EXTRA: Fireworks Stands

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A couple weeks ago, we made an episode on fireworks shows.

We broke down how pyrotechnics companies orchestrate those big 4th of July shows for cities and towns.

But there's another side to the fireworks business that our senior producer, Sarah Lilly, was curious about.

You know, every year, in the couple weeks before the 4th of July, all these fireworks stands and tents pop up all over the country on the sides of roads and in parking lots.

And they're there for like a week and then disappear.

you in the market for some fireworks

god no i actually hate fireworks really

well i have dogs so you know how that goes okay anyway i've just always wondered who runs these stands and how they make money

so to answer this question i decided to call up a guy who knows pretty much everything about the business Alex Zolden, and I'm the vice president here at Phantom.

Phantom is one of the largest consumer fireworks retailers in America.

We have about 1,500 temporary pop-up tents and stands that go up from Hawaii, California to New York and down to Florida.

We're in almost every state and then also we do about 4,000 big box stores.

So Menards, Home Depot, Giant Eagle.

For the Freakonomics Radio Network, this is the economics of everyday things.

I'm Zachary Crockett.

Today, we've got a special bonus episode for you on Fireworks Stands.

Zach, a few weeks ago, you told us about the fireworks shows that cities and towns put on.

And I want to know, how does that relate to the kinds of fireworks that regular people do in their own backyards?

So you've kind of got two parts to the fireworks business.

On one side, you have the display fireworks.

That's about a $600 million a year industry.

The other part is consumer fireworks, and that's the stuff stuff that's sold to the general public.

And the consumer stuff is actually a way bigger part of the fireworks industry than the display stuff.

We're talking about $2.2 billion in annual sales.

Here's Alex Solden.

Well, you know, the display side is awesome, and there's some great people on that side with long family traditions of doing big shows throughout our country.

But there's a lot more backyards in our country, and there's a lot of people that have parties in their backyards for the 4th of July and barbecues.

We focus on supplying those people and building those family traditions.

There are hundreds of retailers who make a business out of this every year.

Many are just small mom-and-pop operations.

But Phantom Fireworks operates nationally.

The company was started by Alex's dad, Bruce, back in 1972.

When my dad was younger, his father, my grandfather, was a salesman, and he would travel travel on the road and sell to grocery stores.

And he, one 4th of July, brought home some fireworks.

My dad turned around and sold it to all the kids in the neighborhood and said, I need to go get some more fireworks.

It started off as a fun thing and he was doing it to pay his way through college.

Back then, there was a bootleg business.

It was not something that was legitimized.

And there was people who would wholesale to somebody and they made their way up to different parts of the country.

So fireworks were kind of a shady business.

You never really knew if you were going to get a dud or if the firework would blow up in your face.

But in the 1970s, that began to change.

Congress set up this agency called the U.S.

Consumer Product Safety Commission, and they started regulating consumer fireworks and making them a little safer.

They made the bases stronger and the fuses longer.

I remember watching fireworks and some would say, oh, there's a dud.

Well, we don't really see duds anymore.

Things Things are made so much more efficient than ever before, and it's because of all the standards that have been put in place.

In the last few decades, the consumer fireworks industry has,

let's just say, it's skyrocketed.

Just to put things into perspective, in 1976, around 29 million pounds of fireworks were ignited in America.

Today, we're talking almost 300 million pounds.

I'm always confused about whether they're legal, though.

Well, it's a great question, and there are sort of two sides to the answer.

When it comes to using them, it really depends what state you're in.

If you live in Missouri, you can launch all kinds of consumer fireworks year-round.

In Massachusetts, it's illegal to possess any fireworks.

And in between those extremes, there are states where you can only light certain types, like sparklers or fountains.

Different states also have different laws about selling consumer fireworks.

what kind a retailer can offer and where they can sell them.

But in a lot of places, a company like Phantom can pay for a license from a state fire marshal, lease a plot of land, and open a stand for the season.

But are the fireworks in these stands the same ones you see at professional shows?

Not exactly.

Here's Alex Solden.

