Halloween 2014: Beware, the sugar-high won't last long

It's the time of year for ghosts, goblins, witches and Disney princesses. It's the storm before the storm. A chance for retailers to test out promotions, gauge traffic, move inventory—all so that on November 1, they can make way for the "real" holiday.

But before pumpkins turn into Christmas trees, retailers have Halloween sales to look forward to and, according to early predictions, there is nothing to be too frightened of. Total spending is estimated to reach $7.4 billion this Halloween season.

Doug Chavez

"Halloween should be a sweet surprise for retailers this year," said Doug Chavez, global head of marketing research and content for Kenshoo. "It's always a good omen when Halloween falls on a weekend and this year it's on Friday, so shoppers will have more time to buy costumes, do party planning and make candy purchases along with weekend party prep."

And what will retailers need to be stocking for the festivities? Pumpkins are always in high demand. Last year Walmart sold 9.3 million during the harvest season.

Consumers will spend around $2.2 billion on candy this year, and Walmart customers buy more baked goods in the fall than any other time of year—specifically a lot of apple pie. In fact, last Halloween 20 percent of Walmart's annual bakery sales took place in the three days leading up to October 31.

But nothing will be in as high demand as costumes. According to the National Retail Federation's Halloween Consumer Spending survey, 67.4 percent of respondents will buy a costume, this year—the highest reported number in the survey's 11-year history. The expected outcome is $2.8 billion on costume sales for retailers.

Walmart reported seeing more online "Halloween costume" searches earlier on the calendar this year versus last year by about two weeks. To date, "Halloween costume" is the number one Halloween-related search term on the retailer's website.

Walmart and Meijer are both reporting an increased demand for pet costumes this year. At Walmart, pet costumes are one of the fastest-growing costume categories. U.S. shoppers will spend around $350 million on costumes for their dogs.

Matthew Shay

"There's no question that the variety of adult, child and even pet costumes now available has driven the demand and popularity of Halloween among consumers of all ages," said Matthew Shay, NRF president and CEO. "And, with the holiday falling on a Friday this year, we fully expect there will be a record number of consumers taking to the streets, visiting haunted houses and throwing unforgettable celebrations."

Despite all the good intentions to purchase costumes, and the long-weekend incentive to party, online sales related to Halloween continue to show a downward trend this year, according to a recent study put out by SimilarWeb. The study examined four of the largest Halloween and costume sites for the month of September and found that all four had been losing traffic over the last three years.

SimilarWeb's trends for September are a good indicator for how these websites will perform moving into October.

In addition, the state of the economy is still worrying Halloween-bound consumers. Therefore, there is a good chance that retailers will lose a share of the costume-buying market to those people who plan to make costumes at home. In fact, two in five respondents said they plan to make a costume at home rather than buy a new one.

One possible pitfall retailers need to be aware of this year and every Halloween is inventory, especially when, come November, the shelves need to be cleared for the next holiday.

Mickey North Rizza

"Inventory pitfalls occur all the time, it isn't just at Halloween," said Mickey North Rizza, VP of strategic services at BravoSolution. "For instance, on the consumer side, fashion predictions for the next seasons can be way off the mark and too much inventory is ordered–hence you find the markdown strategies in full swing so retailers can save some of their sunk cost."

While Halloween can be a precursor and an indication of what will happen between Black Friday and Christmas, it's not a full direction.

The first step in the transition from Halloween to the Christmas holiday will be examining what was purchased and what was not. "For children's items, Halloween sales will be an indicator of sales for the rest of the holiday season, and the same for decorations and adult items," said North Rizza. There will also be an examination of online versus physical store sales.

She added: "Regardless, it will only be an indicator–holiday shopping will ramp up after Halloween and these items will be in the stores already or just coming to the shelves. Therefore, the buying strategies and analysis received may come in too late to change the orders of incoming products that need to be sold."