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June 13, 2024
Is Spirit Halloween’s Business Model Scary Good?
Spirit Halloween, by all accounts the most successful pop-up in retail history, is again ramping up seasonal hiring in apparent expectation of another record year.
About 50,000 seasonal staffers are set to be hired this year, up from 40,000 last year. About 1,525 stores are planned versus 1,500 last year.
“The excitement and enthusiasm of Halloween continues to grow,” said Steven Silverstein, the chain’s CEO since 2003, in a statement.
Much of the credit for Spirit’s success is attributed to Joseph Marver, who founded the chain in 1983, but the expansion has been led by Silverstein, who acquired the business in 1999 when Spirit had only 60 stores. Silverstein is also the owner of Spencer Gifts, the mall-based chain known for its gag gifts and novelty items.
In an interview with The Seattle Times in 2000, Marver, who was still running the chain at the time, said Spirit stands out for its extensive inventories. A department store or discounter may carry 1,000 to 1,500 costumes, while Spirit offers more than 4,500.
The retailer decides on which costumes will be hot sellers in January based on hype around upcoming movie releases, trending television shows, and the prior year’s sales while holding some open-to-buy for surprise hit costumes. At the time, Marver said, “You have certain manufacturers… who can turn on a dime.”
Silverstein told Forbes in 2013 that Spirit’s inventory management is its “secret sauce.” With the majority of sales done the last two weeks before Halloween, Spirit’s capacity to hold over merchandise to the following year packs an advantage over discounters, including Amazon, that focus on liquidation over the final weeks.
Silverstein told Forbes, “In traditional retail, you might not be repurposing anything. For us, consistent themes remain, and we’re repurposing 30% to 40%. We’re not just trying to get rid of it.”
Another unique attribute is Spirit’s real estate strategy, with the chain asking tenants to rent space only from early August through early November. The disruption across retail in recent decades has made it easier for Spirit to secure locations in former Circuit City, Toys“R”Us, and other defunct chains, but Silverstein told USA Today last year that the chain has become a “sought-after destination” as a traffic driver for landlords.
The concept also works in locations ranging from 5,000 to 50,000 square feet of selling space. Silverstein said, “It really boils down to sort of where the availability is, where we can be most visible.”
The chain has also been helped by the growing popularity of Halloween, with NRF finding a record number of people (73%) participating in Halloween-related activities in 2023, although Spirit has a first-mover advantage over the two other chains, Party City and Halloween Express, prioritizing the Halloween opportunity.
Finally, the Spirit experience is also often called out, with the store featuring decorative props and animatronics as well as an enthused staff, often in costumes themselves. A five-year Spirit employee told Mental Floss in 2020, “I’ve never once worked with an employee that didn’t love Halloween. It’s something that all employees have in common.”
Discussion Questions
Do you think its inventory management approach, real estate strategy, in-store experience, or another factor is the biggest driver of Spirit Halloween’s success?
What most impresses you about Spirit’s model and steady growth?
Do you see any threats to its dominant positioning around Halloween retail?
Poll
Loading …BrainTrust
Pamela Kaplan
Principal, PK Consulting
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Jeff Sward
Founding Partner, Merchandising Metrics
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Spirit Halloween is a very savvy and experienced operator. What’s most impressive to me is the real estate operation, which moves at light speed when it comes to opening new stores. The locations are usually secured well in advance from a network of brokers and real estate professionals who are constantly on the lookout for suitable sites. Once they have the agreements for a temporary lease they are able to quickly fit out stores for opening. Most stores follow a set template and have modular fixtures, which really cuts down on the time it takes to open. It’s a bit like an IKEA approach to shop fitting in that the fixtures are quickly assembled and disassembled like flat-pack furniture. As the stores are only temporary, Spirit Halloween doesn’t have to pay too much attention to things like flooring and construction, which are usually very time consuming when opening new shops. The approach store take is cookie cutter in that they all look alike, have similar ranges and similar operating models. This keeps things simple and the emphasis on efficiency.
Spirit Halloween’s business model is excellent. However, other pop up retailers should be careful not to emulate or copy it only partially, incompletely, or generally, since Spirit Halloween’s model works because of its full scale of dynamics.
Inventory strategy, assortment, timing, leasing, and experience are all part of the dynamics. If someone else tried to copy the model, it would probably fall short. – Db
For logistical skill, speed, and accuracy in setting up massive public-service operations in wildly dynamic conditions, you study the US Army, Waffle House, and Spirit Halloween.
This business model works so well for Spirit because they know who they are and they know who their customer is. I love that they stay true to their core and go big with managing inventory and real estate during a tight window. Not having to discount for end of season or build out stores while filling a gap for real estate landlords before the xmas holidays is the perfect combination for top and bottom line. And the fact that the employees all love halloween is the cherry on the cake.
“Spirit because they know who they are and they know who their customer is”. Pamela, you might send this over to today’s SBX discussion.
What a great business model! Imagine if every retailer was only open in the weeks or months that they made money.
These guys are good. The operations are quite complex, but at the same time, the business model is simple. And, over the years they have endeavored to keep it simple.
I don’t know if it is the same in other cities, but here in NYC, down the street from us is one of their stores. It has arrived every year for at least 20 years. Same location every time. For ten months when it isn’t a Halloween Store, it is a furniture store. Hmmm?
In cities, I have lived in, its mostly in different location every time, It’s the same quick process to set up and be in business. I have seen copy cats and they are no where successful as the original. Good for them.
They were very quick to swoop on Bed Bath & Beyond stores that had not been taken over by other chains. There are still many sitting empty, so they will probably occupy them again this year!
While Spirit Halloween’s success is a confluence of many factors, my vote goes to inventory and supply chain management. Their whole thought process revolves around executing to 5R content (RIGHT…). They make their content as data-driven as possible based on LY success, their read on current trends, and then they leave open some OTB dollars for trends that emerge closer to peak demand. AND, they have supply chain partners that can execute to that strategy. That’s textbook thinking and execution in my opinion. Every apparel brand in the mall should be emulating that model. Especially the part where OTB is left open for emerging trends and items. Leaving the dollars open is the easy part. Having the supply chain partners who can actually execute is the hard part.
These guys are running a “fashion” business. They have Basics, Key Items, and Fashion. The Basics and Key Items are perennial favorites and will still be in demand next year (pack away). Then they have “fashion” that is driven by the current trend in movies and TV, and it sounds like they try to buy that portion of their content as late as possible. (Data + supply chain…!!!) Sure, the strategy and tactics are smart. But it’s the supply chain partnerships built over the years that make it all possible. They have learned how to scale. What might have been easy with a handful of stores has grown into a model that supports 1500 stores. Their execution at scale is to be heartily applauded.
Agreed, Jeff. The fashion side is particularly impressive as they have to predict what will be ‘in’ for a very short selling window! And if it doesn’t sell during the season it’s basically a write-off. Buy these guys, more often than not, get it right!
Spirit Halloween’s inventory management approach and real estate strategy have always been key to their success. Yes, others can try to emulate this but their credibility/reliability as a seasonal brand isn’t something that can be easily copied.
When I was working in Asia, I was involved in some of the sourcing deals for Halloween products like this. Even then, it wasn’t a welcome deal for suppliers unless they had machinery in place (labour supply and costs weren’t cheap even then) and the volumes involved justified the tooling costs. Capacity isn’t as elastic as many people think. It’s going to be a chase to the bottom to keep trying to find low-cost manufacturers at this scale. I imagine there are already multi-prong supply chain strategies in place with the current geopolitical sourcing issues too.