Behind the Scenes: Going Out of Business
Store liquidators are one of the few successful businesses in this recession.
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.
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."
Going-Out-of-Business Sale
Take the case of The Leader Store, the sporting goods store in suburban New Jersey that McKie is currently liquidating. Two brothers own the business and are closing the store as part of a larger retail and residential renovation to the building, which they also own.
The first step was to send a mass mailing to everybody in the area.
"You are the first to know," sad the letter announcing the closing. "We are extending a special invitation to our local customers and wonderful friends like you to come to our store … one week before we publicly announce this sale in the newspaper."
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."
The Big Prize Giveaway
To get return customers, McKie signs up people for a prize giveaway. The more you spend and the more often you come back into the store, the more likely you are to get a new TV, iPod or DVD player. Basically, the top 10 shoppers during the sale period win the prizes valued from $850 down to $50.
But the real key to the contest is to get customer addresses. Each week of the sale, McKie will send them another mailing, keeping them posted on the latest details of the sale, trying to get them to walk through the door again.
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.
Deep Discounts
Ellen Davis, vice president for public relations at the National Retail Federation, said that a going-out-of-business sale really can be "a goldmine for a shopper."
The sales often start out with just 20 or 25 percent off. The biggest discounts come at the end, but there's no guarantee that those items will be the merchandise you want to buy.
"There's a little bit of a game of chicken involved," Davis said. "If you don't buy it at 50 percent off, it might be 70 [percent] or 80 percent off next -- or it might be gone."
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.
Beware of Scams
Richard Eppstein, president of the Northwest Ohio Better Business Bureau, said that consumers should have their doubts.
Consumers can find some good bargains, Eppstein said, but "some liquidators engage in very dishonest practices."
"This has been a very unusual year for retailing," he added. "We have never seen so many closing and going-out-of business sales during the Christmas season."
First, some stores that have going-out-of-business sales never actually go out of business. But a more common approach, Eppstein said, is for liquidators to bring in their own goods. The first 30 days of a sale might be regular items and then "all of a sudden, new things show up, products that were clearly never part of that store's inventory."
"That's misleading, that's dishonest and that's deceptive," Eppstein said.
If you find such problems, he said to report them to your local Better Business Bureau, which could investigate and make it known to the public that the sale is a sham.
That said, Eppstein noted that there are plenty of legitimate going-out-of-business sales. Consumers just need to know the risks.
Often, there are no returns or exchanges because consumers give up that right, essentially, for a lower price.
Eppstein also warned shoppers to know their prices and comparison shop.
"What we don't want to do is assume," he said, "that because the big banner on the wall says 80 percent off that it is a real bargain."
Sales Near You
Here is a sampling of stores across the country that have begun or will soon kick off liquidation sales.
Cost Plus Stores
Mesa, 1349 Alma School Road, Mesa, Ariz.
Ontario, 4421 Mills Circle, Ontario, Calif.
Vallejo, 105 Plaza Drive, Vallejo, Calif.
Pembroke Pines, 11960 Pines Boulevard, Pembroke Pines, Fla.
Stonecrest, 8140 Mall Parkway, Lithonia, Ga.
Fayetteville, 240 Pavilion Parkway, Fayetteville, Ga.
Hoffman Estates, 2780 Sutton Road, Hoffman Estates, Ill.
Rockford, 6650 East State Street, Rockford, Ill.
Fort Wayne, 4310 Coldwater Road, Fort Wayne, Ind.
Germantown, 20904 Frederick Road, Germantown, Md.
Bloomington, 4250 West 78th Street, Bloomington, Minn.
Maple Grove, 12209 Elm Creek Blvd., Maple Grove, Minn.
Minnetonka, 11240 Wayzata Blvd., Minnetonka, Minn.
Rochester, 1200 16th Street, SW Rochester, Minn.
Roseville, 2401 Fairview Ave., North Roseville, Minn.
Woodbury, 8268 Tamarack Village, Woodbury, Minn.
Southaven, 6535 Towne Center Crossing, Southaven, Miss.
Omaha, 201 North 78th Street, Omaha, Neb.
Papillion, 7549 Towne Centre Parkway, Papillion, Neb.
West Omaha, 17101 Davenport Street, Omaha, Neb.
Western Hills, 5555 Glenway Avenue, Cincinnati, Ohio.
Tri-County, 11747 Princeton Pike, Springdale, Ohio.
Kenwood, 8121 Montgomery Road, Cincinnati, Ohio.
Collierville, 4600 Merchants Park Circle, Collierville, Tenn.
Market at Wolfcreek, 2825 N. Germantown Parkway, Memphis, Tenn.
Tysons Corner, 2051 Chain Bridge Road, Vienna, Va.
Goody's Family Clothing
Goody's 287 stores are located in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia.
To find specific store locations, use Goody's store locator.
Great Indoors
13000 Peyton Dr, Chino Hills, Calif.
1321 E Golf Rd, Schaumburg, Ill.
479 Green St, Woodbridge, N.J.
700 S Rampart Blvd, Las Vegas, Nev.
Kmart
2700 Plainfield Rd., Joilet, Ill.
1215 N State St., Fairmont, Minn.
Route 9W, Glenmont, N.Y.
Macy's Department Stores, Final Clearance Sales
Ernst & Young Plaza, Citicorp Plaza, Los Angeles.
The Citadel, Colorado Springs, Colo.
Westminster Mall, Westminster, Colo.
Palm Beach Mall, West Palm Beach, Fla.
Lafayette Square, Indianapolis, Ind.
Brookdale Center, Brooklyn Center, Minn.
Crestwood Mall, St. Louis, Mo.
Natrona Heights Plaza, Natrona Heights, Pa.
Century III Furniture and Clearance, West Mifflin, Pa.
Bellevue Center, Nashville, Tenn.
Sears Grand
175 N West State Rd, American Fork, Utah.
N77W14435 Appleton Avenue, Menomonee Falls, Wis.