Don’t Bank on Bargains at 'Going Out of Business Sales'

Shop carefully for bargains

by Andrea Downing Peck

Dig deep enough and I am certain “bargain hunter” is encoded somewhere in my DNA. So when big name retailers such as Circuit City, Linens ‘n Things and Mervyns drape storefronts with “Going Out Of Business Sale” banners, I am drawn in like a moth to a flame.

Like a moth, I am also apt to get burned.

While going-out-of-business sales tout massive discounts, consumer advocate Clark Howard said shoppers attracted to liquidation sales in the hope of finding a “steal” are likely to be disappointed. 

“To call going-out-of-business sales frauds would be too strong, but to call them a con would not be, because of the way it works behind the curtain,” said Howard, who hosts a nationally syndicated radio show. “The real deals don’t start until they are down to scraps. You’ve got to get there that last week when things are 90 percent off.”

Understanding what liquidation means
When a retailer turns over its stores to a liquidator, the liquidation company takes control of the merchandise, fixtures, leases and payroll. The liquidator may either receive a percentage of the total amount sold during the going-out-of-business sale or they may have purchased for pennies on the dollar the retailer‘s inventory and gained the right to continue operating under the store’s name for a short period of time.  Using pricing history from the retailer, the liquidator determines the sticker price of sale merchandise as well as the percentage off.

To boost profits, liquidators often retag merchandise – or mark it up – in order to mark it down. This is why a flat screen television at Circuit City may have been priced lower during the retailer’s Christmas sales than during the early stages of its going-out-of-business sale.  New merchandise, leftovers from previous liquidations, also may be brought in to augment the retailer’s remaining inventory.

“Liquidators bring in a lot of what I call phony merchandise,” Howard said. “Most of what is sold at a going-out-of-business sale is stuff that was never sold in that store. They will do the classic mark up to mark down. They’ll bring in a whole bunch of goods with fake pre-tickets on them and then they will mark them down 30 percent or 50 percent. People think they are getting a real bargain and they’re not.”

Know where to find the best price
For those reasons, liquidation sale shoppers need to know whether a better price can be found online or at a competing retailer.  When buying electronics and appliances, consumers with access to iPhone’s “The Find: Where to Shop” application have an easy way to price compare as they shop. The rest of us will need to do our homework before being enticed by street-corner touts holding placards shouting “60 percent off.”

“Finding bargains when shopping at a going-out-of-business sale is a matter of timing and making wise choices,” said Harvie Schreiber, whose husband is on active duty in Fresno with the California Air National Guard.

The couple, when looking to buy a computer monitor, visited Circuit City during its going-out-of-business sale but came away disappointed by the lousy customer service, messy store, poor selection and lack of bargains.  Schreiber said they came home, compared prices online and purchased a monitor from a store where, if necessary, they could return their purchase.

“We resisted the urge to shop recreationally for items we did not need, avoiding the long lines as well as the impact on our budget,” Schreiber said.

Understanding “as is”
When buying at a liquidation sale, it is important to know that all sales are final and merchandise typically is sold “as is.” While a manufacturer may honor the warranty on an appliance or electronics item that is defective, the liquidator or original retailer will not.  If you buy a camera or television at a liquidation sale and find it is damaged, your only recourse is likely to be an expensive repair.

Furniture is the one going-out-of-business sale category that Howard believes can offer consumers true savings. Though third parties may run furniture store liquidations, Howard said, name brand furniture manufacturers typically stand behind their products and a customer’s inability to return merchandise usually is less of an issue.  

“In the last week of a furniture store going out of business sale,” Howard said, “you might just get incredible deals.”