The displays that you see in New York City or Washington, D.C., or at concerts or sporting events, it's a different type of product.

The type of powder and how it's detonated is different.

When it comes to the consumer side, we're limited on how big.

It's It's just under three inches and no single item will have more than 500 grams of composition.

Huh.

Okay, so less powerful than the ones you see in professional shows.

That's right.

But Sultan told me that some of them still pack a pretty big punch.

You just have to live in the right states to be able to get your hands on them.

There are different classifications of products.

California, for example, is a state that is what they call safe and sane.

All products are ground-based.

They don't go up in the air.

They're fountains, smoke bombs, things like that.

A fountain doesn't have anything that bursts.

There's no real loud true bang.

It emits sparks and it won't go higher than 10 feet or wider than 10 feet.

So with all the people in California, the dry climate, everything is safe and sane.

Back east, Michigan, they're full line.

And full line is the things that go up in the air, the firecrackers, Roman candles, They're a little bit more exciting, bigger bangs.

My favorite item in our store and any of them is an aerial item called the Fandimonium.

It's a 205-shot panoramic display, and it starts off one at a time and then goes into a rapid fire that goes back and forth, creating a panoramic effect in the sky.

A lot of colors, noise.

Another item is the racks, where you have nine big shots.

They're kind of like the finale pieces that have the biggest burst over top.

And they're probably

the closest thing to display fireworks that you're going to find in a consumer store.

If you walk into a Phantom Fireworks stand in one of the more permissive states, you'll see all kinds of crazy stuff for sale.

And they get really creative with the names.

Take a look at this list of products I found online.

There's a 30-shot 200-gram repeater called

Wicked Pissa.

Wicked Pissa.

Wicked Pissa.

Yeah, you've got Saloon Showdown, King Midas Touch.

I think my favorite one here is this assortment package called Grounds for Divorce.

And really, this is an important part of their marketing strategy.

It has to be very loud and in your face.

And that goes for the packaging, too.

It was actually all designed by Alex's mom.

You know, vibrant, colorful, bright.

When you walk into our store, we want you to feel kind of a carnival-like feel.

And where does Phantom procure all these fireworks?

So almost every firework you'll find in America is imported from China.

Zoltan says that this has to do with things like safety regulations and the cost of labor, but it also has to do with tradition.

It's an art that's been passed down for generations.

The

chemical compounds that go into it are there.

Everything's there.

The clay that goes into the base of these products come right out of the mountains there.

And it's very much a handmade process.

And they produce, I want to say, 90%

or more of all the fireworks in the world.

And from the consumer side, I'd venture to say it's probably 99%.

Everything is made there.

Some of the smaller fireworks stands will buy their products from a middleman wholesaler.

But the big guys like Phantom ship their own fireworks over.

They order around a thousand 40-foot shipping containers a year.

And one shipping container, by the way, has anywhere from 800 to 1,000 cases of fireworks in it.

From the time it leaves China to get here, it could be six weeks.

There's only certain types of vessels that you can get product on, certain ports that you can come in.

And then once they're here, obviously, there's regulations on how you ship them and where you ship them.

So we have a big warehouse here in Ohio.

We have another five or six throughout the country that we ship to, and we come into a few of the different ports throughout the country.

Our orders are already in by

July for next year because there are disruptions.

We always want to be ahead of the game and have things ready to go.

Okay.

That seems like a lot of overhead.

And these stands are only open a few days a year.

So now I'm really curious how these places make money.

Well, Alex Zolden, he's got you covered.

But first, a quick break.

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Phantom Fireworks has sort of a three-pronged approach to selling its fireworks.

The company actually has around 100 brick-and-mortar stores that are allowed to operate year-round in certain states.

They sell their products wholesale to other big box stores.

And then they have 1,500 temporary stands and tents all over the country every summer.

Alex Solden says that across all of those channels, nearly all of the revenue is made around the 4th of July.

I would say 80% of our entire year's sales are one month.

In some states, it's sort of by decree.

They're only allowed to operate a stand for a few days or a week, maybe.

