The official debt ceiling deadline may not be until Thursday, but last weekend the government made zombies out of thousands of small businesses around the country. The Halloween shopping season, one of the most profitable times of the year for so-called "pop-up" retailers is about to become yet another casualty of government shutdown.
Pop-up retailers are those tiny seasonal shops that fill otherwise vacant store fronts or kiosks in malls. Through their own initiative or with the help of companies like PopUpInsider, entrepreneurs all over the country set up short-term operations catering to all things Halloween. The reason is simple: Halloween means money.
In September the National Retail Federation released it's annual forecast for Halloween sales. The numbers are almost frightening:
- Americans were expected to spend $6.9 billion between costumes, candy and decorations
- 66% of adults would participate
- 21.7 million American pets were to be subjected to the humiliation of getting stuffed into a costume at a cost to their owners of more than $330 million
- $360 million was earmarked for greeting cards
- Roughly $2 billion was expected to be spent on candy with another $2 billion on decorations, second only to Christmas
- Of the $2.2 billion spent on non-pet costumes more than half was going towards adult costumers.
That last point is the most important for entrepreneurs. More than 85% of Americans between the ages of 18 and 44 expect to dress up for Halloween. Halloween costumes for grown ups are made out of all but disposable material and sold for prices anywhere from $25 to well over $100. That's before accessories, makeup and the $15 plastic handcuffs to lend a certain authenticity to your "dirty cop" outfit.
Halloween isn't the biggest top-line holiday of the year but in terms of margin not even roses on Valentine's day comes close to 158 million Americans playing dress-up on the same night.
Unfortunately most of that spending happens by the second week of October."Because of this shutdown, because people are so freaked out about it, and because consumer confidence is so low, we're going to see a dive," says retail expert & author Hitha Prabhakar, looking dazzling in her tiara.
The outfits worn during our interview are a good example of the margins at risk for retailers. I spent $19.99 for my stately felt crown and $34.99 on Hitha's dazzling tiara. By retail math --margin % = 1-(cost/price)-- it's safe to say Party City made at least $30 from our little props. Given what the government has done to these retailers it seemed the least I could do.
So, how "freaked out" is the country about the shutdown? According to Gallup the weekly drop in U.S. Economic Confidence for the week ending October 6th was the largest seen since 2008. A separate Gallup poll measuring the change in spending habits from month to month showed the drop from August to September was the largest on record.
The government could end the shutdown this afternoon and it wouldn't save this year's Halloween. Stores like Ricky's in New York expect to get 25% of their sales from Halloween every year. It's not going to happen in 2013. Halloween is all about discretionary spending, as Prabhakar says. In this environment Americans simply don't feel secure enough to spend.
Every day we wait it gets worse for the merchants. Halloween is dead and buried and Christmas isn't looking so red hot. If the government doesn't get it's act together soon our economic future could be riding on President's Day next February. Should that be the case maybe we'll find a use for some of those unsold fright costumes after all.
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