The $600m Spirit Halloween business
The $600m Spirit Halloween business
Spirit Halloween has 1,450 pop-up shops and makes all its money in only 2 months.
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Today, we’re talking about Spirit Halloween, the seasonal Halloween pop-up shop.
Also this week: Some smart links (the case for posting on LinkedIn) and some wild memes (a genius email signature).
Ah yes, it’s October.
If you’re living in the US or Canada, you’ve seen Spirit Halloween pop-up shops taking over bankrupt big box retail stores all around your city. If you’re from elsewhere, you’ve seen the glorious Spirit Halloween jokes on Twitter.
And no matter where you are, you’ll soon have the chance to watch Spirit Halloween: The Movie. The horror comedy — which has a limited release this weekend before going straight to streaming — is about teenage kids trapped in a haunted Spirit Halloween mall location and proof we’ve officially run out of ideas.
Spirit Halloween is much more than meme, though.
The retailer has turned into a monster seasonal business and real estate operation that runs 1,450 locations…and pulls in ~$600m a year (almost entirely between September and October).
Spirit’s cash bonanza is the confluence of a pioneering pop-up store model and the US Halloween Industrial Complex. And trust me, it’s an industrial complex: Per the US National Retail Federation, consumer are projected to spend a record $10.6B on Halloween in 2022 including: costumes ($3.6B), candy ($3.1B), decorations ($3.4B) and an unreasonable amount of greeting cards ($600m).
That works out to ~$100 per consumer (your neighbour who spent $20,000 on Haunted House decorations is def skewing the average).
How did Spirit Halloween get here?
The story begins in a California strip mall in 1983. A retailer by the name of Joe Marver owns a store called Spirit Women’s Discount Apparel. The business was not doing well but Marver caught some inspiration watching a costume shop across the street pull in insane business every Halloween.
When the Halloween retailer vacated the location, Marver pivoted his own store to a costume shop. In maybe the greatest business coincidence ever, he was already sitting on the perfect name: “Spirit”.
Per the Seattle Times, that first year for Spirit Halloween was “the best October” that Marver ever had and “the next year, he did it again with a temporary space in a nearby mall and sold $100,000 worth of merchandise in 30 days.”
The model hit and — over the next 16 years — Marver expanded the seasonal pop-up business to 60+ spots across the US West and Southwest.
Then, in 1999, Marver struck a deal that took Spirit to another level.
Enter Spencer Gifts, a chain of 600+ stores which sells an inexplicable mix of products including clothes, room decor, collectibles, jewelry, and sex toys (the last category has led to a number of controversies with headlines like “Undercover Video Shows Kids Getting Access to Adult Sex Toys”).
Now called Spencer’s, the mall brand capitalized on selling kitsch products on whatever was trending at the moment. Spirit Halloween was kind of a perfect match for that ethos.
As Marver told Bloomberg in 2016, Spencer woo’d him hard but Marver was happy with his existing business. After a few years of of chatting, Spencer finally convinced Marver to sell Spirit Halloween by giving him a “very nice check” (reminder: if any of you readers have an inclination to write me a “very nice check”, please reply to this email).
The explosion of Spirit’s business in the decades since has coincided with the retail apocalypse. As more brick and mortar retailers go out of business, Spirit is waiting in the wings to scoop up real estate and feed America’s insatiable Halloween appetite.
Spencer’s is a private business so its financials aren’t public. However, in the aforementioned Bloomberg article, ratings agency Moody’s estimated that Spirit brought in $400m in 2015. That works out to ~16% of America’s total Halloween costume spend that year (other major Halloween retailers include Walmart and Party City).
At the same share of total Halloween costume spend, Spirit’s sales would hit $576m in 2022…which is probably conservative because Spirit’s footprint has since increased and people are about to do some ridiculous revenge Halloween-ing this year.
While Spirit Halloween pop-up shops make almost all of the money in September and October, it’s actually a year-round business. According to Vox, the Spirit team starts the search for next year’s pop-up locations on November 1st (AKA the day after Halloween).
Spirit has 14 leasing agents covering nine regions across the US and Canada. Here’s what they are looking for, per the company’s website:
Location: Communities that have 1) a population of approximately 35k, 2) living within a 3-5 mile radius, and 3) with a car count of at least 25k cars per day
Type of retail: Stores sizes of 5k to 50k square feet in power centers, strip centers, free-standing stores, major downtown retail locations and in major malls surrounded by a national retailer mix (preferably with a street view storefront)
Length: the Spirit lease is 3 months from mid-July to mid-November (allowing time for prep and clean-up)
Kick-out clause: Spirit has to give up the lease if the landlord secures a longer-term tenant by June
The pitch for retail operators is simple: above-market rental rates for guaranteed foot traffic for real estate that is otherwise be making $0 (oh, and also insane Halloween animatronics at the larger Spirit locations).
When Spirit has its 1.4k+ locations set up, the real estate operations is nearly on par with Target (1.8k stores) and bigger than Trader Joe's or Whole Foods (each has ~500 stores). Even its online business is primarily meant as top-of-funnel to send people to physical locations, especially for last-second “I need to buy a mask for the Halloween office party” rush (in total, 90% of Spirit’s sales are brick and mortar).
