Behind the Scenes: Going Out of Business

WESTFIELD, N.J., Jan. 15, 2009— -- Driving through downtown, it's hard to miss the bright signs: "Store Closing," "Huge Sale." After 86 years, the local sporting goods store is going out of business and all items must go.

It's a scene repeated all across America as we enter the second year of this recession.

For most, it's a depressing sight. But for Nathan W. McKie Sr., it means another job. He's the guy retailers call when they need to liquidate their goods.

McKie travels the country, spending two, three months at a time in some town far away from home helping a store shut its doors.

He offers advice on prices, runs ads to bring in customers and runs a prize system to reward frequent shoppers.

Business has never been better for him.

Retailers had one of their worst holiday shopping seasons on record and analysts expect many foundering stores now to file for bankruptcy. In 2008, 148,000 stores shut down, the largest number since 2001, according to the International Council of Shopping Centers. Another 73,000 locations may shut their doors in the first half of 2009.

"Our business seems to be good, which is, in many cases, unfortunate for retailers," said Gary Wright, president of G.A. Wright Sales, which employees McKie as a consultant.

Wright's company typically runs 400 to 500 promotional and liquidation sales in a year. He said he now sees more demand for store closings.

"Business was up 20 percent in 2008, and I would imagine it will be up at least that much in 2009," Wright said.

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Store owners and managers know how to sell their goods, he said, but a closing is "a very unique activity.

"It's very intense, it's very problematic," he said. "You have one chance to do it right."

The letter -- provided by McKie but signed by the owners -- then goes on to say that only those who received the letter are invited.

"However, feel free to bring a friend or relative who did not receive an invitation as your guest," it said. "You will have the first opportunity to shop and save on our entire inventory before many items are sold out."

And come they did. On the sale's second day last week, dozens of customers passed through the doors, the majority holding on to the letter.

McKie said he usually gets a 6 to 10 percent return from the initial mailing.

"My husband worked here when he was in high school," said Robin Kabokow, an area resident who was shopping at The Leader Store last week. "It's very sad to me. It's like an institution. It's the goodbye of mom and pops."

Kabokow's eyes than scanned across Westfield's downtown, which features Ann Taylor, Esprit, Banana Republic and Anthology, and said: "All the mall stores are here now."

At the start of the sale, everything in the store was at least 20 percent off, with some hard-to-sell items discounted further. The goal of the sale is to get as much money as possible for the retailer.

"For the most part, the people coming in in the beginning are familiar with the store," McKie said. "They tend to be locals and bought items not so much because of the sale but because they needed the goods. … The bottom-feeders come in for half-off or less. As annoying as it is, you need those folks."

At the very end, some items might be offered for 90 percent off. But some things just won't sell -- like that XXL T-shirt or the 1970s-style pants -- and an auctioneer is brought in.

The other key to the sale: timing the goods with the seasons. The Leader Store's sale goes through March 28. Selling ski gear at the end of the sale is going to be pointless. And now, with record cold temperatures hitting the region, it is going to be tough to sell soccer cleats.

"People are looking for a discount, but it's got to be stuff they want to buy," McKie said.

One thing McKie and Wright said they never do is mark up prices before slashing them for a sale.

"If people come in and see the 'regular' price is higher than they are used to, the whole sale is undermined," McKie said. "It's pretty obvious."

While many customers flock to going-out-of-business sales hoping to get a deal, many are skeptical.

Wright said his ads are designed to enhance credibility. For instance, saying that shelves, lights, desks and other store fixtures are for sale adds credibility. The company also doesn't say that items are 20 to 70 percent off. Instead, they say at least 20 percent. Consumers don't like ranges.

"We believe that consumers are skeptical when we say we're conducting a liquidation sale," Wright said.