Trends & Forecasts

Don’t Get Spooked by Supply Chain Disruptions This Halloween

Let’s face it, Halloween 2020 was scary and not in a good way. Much like everything else last year, Halloween was undoubtedly a bust. But this year, everyone seems to be in the mood to get spooky—even Dr. Fauci. 

The National Retail Federation predicts soaring spending levels this Halloween season, but continued disruption in the global supply chain is causing retailers more tricks than treats. Despite the expectation of increased demand for Halloween inventory, many retailers are unprepared to capture the market’s demand. 

According to Nikki Baird, Vice President of Retail Innovation at Aptos, a market leader in retail technology solutions, the most significant risk for retailers this Halloween and the upcoming holiday season is the inability to meet consumer demand because of widespread supply chain disruption. 

 

A tricky supply chain

Halloween retail items uniquely highlight the current challenges of supply chain disruption. In a way, costumes are the ultimate fast fashion, they come and go, and consumers expect the latest trends cheap. To meet the demand, buyers source Halloween apparel and decorations from overseas. But right now, importing consumer packaged goods (CPGs) is difficult. 

Supply chain disruption often starts from the source, at production factories, many of which are operating at limited capacity due to continued pandemic restraints in some countries. 

This disruption causes a chain reaction of issues that travel through to the retailer. With production issues come transportation and capacity issues, then container shipping becomes a challenge. And now, many retailers looking ahead to the holiday season are starting to plan alternative solutions, like air freight, to expedite the process. 

However, retailers do not have the product margin or timeline to make alternative shipping methods economical or realistic when it comes to Halloween inventory.

Baird explains that, as a result, Halloween retail has significantly more risk attached to it than other seasons. 

“Buyers made purchasing decisions for this season while the world was still suffering through the worst part of pandemic constraints, and this speaks to the challenges in getting inventory, she said. “Along with these issues, the Halloween assortment itself is limited: without blockbuster movies and big character vehicles, a lot of old standby costumes are the only thing available on the shelves this year.”

 

Combating disruption 

Retailers are doing their best to combat this season’s challenges and capture the much-needed consumer demand that didn’t exist last year. But sometimes, there is an upper limit on what they can do.

When it comes to Halloween, the costume costing $150 on October 30th isn’t worth anything on November 1st

Because costumes and decor have a diminishing value, retailers have little incentive to bring in inventory, especially when the supply chain is risky. If retailers miss the window of opportunity, there is no quarter to make up for the loss.  

To combat this challenge, Baird has witnessed many retailers trying to broaden what makes up the category for Halloween. 

“They are adding more products into Halloween shops and offering a broader assortment of season apparel and décor to expand the options that consumers spend their money on,” she said   

She has also seen some retailers utilizing a spot buying technique. To get ahead of demand, spot buyers will go out into the market and purchase whatever they can get their hands on related to Halloween and the upcoming holiday season. 

Spot buyers may not get enough inventory to stock an entire chain of stores, but retailers are willing to have different merchandise from other suppliers to fill the rest of their stores. 

Spot buying might serve as an effective tactic for the upcoming holiday season, but it is more difficult for Halloween. 

First, there are not many suppliers that produce Halloween inventory, and second, the inventory needs to be purchased in the right timeframe to get it in stores at the peak of when shoppers are buying. 

Retailers are now trying to compensate for the lack of Halloween product offerings by bringing in holiday inventory and gift items earlier this year. As a result, consumers are already starting to see Christmas creeping in around the edges.  

 

Tough decisions 

This holiday season is requiring retailers to pivot and make quick decisions to combat lingering challenges.

Large retailers have an easier time making strategic changes quickly, but smaller retailers face additional challenges while navigating the effects of supply chain disruption.

During the pandemic, buying organizations faced pressure with headcount because they were not purchasing as much inventory. 

Many retailers had to downsize their buying and planning team, furloughing employees to stay afloat. Now they are having a hard time getting these experienced individuals to come back—or hiring new skilled laborers altogether—due to what some are calling the “The Great Resignation” — or the Great Reimagination, depending on who you ask. 

The lack of buying power and resources makes it harder for small retailers to respond to the current market challenges than large retailers with more flexibility to adapt. 

But Baird believes holiday retail presents an opportunity for better outcomes than for Halloween as there is a broader assortment of inventory and categories that are associated with the holidays. 

People are giving gifts that are not necessarily seasonal, and unlike Halloween, these items hold their value long term.  To have a successful holiday season, Baird advises retailers to start reassuring consumers.

“I think it will be important for retailers to reassure consumers coming out of Halloween, Baird said. “If they are disappointed, they don’t need to worry because the holiday season will be better.” 

 

Moving forward

Supply chain disruption takes a long time to correct itself. Many challenges are manifesting themselves with consumer packaged goods because the supply chain process is lengthy.

Sometimes it can be nine to twelve months from when a buyer places an order to when that inventory is delivered. The Halloween inventory shortages now are partly a result of purchasing decisions made months ago, back before the CDC approved vaccination for children under age 16. 

Buying and selecting assortment, according to Baird,  has always been part art and part science—the science can forecast a certain level of demand, but ultimately, it’s the buyers’ responsibility to decide how to allow inventory appropriately. 

The challenging part is that forecasting tools have to be fed assumptions to account for expected change dynamics, and developing these assumptions requires human decision-makers who must have the confidence and foresight to predict the market for future seasons. 

It is a delicate balance and a tough job, much like trying to predict right now what outfit to wear on July 1st, 2022.

In early 2021, the retail market faced uncertainty surrounding consumer demand. There was concern about the spending power of consumers facing economic turmoil brought on by the pandemic. 

Fortunately, there is now more clarity surrounding consumer financial stability, and in some categories, 2021 demand exceeds even 2019 levels. Buyers are already beginning to make decisions about summer inventory, which is a good indicator that the market and supply chain will be in a much better place next summer. 

“There is every indication that the pandemic has not significantly impacted the overall level of consumer spending, she said. “There is evidence that there is more pent-up demand than economic forces acting against it—and [buyer] confidence will help get the supply chain moving again.”    

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