October’s Scariest Retailer

Do you have your Halloween costume yet? If not, you might find yourself making a last minute visit to Spirit Halloween, the discount retailer that pops up across the country signaling the start of the Halloween season. Indeed, for some people, fall would not be complete without a visit to Spirit Halloween. The time when Halloween meant carving a pumpkin just before throwing together a costume and going trick or treating is long gone. Halloween has become a big business and a chance for retailers to maximize their profits. This year, even with inflation at frightfully high levels, retailers are expecting record spending on Halloween. Big box stores like Home Depot, home of the 12-foot tall skeleton, plan for the holiday months in advance. In fact, it’s now second only to Christmas as a revenue generating opportunity.

One company, Spirit Halloween, has perfected a business model that is enough to put a fright in more traditional retailers. You’ve probably seen the stores, typically located in a building that had previously housed an unsuccessful big box retailer. Each year, Spirit Halloween sets its sights on vacant buildings located in strip malls across the country. The company negotiates a low rate for a short term rental, fills the space with costumes and other Halloween paraphernalia imported from countries where manufacturing costs are low, avoids scaring off shoppers by offering competitive prices, and then disappears until the next year. The efficiency of the business model has attracted various copycats including Party City. However, with nearly 1,500 stores, Spirit Halloween offers some terrifying competition. In fact, this year, stiff competition from the industry leader could be enough to put weaker companies into the retail graveyard. In an economy where the grim reaper is waiting to pounce, traditional retailers are, instead, hoping that Halloween will not be a ghoulish nightmare on main street, but a sweet treat instead.

Discussion Questions:

1. Discuss the economics of Spirit Halloween’s business model. What role does efficiency play?

2. Does Spirit Halloween’s singular focus give it a competitive advantage over more traditional retailers that are open year round?  Explain. This year, Spirit Halloween will open about 1,500 stores across the United States. How does this help the company compete?

3. High inflation is causing many people to rethink their spending, yet retailers are expecting a banner year when it comes to consumer spending on Halloween. Why do you think people are willing to spend on Halloween, even as they make cuts in other parts of their budget?

Sources| Bloomberg: Halloween Costume, Candy Spending To Reach Record Highs in 2022; CNBC: Home Depot’s giant skeleton vs Lowe’s massive mummy: How retailers are trying to boost Halloween sales; WSJ: How Spirit Halloween Breathes Life Into Empty Store; Unsplash: Trick or treat picture