particularly regarding a company who is – theoreticaily, at least – dedicated to having fun but….(1) what have they done to correct the reason(s) they went bankrupt? (2) What are they doing that can’t be easily imitated? Come up with some good answers, and I’ll celebrate, until then….
The poll here reveals the challenge. Party City is not a retail concept that invites frequent re-patronage. Even families with small children may make 2 – 4 visits per year? Not a great formula for loyalty.
With competitors like Walmart, Target, Amazon selling similar products and Chuck-e-Cheese and its ilk offering turn-key kiddie parties, I’m afraid this makes it kinda hard to scale.
When a retail chain like Party City emerges from bankruptcy and earns a new lease on life, it is always a positive development. Having new leadership is also a good thing, especially when it comes from someone with successful turnaround experience such as Barry Litwin.
Barry Litwin previously led transformative changes at Office Depot, where he successfully revitalized the company’s e-commerce platform and streamlined operations. He also played a crucial role in driving growth at Systemax, helping the company pivot towards more profitable segments. His track record makes him well-equipped to steer Party City toward a prosperous future.
However, Party City’s greatest challenges are still to come. It is not clear whether their “birthday worlds” concept will resonate, as it is unproven and untested. By now, many former Party City customers have shifted to mass merchandisers such as Target, and Party City must win back those customers.
To regain lost customers, Party City should focus on enhancing its online presence with user-friendly features and personalized shopping experiences. Additionally, they could offer exclusive promotions and discounts to lure back former customers. Collaborating with popular influencers to showcase their products and hosting themed events could also help reestablish their brand appeal.
Rebuilding in a fringe category during a recession or pre-recession will be another challenge. Furthermore, suppliers are often reluctant to work with a company that owed them a great deal of money prior to going bankrupt. Since previous debts were not paid, it takes time to rebuild trust, and many businesses that emerge from bankruptcy often struggle and go under, again.
Rebuilding supplier relationships will be crucial for Party City’s long-term success. Establishing transparent communication and consistent payment schedules can help regain supplier trust. Additionally, offering favorable terms and demonstrating a commitment to standardized business practices will be essential in mending these vital partnerships. – Db
New formats and layouts organized around the birthday event will generate buzz and excitement, which is good. The crux of the problem is that these events are only once a year, so as currently designed, it’s an infrequent purchase for the birthday organizer with little incentive for recurrent visits. Store location and demographic projections must be perfect for mining each trade area. Yet, solid one-stop shopping like Walmart or Target and the annual pop-up shops around Halloween exacerbate the competitive landscape.
Optimism and new leadership with turnaround experience are necessary, but more is needed to make this a viable model. There’s always a chance, but it’s a more difficult feat in the party space.
It’s very difficult to devise paths to success here. With Target, Walmart, and Amazon having very credible offerings in this space, consumers are happy to include party supplies in their regular trips to these retailers. The rare party needs for most people make it difficult to imagine there is enough demand in the market for a dedicated store with the amount of space they have.
I like turning some of the stores into birthday destinations to make them experiential, but overall, I just don’t know if specialty in this category makes sense anymore. Consumers can get everything Party City sells in so many other places that are more convenient because they’re shopping those stores for other categories anyway. I think a close eye is going to have to be taken to the assortment to determine how Party City can gain relevancy again.
Party City should put itself or its assets up for sale and spare everyone the agony of watching it slowly become (again) financially unviable.
Why so negative? Birthrates are down, people have less $ to spend on birthday parties due to inflation, etc.
The final nail in this particular retail coffin will be when larger stores like Target or WalMart start to set up an aisle or two with similar merchandise.
Despite Party City’s efforts to reinvent itself post-bankruptcy, including the appointment of new CEO Barry Litwin and the introduction of new store formats, the company’s long-term success remains doubtful. The fundamental challenges that led to its bankruptcy persist: intense competition from mass retailers like Target, Walmart, and Amazon, which offer similar products as part of broader shopping experiences; the seasonal nature of its business, particularly reliant on Halloween and infrequent birthday celebrations; and changing consumer behaviors exacerbated by the pandemic and economic pressures. The new store format, while potentially engaging, doesn’t address the core issue of infrequent customer visits. Additionally, rebuilding supplier trust after bankruptcy and scaling a business model that inherently doesn’t lend itself well to frequent patronage poses significant hurdles. With consumers increasingly price-sensitive and having numerous alternatives for party supplies, including online options, Party City’s niche may continue to shrink, making it difficult to sustain a large brick-and-mortar presence in the long run.