Halloween Retailer Party City Joins Amazon, Dealing a Blow to Retail

Amazon is teaming up with Party City, spelling another potential blow to the retail industry.

On the surface, Amazon appears to be winning its war against retail, negotiating contracts with failing brick-and-mortar businesses such as Sears. This recent deal could very well be indicative of the future for retail businesses, though Party City appears to be optimistic about its chances at success.

Party City to Sell Halloween Costumes on Amazon
With over 900 locations, Party City is a major national chain. Party City was initially founded in 1986 and reports a revenue of $2.27 billion annually. Though it is a general “party super store,” it does much of its business during the run up to Halloween. Party City regularly puts up “pop up” stores for Halloween, and has recently made the decision to put “Toy City” pop up stores up during Christmas, following the closure of Toys “R” Us.

As of this year, Party City will be moving some of its inventory to the online world, selling its Halloween costumes through Amazon. If successful, Party City has stated that it will also be selling things like Christmas decorations and New Year’s decorations: the core of its inventory products.

It makes sense. Party City can capitalize on Amazon’s eCommerce portal, reaching out to customers that want to ease-of-use and convenience of being able to order things from their own homes. However, the ramifications of this could also be somewhat insidious.

Amazon Continues to Embed Itself in the Retail Sector
Amazon has been creating a number of unique partnerships with brick-and-mortar stores, all with the advantages of giving it the strength of a brick-and-mortar venue without any over the overhead. Some examples include:

Sears: Sears will now service Amazon’s automobile products so customers can purchase things like tires on Amazon and have them installed and maintained through Sears.

Kohl’s: Kohl’s now sells Amazon electronics through some Kohl’s stores, and Kohl’s will also accept Amazon’s returns — essentially operating as a service desk for the store.

In addition to this, major stores such as Nike and Best Buy have begun to sell their products through Amazon in lieu of their own corporate websites. This has cemented the idea that Amazon is “the place to go” for many brands.

The Core Dangers for Party City
At a glance, a partnership between Amazon and Party City looks mutually beneficial. There’s a catch, though: Amazon will strengthen its reach within the “party” sector. Few people pay attention to the vendors they’re purchasing from on Amazon; most of them think that they are just buying through Amazon. Consumers may begin to connect Amazon with low cost Halloween costumes.

Amazon already has an inventory of Halloween costumes from other vendors. It’s possible that Amazon could ultimately dilute Party City’s brand, or even end up replacing Party City entirely if their partnership is dissolved or their contracts end. In some ways, Party City will be competing directly with itself: there are a number of customers who would prefer to go online than go to a store, if the inventory is the same.

For the retail sector, it spells out an even more dangerous story: a story in which retail is quickly becoming obsolete. Presently, Amazon is easing itself through this transitional time by using the retail, brick-and-mortar services of other stores. Eventually, though, retail stores may become few and far between.

In the short-term, Party City’s stock went up 3% following the news, and it is likely to be a positive move for the company — at least, temporarily. But it’s Amazon that investors should really have their eyes on now, as Amazon has been aggressively expanding in multiple sectors, and has made it clear that it intends to disrupt the way that retail works and functions. Amazon has already had an impact on large retail chain stores such as Sears and Best Buy, and this trend is likely to continue.

Regards,

Ethan Warrick
Editor
Wealth Authority


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