BuyCostumes.com Leads Online Market
By Marilyn Pritchard, Contributing Editor

This seven-year-old company accounts for more than 30 percent of the online costume business and has grown more than 546 percent over the past three years.

BuyCostumes.com, which began life as a chain of temporary Halloween retail stores, is now the leading online-only costume retailer, with sales reaching nearly $30 million in 2005. The company has twice been listed among Inc. magazine's 500 fastest-growing private firms in the U.S., ranking 75th in 2005 and 223rd in 2006, with 546 percent growth over the past three years. Last August, BuyCostumes.com and its parent company, BuySeasons, were purchased by Liberty Media Corp., a holding company with interests in electronic retailing, media, communications and entertainment businesses, including QVC, Expedia and Starz Entertainment Group and News Corp.

Jalem Getz founded BuyCostumes.com in 1999 with his partner, Jon Majdoch, after running a seasonal chain of seven Halloween stores in the Milwaukee area and northern Illinois for three years. “I saw a void in the online retail marketplace,” says Getz, now CEO of the New Berlin, Wis.-based e-tailer.

They began developing their website at the beginning of that year and launched it in August. That season, Getz continues, “We sold about half of what we did in one of our stores, but we felt there was enough of a market to develop it further.”

Their instincts were proven correct. By October of 2005, BuyCostumes.com had a 31-percent share of the online
costume market, according to Hitwise, an independent Internet monitoring company. In fact, it ranked third among Hitwise's “apparel and accessories” sites that month.

The key to BuyCostume.com's success, according to Getz, is the breadth of its inventory. “The day we launched it, our assortment was unmatched,” he says. “Before BuyCostumes.com, mom and pop retailers only offered a narrow assortment of costumes online. I tapped into the largest distributor of costumes at the time, which was Morris Costumes, and after the first test year we offered 2,000 items. We built from there. Now we have well over 10,000 items on our website. We focus on what the customer is looking for.”

Even though some brick-and-mortar Halloween retailers have gotten bigger since his company began, Getz says they still don't compete with BuyCostumes.com on the basis of inventory. One reason is centralized distribution, he notes, adding that that even major brick-and-mortar Halloween retailers “can't go with a wide inventory. It's not economical. They have to narrow their assortment, probably to 5,000 to 7,000 items, which is half of what we carry. Combined with the fact that their seasonal stores are limited by shelf space, they are what we call ‘busted' by the time Halloween comes.”

There are also regional trends that are hard to track and can pose challenges for traditional merchants, according to Getz. For example, plus sizes sell better in some areas of the country than others, so by Halloween some stores are sold out of certain sizes while they end up sitting on the shelf of others. “That is a less efficient inventory model,” he adds. “The customer ends up settling or going somewhere else. We have everything here at one large distribution facility in large quantities.”

Retailer Partnering
BuySeasons hopes to capitalize on that inventory by offering a private-label program to smaller retailers. Getz calls it BuyCostumes Direct and will be unveiling it at the Halloween show in February. “We're doing something no other retailer has done,” Getz says. “It is a private-label, drop-ship program where any retailer can buy from us, and we will ship directly to their customers, using their labels, their packing lists, so that no one knows it came from us.”

Currently, the program is offered to larger retailers. For example, Getz explains, people can go to Target.com and click on a button that says, “Browse 1,500 costumes.” The vast majority of those costumes come from BuyCostumes.com. “We fulfill the order with a Target box and a Target label, and BuyCostumes.com is transparent to the customer,” he says.

“We are leveraging our inventory and making it available to other retailers, including Amazon.com and QVC [BuyCostumes.com's new sister company via Liberty Media],” says Getz. “Historically, the program was limited to large retailers. Now, with this new program, even a small retailer can tap into our inventory and leverage all the assets of a large retailer.”

Getz believes that he is not just increasing his own company's sales, but helping to grow the entire Halloween industry. “Everything we do is working with other companies, making it easier for them to sell more product,” he continues. “We are doing our part to grow the industry by making [our inventory] available to a larger assortment of companies.”

In 2005, BuyCostumes.com launched BuyCostumes.TV, a streaming video program which is linked to the BuyCostumes website and features a costume fashion show. Last fall, the company expanded the program to cable TV. “It's an exciting opportunity to explore,” claims Getz. “It ties into where retail is going. Costumes are a demonstration product. We're not
selling paper clips. It's more fun than a paper clip. Now, some of our competitors are doing it. When people start imitating you, you know you're doing something right. It's increasing our role in online retail sales.”

Getz expects BuyCostumes.com's sales to continue to grow over the next few years as the industry itself expands. “Our growth rate is continuing, if not accelerating,” he says. “It could slow down, but not necessarily. We believe we will continue to grow quite rapidly.”

“I believe we can continue to grow our business without taking business away from each other,” he continues. “The number of companies that sell Halloween merchandise has grown, and their sales are growing. To me, that means they're not taking
business away from their competition. That is organic growth.”

BuySeasons also operates Deal.com, a comparison-shopping website, and content information websites, such as www.everythingHolidays.com , www.everythingHalloween.com and www.Halloweenassociation.com .