Direct-to-Retail (DTR) deals are increasingly playing a role in Halloween sales as large specialty retailers build their own supply chains in a bid to both boost profit margins and separate themselves from competition.

The trend toward DTRs has accelerated as retailers acquire the 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 larger specialty chains.

For example, big box retailer Party City bought Festival SA in 2016, giving it a manufacturing plant in Madagascar. The retailer also has a direct license for specific Warner Bros. and Disney Princess-related items. And Spencer Gifts’ Spirit Halloween chain, which operates 1,300 seasonal stores, is “aggressively pursuing” DTRs, having landed them this year for Netflix’s “Stranger Things”, “Rick and Morty” and the 1993 Disney Halloween cult-classic Hocus Pocus, says Spirit’s Kym Sarkos.

“There is too much sameness in the market today and Spirit has to pursue a different path, so we expect to grow our DTR relationships significantly,” says Sarkos.

Yet the DTRs governing the Halloween products have a wrinkle typically not found in apparel deals. Many are non-exclusive, allowing multiple licensees to field product under the same property provided the design and/or fabrication is different, says Bernice Nesbit of Disguise.  For example, Party City has a DTR for Disney Princess, but Disguise also sells product with a different design, but aimed at similar price point and customer. Meanwhile Disney Stores also have their own version of Disney Princess costumes, but typically at a higher price and in more limited quantities, says Nesbit.

“As these retailers gain the ability to source their own products it becomes easier for them to take on their own licenses,” says Disguise’s Nesbit. “As we go through the approval process we try to make sure there is differentiation in our product versus the DTR and we work as closely as we can with the licensor to make sure we are getting the right design out there.”

Yet going the DTR route carries both risks and rewards. Retailers get better control over the entire supply chain from design and development to finished goods, but they also can be stuck with inventory if sales come up short. “We can control the entire process from development to the merchandising, packaging, pricing and marketing,” says a retail executive.  “It gives us a very conceptual approach to the entire process and allows us to deliver a superior product in the end.”

Howard Beige of Rubie’s Costume acknowledges that “A [licensor doing a] DTR means we will have one less customer” for a given property, but also says that “them getting a DTR can be [perceived] by other retailers [as] an important license if [the retailer is] investing in it.”

The DTRs are increasingly driven by brick-and-mortar retailers seeking to separate themselves from their online-only competitors.

“As licensors, we always want to have broader distribution and with a DTR you run the risk of alienating other retailers,” says Lionsgate’s Sheila Clark. “Unless you get a very large commitment for the DTR, you run the risk of not generating the maximum revenue for your properties.”

For some costume suppliers, the trend toward DTRs is forcing them to carve out a niche. Rasta Imposta has found a home in designing food and beverage-related costumes, having introduced Tootsie Roll products in the past and having launched Fireball Cinnamon Whiskey and Oreo versions this year.

“It used to be that everyone in the Halloween industry had their role, but in the past few years retailers have become manufacturers and manufacturers have become retailers,” says Rasta Imposta’s Robert Berman, pointing to Rubie’s opening a few stores in New York. “That forces us to find a niche and seek out unique brands that may not have a licensing department yet and where we can grow our business.”

The push by some retailers to expand the assortment of DTRs comes amid growing sales of Halloween-related products. U.S. sales of Halloween products are projected to increase 8.3% this year $9.1 billion with average per-family spending projected to rise 3.8% to $86.13, the National Retail Federation said. About $3.4 billion is forecast to be spent on costumes this year, up about 1% from a year ago, with 47% of consumers expected to shop for their products in discount stores and  38% at specialty retailers. Thirty-five percent will get their inspiration for costumes online, while 30% look in stores.