But even in places where they don't have limitations, the demand is really seasonal.

It's just one of those products that most people only think about during the 4th of July.

California is a place where something might be open for four days.

Other parts could be one week.

There's other states that allow you to open whenever you want, but if you try to sell fireworks in November in Michigan, you're not going to get too many takers.

So the demand comes on so strong and then goes away that somewhat forces our hand in that area.

Selling thousands of fireworks in a couple days in the middle of summer is not for the faint of heart.

It's usually very hot.

It's very high intensity.

People line up.

They're there all day long.

It's a brutal run, but it's like a month and a few days.

Honestly, our business is 90 plus percent planning and 10 executing.

And people say, what do you do in the offseason?

Well, we really don't have an offseason because as soon as the fourth's over, we're already looking at next year.

And the business has a surprising amount of overhead.

You've got the cost of goods, import fees, shipping, storage, all the stuff we talked about before.

And then you also have to rent the land.

We're in a number of different places.

It could be a lot on the side of the road.

It could be in a shopping mall parking lot, a grocery store parking lot.

It's a temporary leased portion of land that usually is a one-month period, even though the prime season is one week or two weeks or something like that.

Each stand needs insurance.

That'll set you back, let's say, 300 bucks or so per stand per season.

You have to buy all the shelves and the tarps and the stuff to set up the stand.

You have labor and you have the licenses, which depending on where you're operating, can be very expensive.

So what's the move to make all that money back?

Well, for starters, the markup at your typical fireworks stand is around three times the wholesale price.

A lot of regular customers online say they've seen markups as high as five times or more in some cases.

But these stands will also run constant promotions to get attention.

You'll see things like buy one get two free.

Their strategy often is basically to boost prices and then then put everything on sale.

Because as Zolden says, there's a ceiling on how much people are willing to pay.

It's not something that you need.

You know, it's something that you enjoy as Americans to celebrate our birthday.

And we'll go through extreme lengths to celebrate it, but there's certainly a price sensitivity that comes along with anything like that.

So how much business can these stands do in just a couple days?

Well, Zolden says it really depends.

I've seen stands that could do $100,000 in a two or three day period, and there's some that could do, you know, $10,000 a day.

It's all relative to the area and the stand.

I talked to a few other people who run fireworks stands in states like Texas, Missouri, and Kentucky just to get a range of answers on this.

And the consensus is that most stands pull in between $25,000 and $60,000 during the 4th of July season.

Sales.

Yep, that's just gross sales.

So So what do we think the profits are?

A lot of stand owners say that if they net around 20%,

that's a pretty good outcome.

So let's say you sell $50,000 worth of fireworks in a week.

You'll walk away with about 10,000 bucks in your pocket.

But at Phantom, there's kind of an interesting twist to this.

A lot of their stands are run by non-profits.

There's probably close to a thousand stands that we run in California, and every single one of them is a non-profit.

And it's one of their largest fundraisers throughout the year.

So there's a thousand plus nonprofits that we work with and they range from veteran groups to church groups to cheerleading groups.

We do all the legwork.

We get the licensing.

We set up the stands.

We deliver the product and they run it and they share in the profits with us.

So that cheerleading team, they run the stand for free.

And in return, the team gets to keep, let's say, something like 20% of the profits.

They might buy their uniforms and pay for their tournaments with fireworks.

Oh my God, that is so American.

Well, in Alex Zolden's mind, it's about as American as you can get.

When you are lighting fireworks, you're celebrating your country, your family, who you are, it comes all in one holiday.

And people are creating great memories with their families, days that they'll think of the rest of their life.

So I have to ask Sarah, do you like fireworks a little more now?

Well, Zach, I do love to change my mind, but you're going to have to talk to the dogs.

And I already know what they're going to say.

For the Economics of Everyday Things, I'm Zachary Crockett.

This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston.

We had help from Daniel Moritz Raps.

My finale at at home, I like to put the Phandamonium up front with a big nine-shot rack behind, light them almost simultaneously, and you have a ground-to-top display that's hard to beat.

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