How Halloween Stores Conquered America

The largest chain of spooky pop-ups was built on a foundation of fart machines and women’s clothing.

A customer posing in a Hillary Clinton mask at Spirit Halloween in New York's Herald Square.
Photographer: Dolly Faibyshev for Bloomberg

Before sexy Harambe and costumes for dogs existed, Halloween was just for kids.

Then in 1983, Joe Marver opened his first Halloween store in Castro Valley, Calif., putting his regular stock of women's apparel into storage and stocking his aisles with wigs, makeup, and Batman masks. The costumes sold fast, so the next year he doubled down on the concept, leasing an out-of-the-way space in a nearby shopping mall and setting up what's known today as a pop-up shop.

Shopping fatigue at Ricky's Halloween pop up shop in Downtown Brooklyn.
Photographer: Dolly Faibyshev for Bloomberg

Marver, now 73, didn't have any special love for the Oct. 31 holiday, but he was a self-described "maniac" for the business. He called his stores Spirit Halloween in a riff on his original store—called Spirit Women’s Discount Apparel—and expanded throughout California and much of the Southwest. 

Fifteen years after he'd launched his first store, the chain had grown to nearly 60 pop-ups, and Marver was fending off acquisition offers from larger companies. In 1999, he ran into an executive from Spencer Gifts, the mall retailer known for selling lava lamps and fart machines, at a party-supply trade show in Manhattan and accepted a limousine ride to the company’s headquarters in Egg Harbor Township, N.J., just outside Atlantic City. 

“We had negotiated the year before, and they didn’t want to come up with what I was asking,” Marver recalled in a telephone interview from Twisp, Wash., where he owns and operates a 16-room hotel. “Now they said, ‘Fine, we’ll do it your way.’ Then they gave me a very nice check.”

When the deal closed, Spirit Halloween was operating 63 stores and Spencer Gifts occupied a tiny corner of Seagram Co.'s Universal Studios division. The French media company Vivendi bought Universal in 2000 and three years later sold the Spencer-Spirit business to a restructuring shop, which in turn installed a former Linens ’n Things executive named Steven Silverstein as chief executive officer. 

The ghoulish mashup of a company worked: Spencer, which sells a hodgepodge of novelty items, has a finger on the pulse of the popular culture—or at least, that part of pop culture that lives at the intersection of sex toys, beer-pong accessories, and punny T-shirts. That cultural knowledge transitioned well into a business that depended, in part, on grabbing hold of the zeitgeist, dressing it in a miniskirt, and adding cleavage. Spencer's year-round staff also provided key infrastructure for Spirit's pop-up business, with managers moving from one chain to the other for the holiday season, Marver said.

The Halloween business has kept growing. This year, it's expected to generate $8.4 billion in consumer spending, according to the National Retail Federation, up more than 60 percent from a decade earlier. Spirit Halloween expanded to more than 1,100 pop-up stores across the U.S. and Canada this season—more than any other specialty retailer focused on the holiday. That's enough retail locations to make Spirit Halloween bigger, for a couple of months, than J.C. Penney or Toys "R" Us.

"They've done a good job creating the right atmosphere and stocking the right assortment of products," said Raya Sokolyanska, a senior analyst at Moody's Investors Service, whose research indicates that Spirit Halloween rang up close to $400 million in sales during the 2015 season. "Everyone sells Halloween costumes, from Walgreens to Walmart, but among the specialty retailers, they've been winning share."

Trisha Lombardo, a spokeswoman for Spencer Spirit Holdings, declined to confirm those sales numbers or make an executive available for an interview.

Halloween first went mainstream in the aftermath of World War II, when Disney began licensing its characters' likenesses for costume patterns sold at local five-and-dimes. "That's when Americans became very suburban," said Daniel Gifford, an assistant professor at George Mason University who studies American holiday culture. "The typical suburb is house after house, and you can go one after the other in a controlled environment—that led to the rise of getting in costume and trick-or-treating."

By the 1980s, older baby boomers were having kids of their own, and younger members of the boomer generation were turning the holiday into an excuse for a night out. At the same time, licensing deals with comic book publishers and movie studios helped costume sellers expand their offerings beyond fake blood, hats, and brooms. 

