As the list of retail brands going bust grows and everything-must-go sale signs clutter street corners, it’s easy to be lured by the promise of big bargains. But liquidation sales can be some of the worst places to shop for deals, so it’s important to know the pitfalls.
“Liquidation sales can be worse than the regular promotions available at the same stores before they announce the closing of their businesses,” says Tony Gao, a marketing professor and retail expert at Northeastern University’s business school in Boston.
Going-out-of-business sales will grow amid the retail industry’s continued slide. The International Council of Shopping Centers predicts 148,000 retail stores will shut in 2009.
But why put up with poor service, crowded lines and the “all sales are final” policies typical of liquidation sales if you aren’t even getting a good deal?
Here are seven tips to making a liquidation sale work for you.
- Make sure it’s a bargain.
- Ask who is managing the sale.
- Ask about warranties.
- Check the item you’re buying thoroughly.
- Pay with a credit card.
- Check with the Better Business Bureau.
Make sure it’s a bargain
“You can’t just go into the store thinking everything is going to be a good deal. Don’t just walk in saying, ‘Hey, I want a flat-screen TV,’ and walk out with it. Compare prices and don’t just presume everything is a good deal,” says Alison Southwick, spokeswoman at the Better Business Bureau, or BBB, in Arlington, Va.
Complaints ran rampant after recent liquidation sales at national retailers Circuit City and Linens ‘n Things, with items actually priced higher at the sales than in the weeks before the liquidation. In January, the BBB even issued a warning to bargain hunters to be on the alert for false deals, noting that liquidation sales often are marked up for the sales.
ABC’s “Good Morning America” went undercover at the Linens ‘n Things’ liquidation sales and peeled back the price tags to reveal, for example, that a Calphalon saucepan priced at $124.99 during the sale normally sold for just $109.99. Avoid the pitfall of inflated prices by comparing item prices with a competitor.
Ask who is managing the sale
If the retailer is handling the liquidation sale, the deals will likely be better. But if the chain has contracted out the sale to one of the handful of for-profit liquidators, steer clear, Gao says. Liquidators have a tried-and-true formula for creating impulse buys and seek only to maximize profits. They often make pricing and discounts confusing.
“The labels may look appealing, especially when there are 50-percent-off signs, but don’t rush. Often, these discounts are deceptive,” Gao says.
Another question to ask before buying: Do I need this? If you set a budget even before walking into the madness of liquidation sales, you’re less likely to succumb to a bad deal in sheep’s clothing.
Ask about warranties
Because the company is going out of business, many of its consumer warranties won’t be available. Make sure ahead of time that you know if a warranty is available. In some cases, manufacturer warranties may not apply. When something is sold “as is,” you obviously can’t return it to the retailer, but manufacturers might have some legal wiggle room to renege.
“When you buy something as is, it can become rough to deal with a manufacturer, especially since it is always much easier to simply return an item to the retail store,” says Southwick. “If you buy a TV, for example, at a liquidation sale, and you get it home and you find out it doesn’t work, the manufacturer’s warranty will likely cover it. However, if get the TV home, open the box and see that the screen is cracked, the warranty won’t cover that, and your best bet to recover money is to dispute the charge with your credit card company.
“The manufacturer’s warranty will cover the manufacturer’s errors. It won’t likely cover any damage done to the item after it leaves their factory. And of course, the liquidator is going to be of little help,” Southwick says.
Check the item you’re buying thoroughly
In as little as 30 to 60 days, the doors will be locked and the store empty. So if it’s broken, it’s yours. Open the box to make sure the item isn’t damaged. Plug in a flat-screen TV in the store and make sure it works.
The help at these liquidations aren’t clerks looking to find the best fit for you. They’re from a liquidation company and want to sell and sell fast. Make sure you know what you’re getting.
Donna Oe, chief executive of the BBB in Idaho Falls, Idaho, recently fielded a complaint from a consumer who bought a camera at a Circuit City liquidation sale.
“She asked to open the box to make sure everything was there and it was in good shape, but they wouldn’t allow her,” Oe says. “When she got home, the camera was broken. When she tried to take it back, they wouldn’t do a refund or exchange it. There can be bargains out there, but this one obviously was not. She’s out at least $100.”
Pay with a credit card
If you can’t return your item, paying with a credit card will give you more options. In fact, the BBB recommends consumers avoid paying with cash or check at liquidation sales and strictly use credit cards.
Using a credit card provides you with an extra level of protection because if the item you purchased is damaged and you can’t return it, you can work toward getting your money back by disputing the charge with the credit card company.
Check BBB and your state or county consumer agency
Consumer Reports says that jewelry, Oriental rug and electronics liquidations are sometimes scams in which nonstore items are sold illegally.
“There are different laws in different states. Some states say if you are going out of business, you cannot order more inventory to the floor. But other states don’t,” Southwick says.
For example, Wyoming, Tennessee, Nevada, North Dakota, Nebraska, Mississippi, Colorado and Arizona have no laws on the books strictly regulating going-out-of-business sales, Southwick says.
“If you live in one of those states without restrictions, you should be especially careful. Make sure you aren’t at a fake liquidation. You can also check with the local courts as to whether the retailer has actually even filed for bankruptcy,” she says.
Even so, the Federal Trade Commission, or FTC, considers fake going-out-of-business sales as deceptive advertising. The FTC Web site recommends contacting your state attorney general’s office if a store is advertising what looks to be a bogus going-out-of-business sale.
“They can go after the store if they feel it was a phony going-out-of-business sale,” says FTC spokeswoman Betsy Lourdan. “They are the ones that can impose a penalty for a false sale. We haven’t really had a big involvement in that issue because it’s been regulated at the state level,” she says.
There’s some debate over whether haggling works because liquidators are sometimes given a floor on the prices they can offer. But what the heck, give it a try.
Donny Lowy, chief executive of Closeoutexplosion.com, a Web site offering overstocked items at a discount and author of “Selling Online: Beyond eBay,” suggests offering to buy in bulk and making an offer that’s below the ticket price.
If you do your homework beforehand by comparison shopping online, you could bolster your negotiating position with price information culled from comparison shopping Web sites for similar merchandise or at retail stores that aren’t going out of business. It’s also always worth checking if you can get a better deal online.
“If you are about to buy a digital camera at a liquidation sale, print out the price pages from our site and bring it to the store in a liquidation sale,” says Michelle Kane, a spokeswoman at PriceGrabber.com, a comparison-shopping site with price data on goods at 13,000 retailers, including Target, Best Buy and Wal-Mart. The site often offers free shipping and no taxes on ordered items.
“It’s very smart to keep all your options open and to research and stay very educated about the price point out there for items,” Kane says.