With all the recent news about struggling and/or failing retailers, I thought that now might be a good time to talk a bit about liquidation sales. Sure, the signs in the window claim that “Nothing is Held Back” and “Everything Must Go, ” but are you really be offered the deal of the century? When it comes to liquidation sales, things are not always as they appear.
How it Works
For starters, liquidation sales are typically run by a third party liquidator who buys up the stock in failing stores and then turns around and sells it themselves. Getting rid of the merchandise is actually a secondary goal, at least at first.
The primary goal is of liquidators is, not surprisingly, to wring every last cent that they can out of their investment. This means that products aren’t necessarily priced to sell, at least not at first.
Pricing Games and Other Gotchas
In order to offer an apparent discount, liquidators often raise prices to the manufacturer’s suggested retail price (MSRP) before applying any discounts. Thus, even with a 10% initial discount you might end up paying more for than you would have before the sale started.
Because these sales typically run for several months, the liquidator has plenty of time to prey on the consumer ignorance and make a killing by offering small discounts off inflated prices. By the time they get down to serious discounts, most everything that you actually wanted in the first place will be gone. The irony here is that many consumers will happily overpay for items at a store that couldn’t stay in business by selling the same merchandise at better prices.
Another problem is that, because the store is going out of business, all sales are typically final. This means that, in the event that you have trouble with your purchase, you’ll be stuck dealing with the manufacturer rather than being able to take it back to the retailer. Is it worth saving a few dollars to deal with these sorts of headaches? In some cases, yes. But in other cases, it’s not.
Some Tips for Shopping Liquidation Sales
For those of you that are planning on braving the liquidation sale crowds, here’s a list of six tips shopping at liquidation sales:
- Don’t set foot in the store unless you actually need something. It’s easy to get swept up in the excitement of sale and make purchases that you’ll later regret. The problem here is that, as noted above, liquidation sales are typically final, such that you won’t have an opportunity to re-think your decision and return the item in question.
- Do your homework. While it’s possible to get a great deal, it’s also possible to get totally hosed. Since you already know what you want to buy (see tip #1) there’s no excuse for not knowing exactly how much you could get it for elsewhere.
- Be leery of extended warranties. I’ve never been a fan of extended warranties. In the case of liquidation sales, you should be even more cautious, as the warranty may or may not outlive the merchant. In most cases, you should probably just rely on the manufacturer’s warranty, which will be unaffected by the merchant’s closing.
- Don’t forget to spend your gift cards. Since the company is going under, the clock is ticking. If you don’t spend it before the sale ends, your gift card will be little more than a souvenir from a bygone era.
- Pay with a credit card.This is especially true for items that will be delivered. If your stuff never shows up, you can always go through your card issuer to get your money back.
- Beware the last minute sale items. As the clock winds down, many liquidators will bring in outside merchandise and sell it alongside the stuff they’re liquidating. In some cases, this is simply stuff they didn’t sell when liquidating a different retailer, but in other cases they’ll actually be pushing reconditioned goods.