Get Out of Business Liquidation Sales: Not A True Bargain

by Silicon Valley Blogger on 2010-07-2714

Liquidation sales appear to be a place where you may find a lot of great deals. But recently, I came upon some eye-opening facts about the liquidation business. Some of you may already be aware of this but I don’t think everyone necessarily knows about the truth behind some of these warehouse type sales.

For example, I’ve got some friends and family members (you know who you are!) who love to shop. I am the odd person out in the family because I hate to go to stores…. ;) . At any rate, these people love sales and will sniff one out many miles away. They also love outlets and will travel to the ends of the earth to shop at these places.

So when they see a “go out of business” sale? They hop to it! It doesn’t help that many of these folks I know are simply travelers, vacationers or tourists who are here for the sole purpose of shopping (and visiting family). Hence, it’s very easy for them to be drawn to discount events like those set up by liquidators.

But to see what’s truly behind those sales, just check out these peek-a-boo prices! Here’s a Linens ‘N Things price tag from a liquidator:

liquidator price


And here’s the regular price for the same item under the original management, before the liquidators took over.

regular price

So much for a “store closing” sale! Apparently, liquidators that take over stores tend to change up the prices of merchandise and will offer items at much higher prices than what original management used to sell them for. So “get out of business sales” are not always the awesome deals that you think they are.

Get Out of Business Liquidation Sales: Not A True Bargain

This video should explain it all and should be required viewing material for all shoppers.

In summary: be prepared to encounter price tags that hide other price tags at these “get out of business” sales events. When liquidators step in, they jack up the prices for a while and gradually lower them over time. Their goal is to make themselves money, not necessarily to offer you the best deals. So the point here is that no matter where you shop, you need to compare prices. And be aware that when you buy from this type of sale, there are no returns!

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{ 14 comments… read them below or add one }

Tom @ Canadian Finance Blog July 27, 2010 at 7:01 pm

Thanks for the link! Nice tip about liquidation sales, I would have assumed everything would be cheaper too!

Consumermiser July 28, 2010 at 6:53 am

SVB,

Love the article and video. Thanks for exposing this issue about liquidators who jack up prices and then lower them to con you into thinking they are giving you a discount. Additionally, like outlet stores, liquidators also sometimes bring in special cheap items just for the liquidation “sale”, so look out!

Lloyd Burrell @ Office Desk Reviews July 28, 2010 at 8:23 am

This post is very informative. And it’s true that liquidators play within a price range that vary according to their own needs and interests (which is normal, up to a point), which leads to price aberrations like the one above.

Gal @ Equally Happy July 28, 2010 at 9:32 am

This is true of any “special” sale. I’ve often seen stores that have “store closing, EVERYTHING MUST GO!” signs for years without really closing. I’ve also seen coupons for prices that were near the original price. Never pay attention to the SALE! hype, always pay attention to the actual price.

Tim Chen July 28, 2010 at 9:49 am

Ha! I saw this happen in New York a few years ago. When Circuit City was handed off to liquidators, the store in Union Square was packed full of people trying to score deals on LCD TVs and stuff, but the prices were ridiculous! You could’ve gone to Best Buy and bought something that wasn’t on sale for considerably cheaper.

Plus there were all kinds of items in the Circuit City that they don’t normally sell (like bed linens). I’m guessing the liquidators probably brought in stock from other stores under liquidation.

Mike @Saving Money Today July 28, 2010 at 12:08 pm

@Tim, I remember hitting a Circuit City in NJ before they closed the doors. There was a small section upfront that had some good deals, but it was already pretty cleaned out. The rest of the store looked like regular prices. What a waste of time.

BRB July 28, 2010 at 12:46 pm

I’ve noticed this when I shopped at the recent closing of a Macy’s. I had shopped there a few times before and I kind of knew what most things should cost and when I compared it to what they were charging it was way more than original price. So what that that duvet cover is 50% off, it’s marked $300 originally, so it still is $150!

MFO July 28, 2010 at 3:39 pm

Makes sense if you ask me! From the business/marketing standpoint at least. Consumers associate a liquidation sale with cheap prices. Therefore if you announce a liquidation sale, you are sure to have plenty of customers. Then, if you don’t actually LOWER the prices, you will lose some potential customers, but still, you still got many extra customers in your store to begin with, some of which are SURE to buy stuff!

Brilliant!

Kevin@InvestItWisely July 28, 2010 at 5:24 pm

I’ve seen something similar where some stores have “huge discounts” almost every day, offering 40 to 50% off plus an additional “10 – 25%” off for that day only…. but in the end, the prices that you get are more or less the same as regular prices elsewhere! It’s just a trick to make you think you’re getting a good deal, when you’re really just paying a regular price.

Greg McFarlane July 28, 2010 at 7:59 pm

Wow, liquidators are in it for a buck? And all this time I always thought the point of being in business was to lose money.

Did they really need a hidden camera for this? No one’s getting screwed here, are they? If you don’t like the prices offered, don’t buy. If you think the clerk will honor the obscured price, good luck.

Silicon Valley Blogger July 28, 2010 at 8:22 pm

Of course they’re there to make a buck. How much they profit is the question. It would be great if it were more of a win-win for everyone. They make a buck and consumers actually get a good deal. Is this too much to ask?

Donny @ TODHD July 29, 2010 at 8:33 am

It is definitely not a true business because your profit margins are definitely too small.

The Best Money Blog July 29, 2010 at 9:44 am

I always thought this was hilarious. We had a pretty big electronics store go out of business about a year ago. They had great prices when they were open so I thought I’d stop by. I left wondering when they doubled their prices on flash memory.

Brand Police August 7, 2010 at 10:09 pm

That’s a really great catch! It obviously makes sense that they may do this, although I could see it working sometimes and not others.

To me, what it really goes to show is the value of marketing and specifically how you position your product. It’s all about perception – if people are there to buy and get a bargain, but have little idea of what the product is really worth, there can be the perception (fostered on purpose by the liquidator) that there are special deals to be had when there are really not.

What it comes down to also is that humans are much better at comparing than remembering – ie they can compare two prices to see which one is better value and by how much, but remembering what something is worth is a skill less have – hence why “the price is right” is still a challenging show!

Matt

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