And that’s how we get Spirit taking over such retail classics like Babies ‘R Us, Circuit City, Sears and Toy ‘R Us (if you’re thinking “this is incredibly grim”, I agree). To staff the locations, Spirit hires tens of thousands of temp workers and provides a very on-brand benefit: 25% discounts on costumes (lol).
It’s not just the real estate scouting that is year-round. Spirit also stocks ~4-5k costumes. In the early days, Marver made inventory bets in January based on movie and TV trailers that he thought would be popular. Nowadays, the Spirit Halloween Twitter handle is a good place to see what costumes are trending: some hits for 2022 look like Stranger Things, Ted Lasso, Top Gun, Mountain Dew and “skull with a spike in its head”.
Fortunately for Spirit, a lot of its inventory is re-usable because stuff like ghosts, Elvis and things with spikes in their heads never go out of style. Steven Silverstein — who has been Spencer’s CEO since 2003 — told Forbes that Spirit’s inventory management is its “secret sauce”.
“You have to be able to carry over a significant amount of inventory year to year,” says Silverstein. “In traditional retail, you might not be repurposing anything. For us, consistent themes remain, and we're repurposing 30% to 40%. We're not just trying to get rid of it."
Spirit Halloween has one last thing that is “year-round”: a very popular meme template that plays on the metronome consistency of Spirit pop-up shops taking over bankrupt retailers.
Anytime an organization is going through a perceived failure or hard time, someone on Twitter will post a photo of the Spirit Halloween banner photoshopped over the ailing organization with the caption “wow, they move fast” or “whoa they move fast”.
Below are three viral examples of the meme format (left to right):
Facebook HQ after the site went offline for a full day
OnlyFans logo after credit card companies temporarily said they would block payments on the platform
Buckingham Palace after the Queen passed away
Keep an eye out for these…whether or not it’s October.
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Links and Memes
The case for posting on LinkedIn: In an unprecedented 180-degree turn, I now believe that LinkedIn is an under-utilized platform and that people should be posting there more.
I explain why in my latest Bloomberg piece:
To start with, LinkedIn has 850 million users. The Microsoft-owned site doesn’t break out daily active users, but even a minority of that user base is comparable to traditional social networks like Snap (347 million) or Twitter (238 million).
Meanwhile, LinkedIn’s ad business has surpassed $5 billion a year, which is on par with Twitter ($5.1 billion) and more than Snap ($4.1 billion) or Pinterest ($2.6 billion)
Despite its scale, many people (understandably) don’t post on LinkedIn because they are scared to trigger colleagues, co-workers and their bosses. So, there’s a content deficit and arbitrage opportunity to get your work in front of many people’s eyeballs if you’re willing to post (particularly if you’re willing to sh*tpost).
Elon vs. Twitter: We’re about 2 weeks away from Elon and Twitter going to Delaware Court over Elon’s intention of waling away from a $44B deal to acquire the social network (if they don’t settle first). In the meantime, the internet is going wild over a dump of texts between Elon and a bunch of tech heavyweights. The texts are from a court filing and Big Technology’s Alex Kantrowitz has a good breakdown:
Twitter co-founder Jack Dorsey was supportive of Elon’s efforts and said that Twitter “never should have been a company” (it should have only been a protocol)
Microsoft CEO Satya Nadella and Salesforce Co-CEO Marc Benioff both slid into Elon’s DMs shortly after the deal announcement to talk collaborations (Joe Rogan also texted Elon to ask “Are you going to liberate Twitter from the censorship happy mob?”)
Twitter CEO Parag Agrawal tried to get into the same corner as Elon by mentioning his own technical chops (Elon dislikes MBA types) before their relationship turned contentious
Oracle founder Larry Ellison received a message from Elon asking for him to participate (Ellison discussed how much he should chip in “A billion… or whatever you recommend”…and Elon recommended $2B)
CBS Host Gayle King asked Elon if she could do an interview on the deal (and Musk floated the idea of putting Oprah Winfrey on the board).
The entire text record is 40+ pages is well-worth a read for those that want to see how the sausage is made.
One text exchange really caught my eye…because it included a meme I made: On April 4th — before Twitter announced that Elon was joining its board (he declined it a few days later) — Twitter Chairman (and Salesforce co-CEO) Bret Taylor sent my joke tweet (of Elon as Wario from his SNL skit) in a three-way chat between himself, Elon and Agrawal.
Elon replied “approved” and Parag heart-emoji’d the reply shortly before sending out a tweet saying Elon was joining Twitter’s board. As always, memes are the language of the internets.
Ok, one more Spirit meme: Comedian Nick Lutsko dropped an unofficial “Spirit Halloween” theme last year…and it’s timeless.
And here some gold tweets…
Based on this tweet, I’m considering updating my email signature to “what we do in life, echoes in eternity” (IYKYK).
As this next tweet highlights, Winston Churchill was known to be a heavy drinker. And he did drink a lot during World War II, but it was in a weirdly strategic way to stay buzzed all day. From William Manchester’s book on Churchill (Alone): “Churchill is a sensible, if unorthodox, drinker. There is always some alcohol in his bloodstream, and it reaches its peak late in the evening after he has had two or three scotches, several glasses of champagne, at least two brandies, and a high ball, but his family never sees him the worse for drink.”
Seriously though, why are news channels still sending reporters into storms…
Finally, this tweet explains my portfolio in 2022.
