When a retailer goes out of business, that means big savings for consumers—right?
Well, not always. As well-known retailers like Sears, Macy’s, and J.C. Penney announce store closures, customers expect steep discounts on popular items.
But depending on how a store gets rid of its leftover merchandise, customers might actually end up paying more than what the same items cost at a competing retailer. Here’s how to shop a going out of business sale without getting fleeced.
Know who you’re buying from
If a retailer is only closing a few locations, don’t expect to find the best merchandise sitting around in a store that’s soon to be shuttered. Chances are it will have been moved to a location that’s staying open, where it might have a better chance of selling.
Things are different if the entire chain is folding, however, and shoppers should be aware of the difference.
“Liquidation sales are very different from regular, ordinary sales going on in the store,” said Dr. Tony Gao, an associate professor of marketing at the University of Massachusetts Lowell’s Manning School of Business.
That’s because most major retailers use professional liquidation companies to move merchandise. These liquidators—like Great American and Tiger Direct, who handled HH Gregg’s liquidation—often buy remaining merchandise outright. So even if the retailer’s name is still on the front of the store, you’re buying that new camera or laptop from a liquidator.
As a result, the store’s ordinary return policy may not apply, or coupons may not be valid. Make sure to read the fine print before you buy.
Don’t get psyched out
Even those red-and-white signs that proclaim, “EVERYTHING MUST GO!” are there for a reason. Liquidators have done thousands of going out of business sales, and they know what works.
“They understand the consumer’s buying psychology, and they know when to start the sales, how long they’ll last, and they’ll also move around inventory from store to store,” Gao said. “They operate on the assumption that consumers are attracted by liquidation sales.”
Indeed, it’s not uncommon for liquidators to warehouse merchandise from closed retailers, and move it to wherever they think it might sell. Anything left behind goes back in the warehouse until it’s time to liquidate another retailer—which is why you might see discount furniture at an electronics store, or outdated fashions at a clothing store.
“Liquidation companies do that—they have patience,” said Gao. “Many of them have more patience than the retailers being closed themselves.”
To avoid getting sucked in, ask yourself if you actually need what’s going on sale. If you do, check prices from other retailers on your phone to make sure you’re getting a good deal.
Shop small and save
Although major retailers tend to rely on liquidators to empty stock, shoppers can still sometimes find deals when smaller stores or specialty retailers go out of business.
“The larger stores play more games than the little stores,” said Bob Nelson of Power Retail, a Phoenix, AZ-based liquidation consultant.
Many of the smaller customers Nelson works with are shutting down due to an illness or retirement. They’ve often been fixtures in a community, and want to maximize the value of their inventory without upsetting loyal customers.
“The smart ones want to get out of there clean. It’s only the desperate ones that would sell it to a liquidator,” he said. “Working with the smaller retailers, we always tell them they have to keep their integrity.”
According to Nelson, some of the best deals can come from specialty stores that carry unique merchandise—like high-end clothing. In that case, he said, “you want to get there early, not late, because late everything’s picked over.”