A Profitable Transformation
By Joseph Dobrian, Contributing Editor

Like Superman, Spiderman and other superheros, Halloween retailer Party USA (alias Halloween USA) has a dual identity.

When a business is seasonal, and many of its store locations are temporary, a flexible approach is a necessity. The ability to go with the flow and take advantage of opportunities has been the secret of success for Livonia, Mich.-based Party USA and its seasonal alter ego, Halloween USA. Every fall, the 30-unit Party USA chain undergoes a superhero-like metamorphosis, changing its name, tripling its number of locations and transforming itself into one of the nation’s leading Halloween retailers.

Party USA is itself a new name for the firm, which was founded in 1977 as Gags and Games by owners Chris Bearss and John McIntire. In the years since then, the firm has grown from a single 1,600-square-foot store into a chain that includes both permanent and temporary stores and both corporate and franchise-owned ones. Marketing manager Amy Gajda explains the company’s modus operandi: “We operate 30 retail stores in Michigan and Ohio — under the name of Party USA as of last year. During Halloween we change over to an almost all-Halloween merchandise mix, and open temporary locations.”

Counting both temporary and permanent locations, about 100 Halloween USA stores operate in Michigan, Indiana, Ohio, and Tennessee. The majority of these stores are corporate-owned, and some are franchised to local retailers. “How many of the stores are franchised varies from year to year,” Gajda says. “Our stores retain a small assortment of generic party supplies during the Halloween season, but the merchandise mix is about 90 percent Halloween-oriented.”

Halloween USA stores vary in size from 5,000 to 35,000 square feet, depending on the strength of the individual market. They’re located in medium-sized cities such as Columbus, Ohio, and Lansing, Mich., as well as in smaller suburban towns. Most are located in strip centers (which the company prefers for the sake of visibility), but there are free-standing stores as well as some in regional centers. Permanent Party USA stores range from 6,000 to 10,000 square feet in size.
The SKU count varies from store to store, but basically Halloween USA carries just about everything Halloween: costumes for infants, pets, toddlers, children, adults, and extra-large adults; indoor and outdoor decorations; props (including an extensive line of battery-operated items); special effects items; accessories; novelties; and party supplies.

“Demand grows every year,” says Gajda. “We’ve always had a big variety, and as we’ve grown, our suppliers have grown as well. We see constantly growing demand for realistic props, and the popularity of licensed products is higher than ever, both for kids and adults. Superheroes are especially popular, and Pirates of the Caribbean is still a pretty big seller.”

Since some Halloween USA stores are independently owned, it’s hard to come up with accurate statistics, such as average spend per customer, but Gajda says the chain’s general trends are all positive.

“Of course the average spending varies a great deal,” she concedes, “but I guess there’s a reason why we come back every year and add locations, so people must be spending more. Outdoor is a growing category for us, including large, lighted inflatables, fog machines, and strobe lights. For indoors we have ‘Scene Setters,’ which allow you to re-create your whole room: press-on wall stickers that let you dress up a room as a dungeon or a forest.

“I’d say our stores have a bigger variety than most of the competition. And in most of the temporary locations we’ve been coming back for several years, so people know us. We’re known for our abundance of merchandise, and the quality of it. We’re the store people think of when they need something special and specific.”
Unlike many Halloween retailers, Halloween USA’s costume business is 100 percent sales-driven. A few stores tried costume rentals over the years, but success was spotty, and Halloween USA decided to drop the idea, says Gajda. The temporary stores vary considerably as to size, configuration, and personnel, Gajda notes, but corporate headquarters does try to achieve some degree of uniformity.

“All our advertising comes out of corporate: direct mail, newspaper, radio, billboards, and some TV,” she says. “The signage is also uniform. In-store displays vary, but all stores are encouraged to show product in use — that is, to have mechanical and electronic devices up and running. As to who manages the stores, we have a wide variety of people, and usually they’re hired back season after season. We don’t usually have a problem putting together a team. Store personnel includes students, retirees, housewives: you name it.”

The number of temporary hires varies considerably store-to-store, and employees usually sign on because they’re enthusiastic about Halloween, which makes for a motivated work force.

As for the outlook for 2006, Gajda says Halloween USA is sure to add some stores — as it does every year — but she couldn’t say how many. She expects the firm’s Internet business (www.halloweenusastore.com) to grow, as well.“We’ve had lot of Web sales in the past two years,” she notes. “We doubled our Web sales in 2005 over 2004.”

The Off-Season
When Halloween is over each year, Halloween USA transforms itself back into Party USA and goes back to selling balloons, greeting cards, party supplies, tableware, personalized invitations, catering supplies, all-occasion gifts, wedding accessories and supplies, bachelorette novelties, and poker/casino supplies.
“We also have a masquerade section for year-round business,” says Gajda. “People use it for holiday pageants, school plays, and other occasions.” At present, Gajda concludes, Halloween USA’s plans are as flexible as its overall approach. “We always hope to grow into more stores and more markets,” she says.