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For Specialty Retailers, Love Is in the Air

Americans now spend more than $13 billion on Valentine's Day. That's good news for companies that make teddy bears, chocolates, and other romantic gifts.
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When it comes to matters of the heart, do small businesses have an edge on their larger competitors?

While Christmas, Thanksgiving, and other holidays generally boost sales across most retail categories, Valentine's Day tends to bring out shoppers seeking more specific items -- cards, flowers, chocolates, candles, gourmet dinners and other tokens of affection, categories in which smaller specialty retailers, boutique stores, and online outlets are flourishing, market watchers say.

"When it comes to shopping for their special someone on Valentine's Day, consumers turn to more sentimental gifts," says Tracy Mullins, the president of the National Federation of Retailers, a Washington-based trade group.

That's given a few niche retailers something to look forward to during the February blahs. 

"Valentine's Day is definitely the number one holiday for us," said Nicole L'Huillier, a spokesperson for The Vermont Teddy Bear Company. Of the $66 million in revenue the former Inc. 500 company made last year, some 30 percent came from Valentine's Day sales, L'Huillier said. The company typically ships over 100,000 bears for the holiday.

"We've really carved out a niche," she said.

What Vermont Teddy Bear and other smaller specialty retailers are tapping into is a surge in Valentine's Day spending in recent years. In 2001, consumers spent an average of $82.60 on gifts. Five years later, those gift budgets rose to $100.89, boosting overall spending to more than $13 billion in 2006, according to the National Retail Federation. The only demographic group cutting back on spending is 18 - 24 year olds, the trade association reported.

So what did shoppers buy? About 62 percent of consumers bought at least one card last year, while 47.1 percent bought candy and 42.1 percent paid for a night out on the town, the retail group said. And, unlike most holidays, men tend to spend nearly twice as much as women on gifts, while 45-54 year olds top all other age groups, spending $128.78, on average, in 2006.

Among all consumers, most buy Valentine's Day gifts for spouses or significant others, followed by relatives, friends, classmates, teachers, co-workers, and neighbors.

Besides being a big time for teddy bears, the holiday is also a strong one for the nation's 22,753 florists, who sold more than 189 million roses for Feb. 14 last year, according to the Society of American Florists. For fresh cut flowers, the holiday also beats out both Christmas and Mother's Day, accounting for 35 percent of all purchases from florists -- though it drops to third place when you include flowers bought at big-box stores and supermarkets.

Chocolate sales see a similar surge. Industry-wide, chocolate candy sales jumped 1.8 percent on Valentine's Day last year, driven by 36 million sales of heart-shaped boxes of chocolates, according to the National Confectioner's Association, a trade group based in Vienna, Va. By comparison, total annual chocolate sales grew by 3.2 percent to $15.8 million in 2005, according to the Commerce Department.

Gail Ambrosius, who owns a boutique homemade chocolate shop in Madison, Wis., ran out of inventory about two days before Valentine's Day last year.

"Each year it's almost double the demand from the year before," Ambrosius says, adding she stayed up all night making new batches to fulfill orders. "The last two days are the busiest."

This year, Ambrosius started offering Valentine's Day promotions in late January. "People are thinking ahead and have already made orders," she says.

It's not just brick-and-mortar stores that are cashing in. According to PayPal, Valentine's Day orders online grew by 23 percent in 2006 over the previous year, with candy and jewelry ranking the highest among Internet shoppers.

Earlier this month, Midnight Fairy, an online bath and body products store, started a countdown to Valentine's Day on its homepage, letting customers know they had until the end of the month to place orders that would arrive by Feb. 14.

Last updated: Jan 22, 2007




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