Beware of Liquidation Sales
Welcome back!
With the bad economy, major retailers are dropping like flies. Circuit City is the latest company to close it’s doors and liquidation sales are becoming a common sight in many communities. Usually, people think that this means that you can get a great deal.
You usually can’t. Here’s why.
When a store liquidates, it hires an outside company to close the store. The outside company pays the bankrupting company for the right to do this (this money goes to the creditors). In return, they close the store and sell off the remaining stock until it’s all gone. Sound good so far, right?
Well, it’s in the best interest of the liquidator to extract as much value as possible from the remaining stock. So how do they do this?
They raise all prices back up to Manufacturer’s Suggested Retail Price and THEN starting discounting for the liquidation. This means that some items can cost as much as 50% more than they did before the store was liquidating.
Generally, retail stores always have their goods on sale and occasionally cut prices a bit more to move stock. Also, very few retailers actually charge the Manufacturer’s Suggested Retail Price for anything – the price is always too high.
So, while you may think your getting a deal when you go to a store in liquidation, especially when you see signs that say 20% to 50% off. Prices are actually around where they were initially.
Most people don’t know that they’re not getting a deal and think they are. So, they swamp to liquidation sales to ’save money.’ Well, you’re not saving money. As a result of this kind of consumer thinking, all the good items get picked clean from the store and when the store finally actually lowers prices to ‘deal’ levels, all the good stuff is gone and you’re left with saving 75% on a roll of toilet paper.
An Office Depot opened up in my town about six months ago. Despite the fact that it had not even been open a year, Office Depot decided that they should close it down. So, there’s been a liquidation sale going on for the last month. Have there been any deals?
Not really. I saved a few bucks on some pens and blank DVD’s. I’ve been back several times as they’ve lowered prices. I’ve noticed they haven’t been lowering the prices on expensive things like computer monitors, hard drives and printers. They’ve been lowering the prices of the office supplies but not the stuff with any actual value. Even some office supplies are still overpriced. The goal is to make you THINK you’re getting a deal.
Sorry but $200 for a 19″ monitor I could get for $100 as Wal-Mart is not a deal.
There is one possibility for a good deal during a store liquidation and that’s buying store fixtures. The liquidation company has no need for the store fixtures (shelves, displays, registers etc…) so when the store is in it’s final days, you can usually pick up this stuff as great prices. So, if you’re opening your own retail store, head down to the local store going out of business.
5 Things to Keep in Mind about Store Liquidations:
1. Don’t expect staff to be friendly or helpful – they’re losing their jobs so at least be nice to them.
2. Use your store gift card before the store closes or else it’s worthless.
3. They won’t take checks. Cash or Credit only.
4. They won’t accept returns.
5. All Sales are Final.
6. What you see is what you get – don’t expect there to be items in the storage room.
