As they did business at last week’s International Halloween Show in New York, Halloween manufacturers have found themselves not only competing with each other, but also with the increasing role direct-to-retail (DTR) deals are playing in Halloween sales at large specialty retailers such as Spirit Halloween and Halloween City (part of Party City).

The trend toward DTRs has accelerated as specialty retailers have acquired the sourcing skills they once left to their suppliers. And while DTRs have long been a staple of apparel and other categories, they are a relatively new phenomenon in the Halloween business and almost entirely limited to the big specialty chains.

Those retailers have been going to directly to licensors, contract manufacturers and their own supply chains in a bid to boost profit margins. For example, Spirit had an exclusive DTR for “Stranger Things” for the show’s first season. And Party City currently has DTRs for Disney Princess and Marvel characters.

The majority of these DTRs are non-exclusive; the attraction for the retailers is the higher margin, with a design that’s not available elsewhere.  The increasing prevalence of Halloween DTRs is largely confined to Spirit and Party City, leaving Walmart and Target and new channels of distribution open for more broadly available product.

New Distribution

New channels are being developed by the major manufacturers to (hopefully) offset business at the Halloween specialty chains lost to the DTRs. Rubie’s, for example, added Big Lots for licensed products this past fall. And it will sell through Five Below next year with $5 licensed Warner Bros., Marvel and Cartoon Network costume packages (t-shirts and masks) as the retailer expands from internally-sourced generic goods, says Rubie’s CEO Howard Beige. In addition, H&M, which also has largely carried generic costumes in the past, added Rubie’s licensed Spiderman costume this year, says Beige.

“We are adjusting by trying to bring in new accounts and in many cases we may start out by supplying generic costumes and then add licensed products on top,” Beige said.

The push toward finding new distribution plays out against the specter of potential tariffs on goods produced in China, whose factories manufacture nearly 90% percent of the Halloween products sold in the U.S. With a 15% tariff scheduled to be imposed Dec. 15 on all goods imported from China, Halloween suppliers, who have so far absorbed the cost by gaining concessions from contract manufacturers or gotten some retailers to take slightly lower margins, will have little choice but to raise wholesale prices in 2020, executives said.

“The consumer is going to have to pay for it in the end if this continues past Jan. 1 and while it won’t a full 15 percent increase” in retail prices,  it could be a single-digit increase,” says Beige, whose company has been shielded to some extent by its ability to manufacture in factories in Phoenix, AZ (cosmetics), Mauldin, S.C. (basic fabric) and Mexico (latex masks).

Streaming, YouTube Properties’ New Role

In addition to seeking new distribution, costume suppliers are increasingly making a play for properties rooted in streaming platforms and YouTube channels properties, or giving a new spin to tried and true licenses. Rubie’s has added Amazon Prime’s “The Boys,” to its mix along with Nano Productions’ “Fozi Mozi & Tutti” YouTube series (which will largely target non-U.S. markets), while Fun World partnered with InSpirit Designs to develop costumes around  electronic dance music’s DJ Marshmello that will launch in 2020.

Among the tried and true,  Rubie’s is also readying a new line of Crayola-licensed products with dresses and make-up, broadening a mix that has typically focused on large-scale representations of crayons. or its part, Disguise plans to launch 80 SKUs next year under its newly acquired Harry Potter license, broadening the line to include separate character costumes for Harry Potter, Hermione Granger and Ronald Weasley.

“People are looking to take advantage of what is out there on YouTube, streaming or social media because many of these new properties have huge followings are very smart at marketing themselves and wear a certain something that can easily be licensed,” says Fun World’s Licensing Director R.J. Torbett, whose company sold Ryan’s World costumes through Target.

Says Disguise Marketing Director Bernice Nesbit: “Videogames are really being pushed to the forefront because kids are playing them; it is a natural progression that those are characters that they fall in love with as well and that influences their Halloween decisions.” Disguise has licenses for Pokémon, Halo and the mobile game Bendy and the Ink Machine.

The search for new business also increasingly is moving into the pet category. While Rubie’s has had Disney-licensed products as part of its Pet Boutique line for several years and expanded distribution at PetSmart, it will be joined this year by Fun World, which is returning to the category after a 10-year absence. Fun World showed about 40 SKUs of “Paw Prints” non-licensed products at the Halloween show and is weighing added licenses depending on the success of the initial line at retail.  Interestingly, pet retailer Petco, much like Spirit and Party in the human world, has focused on sourcing its own pet costumes.

And pet costumes are increasingly mirroring those of their owners. Rubie’s, for example, will field Baby Shark costumes for adults, children and pets in 2020.

“We have been getting more requests for pet costumes and with consumers, especially among the millennials, pets are being viewed as extensions of the family and that extends to costumes,” says Torbett.