Other Halloween business:

• Licensing is finding a home in the “trunk-or-treating” trend – trick-or-treating meets tailgating, as people gather in a field or parking lot with the trunks of their cars decorated with a Halloween scene. CandyRific developed all-in-one trunk-or-treating Trolls- and Avengers-themed kits pairing a 110-piece bag of taffy with lights and other decorations that can retail for $20. CandyRific will begin presenting the concept to retailers in November with plans for shipping it for Halloween 2018, says the company’s Clark Taylor. Oriental Trading Co.’s online store also is promoting a trunk-or-treating do-it-yourself display replete with Peanuts-licensed paper hanging lanterns and cardboard “Great Pumpkin” figures.
• The recent success of Warner Bros. movie It, based on a Stephen King novel that originally aired as an ABC-TV mini-series in November 1990, caught the movie and licensing industry by surprise. Rubie’s initially had a mask available for the film’s main character Pennywise, but quickly geared up factories in Greenville, S.C. and Richmond Hill, NY, to start producing Pennywise adult-size costumes, the first of which will hit retail shelves in early October, says Beige.

Rubie’s signed a license for It with Warner a year ago, but didn’t start costume production until just after the first box office results were available following the film’s release on Sept. 7. To accommodate the surprise hit, Rubies postponed the start of manufacturing for some of its 2018 line until after Nov. 1. Rubie’s also has the license for the original TV mini-series. The movie had generated more than $470 million in global box office revenue as of late September, including about $270 million in the U.S.

”It was definitely a shock to everyone,” says Beige. “There was nothing to estimate as far as production until two weeks ago and now we will produce every piece that we can” through October. Similarly, Trends International began printing It posters within a week of the film’s release at its plant in Indianapolis, IN, selling them through Amazon, says Trends’ Paul Beck.

• With the eighth installment in Lionsgate’s Saw film series – Jigsaw – slated to be released Oct. 27, the studio struck a licensing deal with NBCUniversal to have the movie be part of the Halloween Horror Nights mazes at Universal Studios parks in Orlando, FL and Hollywood, CA that opened Sept. 15 and will run through Oct. 31. Lionsgate also licensed Eagan Productions for a Saw-themed escape room that will open in Las Vegas in late October.
• Costumes, it should be noted, are not just for Halloween.  A quick poll of several costume suppliers indicates about a third of annual revenue is non-Halloween-related. The rising interest in cosplay – dressing up as a favorite film or TV character and interacting with others in similar garb at “Cons” and other pop culture events – is expanding the business beyond the traditional costume-wearing season. Rubie’s launched its Imagine by Rubie’s children’s costume line in 2012 that was designed to generate year-round sales and has since added studio and other licenses. The costumes are packaged in four-color boxes with a see-thru cellophane top and are designed to be packaged alongside products in toy aisle, says Beige.
• Halloween costumes are taking new forms this year. Disguise recently signed a licensing agreement for costumes based on Hasbro Studio’s “Hanazuki” YouTube series and gained licenses for new Nickelodeon shows Rusty Rivets, which first aired in Canada in late 2016, and Sunny Day, which launched Aug. 21 on Nick Jr. The costumes for both series will be available in 2018. Rubie’s will remain the licensee for Nickelodeon’s current shows including Teenage Mutant Ninja Turtles and Paw Patrol.

Contacts:

CandyRific, Clark Taylor, VP Sales, 360-921-4636, clark@candyrific.com

Disguise, Bernice Nesbit, Marketing Dir., 858- 391-3600 x320, bnesbit@disguise.com

Lionsgate, Sheila Clark, SVP Consumer Products and Franchise Management, 310-255-3612, sclark@lionsgate.com

Rasta Imposta, Robert Berman, CEO, 856-939-9599, robert@rastaimposta.com

Rubie’s Costume Co., Howard Beige, EVP, 516-326-1500, howard@rubies.com

Spirit Halloween, Kym Sarkos, SVP General Merchandise Mgr., 609-645-3300, kym.sarkos@spencergifts.com

Trends International, Paul Beck, 317-388-4031k, pbeck@trendsinternational.com