Sunday, January 25, 2009

"Going out of business" doesn't mean the lowest prices

When I heard that Circuit City was filing for bankruptcy and shutting down all of its nationwide stores, it was a bittersweet day.

On one hand, I've grown up with Circuit City -- it's where my parents bought our first VHS player and subsequently our first DVD player; where I bought my first stereo system for my car when I was 18; where I splurged on a record player for Love's birthday present; and where I bought many a discount CD or DVD (Aretha Franklin's Greatest Hits? Yup, that was a CC purchase). On the other hand, store closures equal super sales, right? Visions of deeply discounted surround sound speakers and Golden Girls DVDs began to pervade my dreams following the announcement ... until I found out about the dirty little secret behind "going out of business" sales.

Someone mentioned to me recently that most stores going out of business don't, in fact, handle their own store closings and merchandise selling -- they hire liquidation firms to take care of that dirty work. I started doing research online. Just like Mervyn's, Whitehall Jewelers and Linens 'N Things before it, it turns out Circuit City has hired a firm -- well, four, in fact -- to peddle the last of its dwindling inventory.

How it works is that Circuit City (or whatever company is going out of business) sells its inventory to a liquidation firm, who sets the final discounted prices. The liquidation firm makes its money by paying back the store's creditors first and then reaping the rewards of any gains made from the sold merchandise.

And we all know how the discounts go that are notorious with going-out-of-business sales, i.e., the first couple weeks it's 10% - 30% off, then 20% - 40% off, etc., until the remaining days of the store's existence hold the best deals. Waiting till the very end does have its risks, like there may not be much to peruse, but it's a risk that works well for many.

Take my experience at Linens 'N Things. When Linens 'N Things was in the process of closing its stores, I remember meandering through the aisles of giant salad bowls and garlic presses, trying in vain to remember what I needed to buy for my apartment. After all, the store was closing, there were red and yellow sale signs everywhere, why not pick up what I needed? That was in the first two weeks of store closures, and I remember thinking that even with the 10% to 30% discount, I'd never pay the inflated prices. Nope, not even for that Pilgrims 'N Pinecones Thanksgiving centerpiece.

I returned to the store many weeks later, when it was in its final stages of shutting down. The shelves were barren at this point, partly because most of the merchandise was opened and either broken or strewn about on the floor. But the prices were better, and that's when the magic (or what some may call the curse) began. I started eyeing everything with the wanton hope that maybe, possibly I needed it or could use it. Giant framed black and white Elvis poster? I've always been a fan of The King. Pink soup ladle? Sure, why not? White cloth chef's hat that I'd never realized I really really wanted until that point? All of a sudden, this last stab at Linens 'N Things was beginning to make sense -- until Love caught up with me voraciously wading through safari-themed bathmats and I realized that I had let the sales dictate my purchases, and not my needs.

And the sales aren't always the best -- even in the final throes of a store's end. Liquidation firms can set their discounts based on manufacturers' prices (aka "the suggested retail price", which is always a rip-off) rather than the price at the store when it closed. What's worse is that the items you purchase in a going-out-of-business sale are non-returnable, so you may end up having to eat the cost of that new sound system you just bought if it has some sort of mechanical glitch.

Before you head into the local store closing of the week (or so it seems, in this economic climate), do your homework. Before you go, check out other stores online and see what they've marked the prices of items you know you want, such as tvs, stereos or digital cameras, among other things. If you find a great deal in a liquidation sale, make sure the manufacturer's warranty will still be honored, and double-check that all the accessories and instruction book are included.

Oh, and my Linens 'N Things adventure? I ended up putting (almost) all the merchandise back on the nearest empty shelf. No framed Elvis poster or pink soup ladle. But I did buy the chef's hat. Sometimes you never knew you wanted something until it was sitting infront of you, marked 80% off.

1 comment:

Broke Bettie said...

I heard that Circuit City inflated their prices for the Going Out Of Business Sale, but even if they hadn't, I don't think i'd trust buying a TV or computer from a company that was liquidating stock - it just seems too risky with big ticket items like electronics.

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