How Spirit Halloween transcends the so-called retail apocalypse

Despite the rise of e-commerce, Spirit Halloween has lived on, even as the brick-and-mortar retail apocalypse has shuttered other stores. Indeed, the seasonal retailer has become synonymous with the retail apocalypse that has led to the demise of the likes of Bed Bath & Beyond, Big Lots and Toys ‘R’ Us by setting up shop in the vacant storefronts that are left behind. Spirit’s reputation as a symbol of fallen retailers has turned the company into an Internet meme of sorts. The company has indicated it’s in on the joke, like when Spirit Venmo’ed comedian Nick Lutsko money for his mock theme song about Spirit that went viral in 2020. 

That might’ve been how the company started out. But recent numbers tell a different story. Last year, corporate bankruptcy filings in the U.S. spiked to the highest level since 2010. At least a dozen retailers have said they would stores upon entering bankruptcy so far this year, including 99 Cents Only, The Body Shop and Express. Data published Sept. 13 by Coresight Research shows that store closures are up nearly 48% over last year at this time. Meanwhile, store openings are only up by 7.5%. That would imply Spirit has had a wealth of locations to choose from. 

But the slowdown in store openings isn’t because retailers don’t want to expand. Rather, it has become incredibly challenging to find space for a new storefront thanks to an increasingly competitive environment. Retail construction completions are at their lowest level in more than 10 years, according to CBRE. The availability rate for retail nationally in the second quarter was 4.7%, the lowest since the commercial real estate brokerage began tracking this figure in 2005. Low supply has also driven up rental rates, which rose 2.3% year over year nationally in the second quarter.

Spirit’s business model of seasonal pop-ups has helped it stay nimble in a tough environment. With short-term stores, Spirit gets to keep its overhead costs down so it can snap up prime real estate and yet benefit from flexibility if, say, a location last season wasn’t as lucrative as previously hoped. Plus, Spirit has mastered the art of the pop-up real estate deal thanks to a team of in-house experts who hustle year-round to snag the best locations at the best price.

All told, Spirit stands out as an unexpected winner at a time when intense demand for real estate is slowing other retailers down.

“When disruption occurs, Spirit is quick on their feet, and they’re able to take advantage of it,” said Bill Read, an executive vice president of real-estate firm Retail Specialists. “Occupancy rates are lower, it’s harder to find retail space now, but Spirit is thriving.”

Arguably, Spirit has transcended the retail apocalypse. The company is a testament to the growing popularity of Halloween itself. The cult following around the spooky season has pushed other big-box retailers to sell holiday products earlier and earlier, and customers can’t get enough. Despite the seasonal nature of Spirit’s operations and increased competition for Halloween dollars, the company has become an enduring part of the spooky season. 

Spirit Halloween did not respond to a request for comment by press time. 

Halloween is big business for retailers. Last year, sales were estimated to hit a record $12.2 billion, according to the National Retail Federation’s annual holiday survey. With more stores and seasonal employees than ever, Spirit appears poised to reap the benefits of Halloween’s popularity more than ever this year.

However, landlords haven’t always been as receptive to Spirit’s cartoonish Grim Reaper logo, according to a former Spirit corporate employee, who spoke to Modern Retail on the condition of anonymity to preserve industry relationships. Most landlords would rather have a long-term tenant than a temporary one like Spirit for the simple reason that long-term leases translate to more money. Spirit also used to be a much smaller company. 

Founded in 1983 by Joe Marver as a single pop-up store in the Castro Vallely Mall in California, the company swelled to 63 stores across the country, according to a 2018 Vox report. The chain started out as a women’s discount apparel store, per Bloomberg, and in 1999 Marver sold the company to Spencer Gifts, a move that helped grow the Halloween business. In fact, the former Spirit employee said the company helped popularize the holiday into the moneymaker it is today by cementing it as part of the cultural zeitgeist. 

Landlords are very risk-averse, according to David Zoller, an executive vice president of retail brokerage at Weitzman, who has brokered a handful of lease agreements with Spirit Halloween on behalf of landlords in the past. Short-term leases are unappealing to landlords because they can be a sign of instability. But if you’re a landlord with a vacant spot to fill, a pop-up chain with major brand recognition like Spirit has its rewards.

“Depending on how big that chunk of money they’re giving you is, your operating costs of that space for a period of time are covered when you otherwise would just be bleeding money on a big, empty box,” Zoller said. 

Contracts for pop-stores like Spirit are generally on the short side — between one to two pages — while contracts for long-term tenants are much longer at around 40 pages, Zoller said. Spirit’s contracts, in particular, come with a “kick-out clause,” according to the company’s website, which means the landlord can back out of the contract if they find a long-term tenant by June. 

That comes with some level of protection, but it’s still a “big decision” for landlords who have to weigh the risks, because they’ll eventually reach a “drop-dead date” when they can’t reverse course, Read said.

Spirit’s stores are also attractive to landlords because of the amount of foot traffic the retailer draws. “A Spirit Halloween store is really unrivaled compared to anything you’re going to find in between the third and fourth quarter of the year when sales are typically lower as you lead into the holiday season,” the former employee said. “They help fill a void.”

By the end of September, former Bed Bath & Beyond and Rite Aid spaces will be overflowing with thousands of polyester costumes, plastic props and seven-foot-tall animatronic zombies. But as the name implies, Spirit will disappear without a trace as soon as November rolls around. That doesn’t mean business stops, though. 

Spirit’s brick-and-mortar stores might be seasonal, but the company is a year-round operation with a dedicated real estate team spread out across the country. Each representative is tasked with scoping out the best site locations, building relationships with landlords and negotiating lease agreements within their respective region. 

In the world of Halloween pop-up stores, earlier is always better. Spirit’s real estate team works to ink deals as soon as possible ahead of the next Halloween season because employees prepare stores for customers in the middle of the summer. That helps Spirit capitalize on the 43% of U.S. shoppers who begin their holiday shopping before October, per eMarketer. Still, lease negotiations can stretch for months, according to the former employee.

They characterized the company’s real estate team as a well-oiled machine, the success of which boils down to persistence and organization. On average, Spirit’s retail team engages in talks with around 450 landlords, if not more, per region each year, spread out over hundreds of square miles. In the quest to secure the best lease for the best price, “No stone is left unturned,” the former employee said. 

The typical Spirit store is around 7,000 square feet, the former employee said, but the company has been known to inhabit a range of retail spaces, from big-box stores to even the former site of storied department store Barneys. As Spirit’s company website puts it, “No store is too large (or too small),” with ideal locations between 5,000 to 50,000 square feet. 

Nowadays, landlords who are reluctant to work with Spirit are “few and few between,” they added.