Party City Joins Parade of Brands Looking to Grow Via Amazon
(Bloomberg) -- Party City looks at its high name recognition, which it says is 80 percent among Americans, and sees a missed opportunity because not all of them are customers. Now it’s betting that Amazon will help.
Early next month, the company’s Halloween costumes will be available on the web giant’s marketplace platform, according to James Harrison, chief executive officer of Party City Holdco Inc. This marks the first time it’s sold branded items outside its more than 900 stores and website. If all goes well, Christmas and New Year’s goods will be added.
After years of viewing Amazon.com Inc. as more of a competitor than a selling platform, Party City is the latest brand to succumb to the lure of its massive audience, joining the likes of Nike Inc., Best Buy Co. and Denny’s Corp. Some surveys show that about half of all online shopping searches in the U.S. begin on Amazon’s website. About 60 million U.S. households, nearly half the households in the country, have Prime memberships, according to Cowen and Company.
“It’s the world’s largest mall,” Harrison said in an interview. “It gives us an opportunity to reach out to a large segment of the population.”
Party City shares rose 2.9 percent to $16.20 at 1:29 p.m. in New York. The company also reported quarterly results earlier Thursday.
Party City isn’t just a retailer -- a 2005 merger with wholesaler Amscan turned it into a manufacturer, too. It now produces about 80 percent of the merchandise offered through its retail operations, up from about a quarter before the deal. Additionally, its wholesale brands, like Costumes USA, are sold to other stores as private-label goods. This includes some wholesale merchandise already being offered by third parties on Amazon’s marketplace.
Like most of the retail industry, Party City is looking for new avenues of sales growth in a world with increased online competition. The company boosted sales just 3.4 percent to $2.37 billion over the two years through 2017. In the wake of the demise of Toys “R” Us, Party City announced plans in June to open toy shops in its temporary Halloween stores.
That’s why Party City wants to complement those Halloween efforts with an expanded presence online. It’s the company’s biggest selling season, with costumes representing about 5 percent of its total annual revenue. But it will come at a price because Amazon collects a commission on every purchase.
Harrison says that cost is worth it because he sees Party City as well positioned to take advantage of increased spending on parties, events and other experiences, particularly among millennials. The influx of social media has created robust demand for shareable moments to publish on Facebook and Snapchat, and celebrating is a big part of that. That’s why the CEO wants to get the brand in front of more 20- and 30-somethings -- the core Amazon customer.
“We’re looking to broaden our reach to a constituency that really isn’t our core consumer at this time,” Harrison said of millennials. “Our brand awareness really resides with mom and grandma.”
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