Liquidation Sales: Deal or No Deal?

The first round of markdowns won't save you much. Smart shoppers wait for prices to drop.

By Jeff Bertolucci, Contributing Writer

From Kiplinger's Personal Finance magazine, May 2009

A grim silver lining to the tanking economy has been the proliferation of going-out-of-business sales. But the demise of national retailers such as Circuit City, Linens 'n Things and Mervyns doesn't guarantee that you'll get great bargains. You can separate the good deals from the hype with just a little effort.

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First you need to know how the GOB game works: Firms called liquidators buy the retailer's merchandise, then spend seven to 13 weeks selling it. In the first week of a sale, liquidators typically mark down prices by 10%. "They're trying to get as much money as they can, so they start off slowly," says Anthony Giorgianni, an editor for Consumer Reports Money Advisor.

But here's the catch: Those discounts sometimes come off a manufacturer's suggested price. That means the price you pay in the initial stage of a liquidation sale might be even higher than what you would have paid before the retailer went belly up.

When Giorgianni went to a Circuit City store in Manhattan the weekend its liquidation sale began, he saw long lines but few bargains. "It was a real eye-opener," he says. Example: With the 10% markdown, the store was selling a Hewlett-Packard Officejet Pro printer for $270. But online retailers were charging as little as $135 (see current prices).

For products that rarely go on sale, such as Apple iPods (see current prices)and Bose speakers (see current prices), buying early at 10% off may make sense. Most of the time, however, it's smarter to wait. "In the first few weeks of a liquidation sale, liquidators are fishing for suckers," says Dan de Grandpre, chief executive of Dealnews.com, a Web site that posts information on retail bargains. "Once their inventories drop, they start to drop prices."

The discounts deepen as the weeks roll by, rising to as much as 90% as the end of the sale approaches and liquidators pull out all the stops to move the remaining merchandise. Of course, if you wait too long, the items you want may be gone.

My experience. I stopped by a Circuit City in Woodland Hills, Cal., five weeks after its liquidation sale began. The best deal I found was a Sony XS-LE121D 12-inch subwoofer for $88 -- 60% off the $220 list price (see current prices). Using price-comparison Web sites such as PriceGrabber.com and Shopzilla, I never found a price lower than $220.

I also found a so-so deal for an Energy Connoisseur Take Classic Home Theater system; the liquidator was charging $360, which was $40 less than the best online price (see current prices).

If you own a smart phone with Web access, bring it to the sale. Comparing prices while you're at the store is much more efficient than jotting them down, then reviewing them at home. Or have a friend on standby at a computer so you can call from the store to get a price reality check.

No returns. One major drawback of liquidation sales is that you can't return defective merchandise. So, if possible, plug in that camcorder or Blu-ray player (see current prices) before taking it home. That might not be feasible with gargantuan items such as big-screen TVs, so you'll have to take your chances.

If the item you buy turns out to defective, it will be covered by the manufacturer's warranty -- that is, if one exists. Ask store employees for documentation, check the package for warranty papers, or research guarantee terms online. Obviously, it will be much more of a hassle to get your gizmo fixed via warranty than to return it to a store.

You should also contact local retailers and ask if they'll match or beat the liquidator's price. Buying from an ongoing local concern will come in especially handy should the product break while it's under warranty.

And if you're buying a demo model, make sure you have the user manuals, warranty, cables, remotes and so on. Liquidation sales are often chaotic and important items may be missing.

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