Spirit Halloween wasn't the only retailer to see the Halloween boom coming. Party City opened its doors in East Hanover, N.J., in 1986 and quickly made the holiday a central part of its business model. In 1990, a chain of seasonal costume shops called Halloween Express took root in Owenton, Ky., expanding to 127 stores last year. There are also local chains such as Halloween Megastore in Florida, and Ricky's, in New York City, which opened in 1989.

Spirit Halloween rang up close to $400 million in sales during the 2015 season.
Photographer: Dolly Faibyshev for Bloomberg

Running one of these businesses is no simple task. In fact, it's a logistical spiderweb. 

Party City, which operates more than 900 year-round stores in North America, starts planning for the holiday a year in advance, scouting locations and employing its team of 130 in-house designers to start thinking about future trends in Halloween fashion. This year, it bought a factory in Madagascar to manufacture costumes itself. When summer rolls around, the company starts hiring—35,000 seasonal employees this year—and by early August a merchandising team is setting up seasonal stores. 

"Halloween is really our Christmas," said Deborah Belevan, the company's vice president of investor relations, adding that Party City booked a quarter of its 2015 revenue—or about $560 million—during the holiday. 

Kids trick-or-treat regardless, but adults are less likely to buy costumes when the holiday falls during the week. Halloween falls on Monday this year, and retailers are forecasting lower sales. That includes Party City, which is operating 275 Halloween City stores—where Belevan said the chain sells "edgier, sexier" adult costumes—down from 335 last year. 

Poonam Goyal, a Bloomberg Intelligence analyst who covers Walmart, believes the Monday celebration could also hurt sales at the big-box retailer, which sells not only costumes but also home décor and candy.

Taking photos of the costumes from inside the stores has buoyed sales for brick-and-mortar locations.
Photographer: Dolly Faibyshev for Bloomberg

It's not just the calendar that's working against the retailers. Halloween pop-ups are opportunistic tenants, signing short-term leases when landlords can't land long-term tenants.

The ghostly stores expanded rapidly during the last recession, when mall landlords were hurting for stable tenants. But lately, retail vacancies are down, and seasonal pop-ups are paying more for retail space, said Melina Cordero, head of Americas retail research at commercial real estate firm CBRE Group.

Rising costs are particularly worrisome to these companies at a time when consumers are increasingly comfortable shopping online. 

Ricky's, a beauty-supply chain in New York and Miami that transforms into a costume shop each fall, is also cutting back on its pop-up locations. The retailer once experimented with some two dozen locations but this year will have only three, though they'll all be considerably larger than usual, said Anna Dauod McConnell, vice president for product development at the company. It has also slashed prices by as much as 50 percent in a bid to compete with online sellers. 

That battle is particularly important since millennials, who were raised in the world of commercial Halloween products and are more likely than older adults to participate in the holiday, tend to spend big for the occasion. The demographic group spends an average of $42.39 on Halloween, compared with $31.03 for all adults overall.

Costume items on sale at Ricky’s Halloween in Downtown Brooklyn.
Photographer: Dolly Faibyshev for Bloomberg

At a Spirit store on East 57th Street in Manhattan, next door to high-rise apartment buildings and a high-end furniture shop, the dimly lit aisles were lined with elaborate costumes sealed in stiff plastic packaging and rows of eerie accessories. Two teenagers giddily tried on neon-colored masks with matching top hats, posing for selfies as they debated the value of a $9.99 chapeau. 

Social media is beginning to change the business. Taking photos of the costumes from inside the stores has buoyed sales for these brick-and-mortar locations, executives said. "They want to post it on Instagram," explained Belevan. "The social media craze is helping drive Halloween participation." Ricky's focuses its social media efforts on Instagram as well, where its company hashtag has been used close to 23,000 times. Spirit Halloween's hashtag appears more than 46,000 times on the platform. 

At Party City, sales of individual costume items are up, pointing to a trend in customization. Accessorizing in this way can help boost sales.  

"People want to be unique," Belevan said. "Not just do a costume out of a bag."

The exterior of Ricky's Halloween in Downtown Brooklyn, one of three pop-up shops they've opened this year.
Photographer: Dolly Faibyshev for Bloomberg