Interview conducted by Arnav Kacker, MBA Class of 2017
Ricky’s NYC is a chain of retail stores across New York that specialize in cosmetic and costume supplies. Arnav Kacker (AK), MBA Class of 2017, spoke with the President & CEO of Ricky’s NYC, Richard Parrott (RP).
AK: Could you tell me a little bit about Ricky’s and how the business is set up?
RP: Sure. Ricky’s has been around for 25 years. It’s a traditional New York retailer – which means we capitalize on seasons. When it’s cold outside, we sell scarves and gloves, and when it’s warm outside, we sell sun-tan lotion and towels- and at Halloween, we sell a lot of costumes. The core business is actually professional beauty supplies and hair care, which makes up the majority of the revenue for the 28 store chain. We also have a wholesale component where we manufacture our own goods and sell to other retailers. So, one New Yorker might know Ricky’s as a Halloween store while another might know us as a hair care product store. We have always had this split identity but at our core we are a brick-and-mortar New York seasonal retailer.
AK: Do you have a varying body of suppliers that you switch up depending on the time of the year or is it a fixed list of suppliers that manufacture different products seasonally?
RP: Everything is opportunistic in retail nowadays. You have to diversify and do business with a lot of people just to keep the breadth of business interesting. Specifically, for Halloween, we develop a lot of our own goods. We partner with people sometimes and, on occasion, we even purchase from other retailers at wholesale prices and call up people who might have access to inventory. I guess the best way to describe it would be an opportunistic buying business.
AK: So, you manufacture your own products, in addition to retailing?
RP: We do manufacture too. We have a large professional beauty supplies business. We make things like combs, clips, brushes etc. that salons carry. This year we’ve done very well with our flower crowns which we can barely keep on the shelves. They sell for Halloween and also double for Day Of The Dead, and are a festival item that people want for concerts in the summer.
AK: Could you talk a bit more about the business of Halloween? Who are the manufacturers and how far in advance does the planning and stockpiling begin?
RP: Globally, the Halloween industry is growing by leaps and bounds. It’s becoming a much more global holiday than it used to be. In New York, there has been so much rapid development through manufacturing at costs that are historically low. The development of internet and e-commerce has changed the industry completely by allowing for, to use your word, ‘stockpiling’ of inventory at an unprecedented level. Everything is available all the time, and it’s at your fingertips. There’s no need for the old adage of ‘You got to buy it now because you can’t get it anywhere else’. I hate to plug my competition but now I can go into Duane Reade and they have great stuff. Years ago, they didn’t have stuff like that. They didn’t have good masks, for example. Now they have good quality masks and they are cheap! Amazon has a ton of stuff and you can have to shipped to you for free, and if you don’t like it, send it back. The quality of manufacturing has gone up so dramatically across the board that the days of the small to mid-sized company having the ability to dominate the business – those days are over. So, for us, Halloween is a nice little money-maker but it’s not what it used to be. It used to be this incredible deluge of money coming in back when we were the only people doing it.
AK: Since your shelves are a lot more valuable than the virtual ones of an e-commerce entity,you probably have to make those tradeoffs when deciding what to stock.
RP: That’s a good point you are bringing up. When we transition our stores to Halloween, there’s always a little lag in sales. Essentially what I am doing is covering up my shampoo and conditioner and putting costumes on top of it. We have come up with a system where we rearrange the entire store to leave the bestsellers out. We wait until the last minute to cover up what we need to. Otherwise, what happens is that customers come in and they can’t find what they are looking for and they walk out. Some people might ask someone but some people don’t. They just think to themselves ‘Oh, I guess they don’t have it’ and they leave. So, we tried to really wait this year because Halloween has just become so hyper-seasonal. It’s probably become the shortest holiday. It used to be the entire month of October. Then it was three weeks, two weeks, one week, and now it’s just a couple of days. You can walk around Manhattan right now – you do not see a lot of Halloween out there and it really doesn’t feel spooky or thematic. There used to be a lot more orange, scary stuff, and that led to it being a whole seasonal holiday. Due to the rapid availability, the higher quality and increased affordability of products out there, there’s no need for everybody to shop for Halloween for the whole month to find deals on what they want and need. Now, it’s reduced to just one night of the year. Personally, Ricky’s has seen a lag in sales over the past two weeks because I feel we started too early.
AK: You mentioned the growth of Halloween and the associated business. Is Halloween high-growth business within New York too?
RP: Go back to ten years ago. If you wanted a costume, you had to go to Ricky’s or Halloween Adventures or Abracadabra. There were a few stores but essentially it was mostly Ricky’s. About four years ago, I saw Duane Reade introduce cool ninja costumes for kids. They never had cool costumes. Then, all of a sudden, they began stocking costumes. Soon, you could go up and down the block and everyone had Halloween supplies, owing to the tremendous availability and cost-effectiveness. There’s just more of it everywhere. People are buying it.That doesn’t necessarily mean that I am making more money off it. In fact, I am making less money. It’s too competitive.
AK: So, the margins have been driven down?
RP: Not necessarily the margins, but the underlying pressure on the consumer has evaporated. It used to be that if you wanted to be a pirate for Halloween, you would go into a store and, if there was a pirate costume, it did not matter whether it was old and expensive. You had to buy it. Now, the supply has dissipated that pressure. If you want to be a pirate today, you can ask yourself ‘What kind of pirate do I want to be?’. You can go look on Amazon or you can come in to Ricky’s or look at any other place. Consumers now have the luxury of time and as a result, demand on each individual retailer has gone down, and it’s more spread out. The margins on the products might not have gone down by that much. Halloween is still a very healthy margin business but the number of transactions has dramatically fallen for each retailer.
AK: If you look at the increased competition from e-commerce, who have lower costs, what keeps Halloween an attractive business for you to remain in, as a brick-and-mortar retailer? Why would you bother?
RP: Well, it’s not that you can’t make money. You just can’t make as much as you used to. There’s less of a piece of pie for everyone but there’s still pie! Further, there’s more for people who are innovative and do things that other people don’t do. Ricky’s has services and proprietary products that we develop. Since we, as a brand, are known as “The Halloween Destination.” You can’t buy that kind of brand equity. It’s not going to be a loss maker for the business. Companies spend a lot of money trying to brand or rebrand themselves. Ricky’s has that and you can’t take it away.
AK: How do you manage your inventory? When you you project your demand and sales, there’s room for error. When it’s off, do you carry your products forward? How do you make your decisions to incur the costs associated with that?
RP: As with fashion, this industry is cyclical too. Costumes are cool then they’re gone, and then they’re cool again. Sure, there is inventory that just dies and will never sell again. For that, we do stuff with colleges, hospitals, and charities where we take some of that inventory and just donate it to people who might not have had the opportunity to obtain one. It means something to them so it has value. For the rest, there is a carry cost from warehousing, but we sell it all year round. There are a lot of other holidays like Mardi Gras, Santa Con, Cinco De Mayo, theme parties that share the demand for these products. Especially in New York, where we have this equity and advantage that gets people to flock to us when they need something. That helps.
AK: Thanks for taking the time to speak with me, Richard.
RP: No problem.