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Sunday, Sep 25, 2022

Scary Season Lasts All Year for Halloween Entrepreneurs

Temporary costume shops appear overnight only to disappear faster than Halloween candy, but the short-lived ventures are mainstays of a $3.12 billion industry.

Sales of Halloween decorations are second only to those for Christmas. This year, the National Retail Federation projects Halloween sales to exceed $3 billion, up from last year’s $2.96 billion.

Despite their brief lives, these Halloween stores are a year-round endeavor, one subject to the vagaries of fuel costs, warehouse availability and insurance requirements. Here is a rundown of the calendar:

Late winter

In March, Lori Lyon, a vice president at Lyon Distributing, begins meeting with suppliers and checking out costumes at an annual Halloween convention in Chicago. A franchisee of Owenton, Ky.-based Halloween Express, Lyon counts temporary stores in Covina and San Dimas among the 80 the Halloween Express chain operates.

Others start buying in February to leave enough time for goods to be manufactured, shipped, inventoried and warehoused.

“For many years this industry was basically mom-and-pops small costume shops that were open year-round and could generate a living,” said Scott Morris, general manager of costume wholesaler Morris Costumes in Charlotte, N.C., which supplies costumes to many local stores from its warehouse in Downey. “But Halloween has become such a commercial holiday, and because of the volume of business that can be done, it lends itself to selling products on a temporary basis.”

Early summer

Diki Wackenstedt, owner of Confetti stores in Agoura Hills and Thousand Oaks, starts looking for real estate in June.

Coming in at the last minute can mean a reduction in rent as landlords fill a long-empty spot. But others make her pay one-and-a-half times the normal rent for the right to a short-term lease.

Halloween Express, Lyon’s franchisor, works with several real estate developers to locate empty space in strip malls. This year, Lyon was presented with a half-dozen locations before selecting a 7,500-square-foot space in San Dimas and a 13,000-square-foot building in Covina. Lyon has paid anywhere from $10,000 to $30,000 for space for the duration of the season, depending on location and size.

Besides rent, Wackenstedt carries the same overhead costs as any retailer, including business licenses, utilities, storage and insurance. Wackenstedt has to carry as much as $2 million in liability coverage for each of the two stores, at a total cost of $3,400, due to the number of children in the stores.

For Redlands-based Lyon Distributing, costs include a $10,000 fee that granted it a franchise for five years. It also sends Halloween Express 5 percent of its gross sales.

Late summer

Costumes ordered earlier in the year make their way to ships by early September. Over the last 10 years, there has been a greater emphasis on producing costumes in China, Korea, Vietnam and India. Morris said his company generally buys its costumes nine months in advance.

“Freight costs have just skyrocketed,” he said, “with the price of fuel going from $2,000 a container to $5,000 a container. There are quite a bit of handling costs to bring the product in, and then we have to ship it back out.”

If his company purchases an item for $1, it will sell it to a retailer for $1.25. Retailers, in turn, generally mark up the merchandise at least 100 percent.

Shipments from wholesaler Morris Costumes, which supplies merchandise to about 5,000 bricks-and-mortar retailers and Internet businesses, peak on Sept. 10.

Mid-September-late October

Business starts slowly in September and picks up in October. Figuring what will be hot early in the year is a gamble, and Lyon said she is generally left with between 15 percent and 20 percent of her inventory after Halloween.

Wackenstedt, too, has substantial inventory to deal with after the holiday, and slashes prices by 50 percent on Nov. 1. “My thinking is, since it’s not permanent, let’s just get rid of it,” she said. “Then we have less to store and a bigger budget for the following year.”

Closing up

By Nov. 4, Lyon Distributing will have packed up and abandoned the stores in Covina and San Dimas.

Lyon Distributing stocks its stores with $80,000 to $90,000 worth of wholesale merchandise and each location generates about $150,000 to $160,000 in revenues per season. Lyon’s Halloween stores have never brought in much more than $300,000. Net income per store is around $25,000 to $30,000.

As to whether one can make a living strictly off Halloween stores, Wackenstedt said, “What’s a living? To some people, $50,000 could be a good living. Some people need $100,000. You do not know what the stores will do year-to-year. It’s a gamble in the Halloween industry.”


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