Going, going, gone
When stores announce closings, liquidators clear the shelves
It's happened to chains big and small. To discount stores like Kmart and Dollar Express. To apparel retailers like The Limited, to department stores like Macy's and J.C. Penney. Even to popular regional retailers like The Andersons. Store closings.
The reasons can be varied, of course, but one thing remains the same: the need to sell all remaining merchandise.
That's when liquidators are called in, and lots of things begin to change.
In a retail liquidation, the merchant typically transfers the operation of stores to a third party, who sells the inventory in a limited time period, usually two to three months. While
management changes, store clerks typically remain in place.
The presence of professional liquidators is why going-out-ofbusiness sales seem so remarkably similar, said Nathan Craig, assistant professor of management sciences at Ohio State University’s Fisher College of Business.
“They bring their own signage, they do their own advertising — in newspapers, social media, even those people who spin the signs out front,” Craig said. “And, as the sale progresses, they use a similar price schedule across the stores.”
That’s when the percent-off increases every few weeks until nothing is left — or at least that’s what retailers hope.
There are a lot of liquidators in the field, but the dominant players are Gordon Bros. in Boston and Hilco Global in Chicago, Craig said.
In the case of hhgregg, smaller liquidation players Tiger Capital Group and Great American Group, both based in Boston, will sell off the merchandise as well as the furniture, fixtures and equipment in the retailer’s stores and distribution centers.
“There’s more going on behind the scenes than you would guess,” Craig said. “For instance, there are some legal concerns. You have to have the right permits to run this kind of sale ... and you can’t perpetually have going-out-of-business sales.
“And, as the process goes on, they do a ‘collapsing’ of the store, moving fixtures and merchandise and so on to the front of the store,” he said. “This is something they talk about as being very, very important: maintaining the shopping environment. The store becomes easier to manage, too.”
If the retailer is going out of business completely, then the liquidator will pull inventory from the retailer’s warehouse into the stores for sale, too. That is often the reason why some closeout merchandise can look less than appealing — it’s been sitting in a warehouse for who knows how long.
In a few cases, the liquidator may also bring in unsold merchandise from another closed store in the same sector.
Marketing fixtures
The Andersons is an exception, in that it’s continuing to stock certain areas of the store and will do so until near the end, and it plans to handle its own liquidation.
One area that it’s not handling — and many other retailers don’t handle, either — is fixture sales. Those coolers and shelves have to go, too.
Columbus-based Lemon Group specializes in that task.
“A store will contact us, whether a larger chain or smaller, and we will do some marketing — Facebook ads, posting on Craigslist, perhaps — and target specific businesses in an area with cold calls,” said Lemon Group owner Steve Bennett.
“For instance, we’ll tell supermarkets in an area, ‘We’ve got carts, coolers, shelves — would you be interested?’ And we’ll put up signage and ask the public to peruse the merchandise, too.”
Fixtures and shelves that aren’t sold at the store will end at the
Lemon Group’s warehouse in Obetz, where businesses that are looking to outfit their stores cheaply can find what they need.
“It’s a funny old business, though,” Bennett said. “A lot of liquor stores want to go with black shelving. So I’ve been looking for a good powder coater who can do high volume for years.”
Online liquidation
Retailers can still be stuck with excess or returned merchandise, even after a closeout sale.
That’s where a liquidator like San Francisco-based B-Stock Solutions comes in.
The company offers a web-based platform to help such retailers as Sears, Lowe’s, Home Depot, Target and Wal-Mart to sell off merchandise.
The company’s business-to-business online auction marketplace lets companies get the best price for “customer returns, overstock, damaged, all the above. It’s just excess merchandise,” said Eric Moriarty, an East Coast-based vice president of B-Stock.
For example, Home Depot— which isn’t going out of business, by the way — recently posted on the auction site that it had 25 pallets of plumbing merchandise that it wanted to sell off. Within hours, the retailer got about a dozen bids on the lot.
“It’s a lot better than what companies used to do: sell inventory to a liquidator for pennies on a dollar,” Moriarty said. “It’s very competitive out there and there is a lot of pressure on (profit) margins, so it’s becoming more and more important for companies to leave no stone unturned to get (bigger profit) margin.”
Those retailers that are still in operation but are closing unprofitable stores are doing so “in preparation for finding what the next store is,” Craig said.
Before that next step and the “store of the future” arrives, however, shoppers can expect to see many more stores closing — and more merchandise selling at deep discounts.
“It’s an exciting but also scary time for retailers,” Craig said. “So many things are changing.”