Going-Out-of-Business Sales Not Always Such a Bargain

"Contrary to popular belief, liquidation sales aren't a great deal for the consumer," said retail industry analyst Stephen Baker of the NPD Group. "The liquidator is there to make money."

Going out of business sales aren't always such a bargain.

Baker explained that liquidators have less leeway than regular retailers in pricing their products because they have no factory-to-dealer incentives to fall back on.

In other words, when manufacturers are trying to get their products onto store shelves and gain market share, they may discount the price they charge to retailers or provide factory rebates. Retailers can then advertise those rebates and pass the savings along to customers. Liquidators don't have options like that because their store is not going to stick around.

Despite what the public might think, Baker said liquidators rarely sell merchandise at a loss, even near the end of the sale. He said there are other ways to sell it off, like to overseas markets hungry for merchandise. So rather than trying to empty a store to the bare walls, Baker explained that going-out-of-business sales are more of a play upon human psychology.

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"Retail is all about excitement, to get people into a store and get them into a mood to spend money," he said.

Outside Goods

Liquidators often try to take advantage of that excitement by bringing in extra outside goods that were never sold at the store that is closing.

We spotted one example at a Linens 'n Things in Fairfax, Va. Hundreds of handmade Oriental rugs were brought in as the rest of the store was emptying out. A salesman told a member of our undercover team, "They ship it after going out of business."

Problem is, even though the rugs were never sold at Linens 'n Things, they still came with tags that said what the price supposedly "was" and what "you will pay."

"If I can sell it, they send some more," the salesman told us. He even offered to bargain over prices and make us a deal. So we found two things never before seen at Linens 'n Things: hand-knotted Oriental rugs — and haggling.

Store Closing Sales

We also visited a Circuit City store that is closing. It's a different situation there. Only 21 percent of Circuit City stores are going under, while the rest of the chain tries to stay afloat. In that case, Circuit City has hired two liquidation companies, Hilco and Gordon Brothers, to run its going-out-of-business sales.