3 Tips for Shopping Going-Out-Of-Business Sales

At a Circuit City store in Northern Virginia--three days before the chain closes forever--the atmosphere is like Rome as it was raided by the Gauls. It's not just what's left of the electronic merchandise that's being pillaged. In the center of the store, a large yellow banner hanging from the ceiling reads, "ENTIRE STORE FOR SALE." That applies to just about anything that can be carried out, down to shelves, pallets, lights, and indeed, "all store fixtures." Given Circuit City's seemingly desperate effort to clean out the store, surely the actual goods can be purchased at fabulously low prices, right? That's not what many wannabe raiders discovered at recent liquidation sales at stores including Circuit City, Linens 'n Things and CompUSA discovered. "If you think every item is going to be the sale of the century, then you are going to be sorely disappointed," says Alison Southwick of the Better Business Bureau.

These liquidation sales certainly won't be the last, as the International Council of Shopping Centers predicts that 148,000 retail stores will shut down this year. To avoid disappointment, here are a few things consumers should keep in mind when shopping going-out-of-business sales:

Comparison shopping is a must. The purpose of an "Everything Must Go!" sign is to convince you to stop shopping around. Why would you need to look anywhere else, since all the crazy deals are right here in this store? But comparison shopping is as important as ever these days. That's because prices might not much lower than they are online, or even at a competing store in the same area. This is especially true when it comes to bankruptcy-related liquidations. In those cases, a liquidator handles the proceedings, not the store itself. Unlike a retail business, liquidators don't need to be nice to customers. "Sophisticated consumers would be wary of liquidators, realizing that they have no incentive to treat them fairly, since nothing depends on their ability to do repeat business with them," says Robert H. Frank, professor of economics and management at Cornell University. "But many consumers are not sophisticated and are therefore vulnerable to exploitation by unscrupulous liquidators," he says.

You might think the final days of a liquidation might yield better deals than the beginning. But that's not always the case. At that Northern Virginia Circuit City location, three days before the store closed forever, an HP Pavilion laptop was priced at $699.99, and advertised as 30 percent off. But a simple Internet search found equivalent products on online retailers' sites listed at same price--or even a few dollars less. In another case, Circuit City was selling a Panasonic plasma TV for 50 percent off at $999.99, but a Best Buy less than a mile away was selling the same product at the same price. Smaller-ticket items seemed to make for better deals. An XM radio car kit could be bought at Circuit City for $18, compared to $79.99 at other stores. A 50 pack of DVD-Rs was going for a mere $6.

Beware of the unopened box. Anything you buy at a going-out-of-business sale is likely to be final. That means no returns. But it also means you could be stuck with an item that doesn't work, and there's nothing you can do about it. "We've also heard [from] consumers who have bought things that are broken," says Southwick. Avoid buying anything that you can't actually see first. Another option is to make sure that the product has an unexpired warranty from the manufacturer. If so, you'd still have someone to complain to if the product turns out to be a lemon.

Know the laws. So you should be cautious when it comes to liquidations of big-box stores, but there's nothing to worry about when a small, mom and pop-style business closes out, right? Not necessarily. You may still find some shady practices. Does that going-out-of-business sale sign never seem to come down, so the business seems to perpetually closing? When you visit a business closing out its inventory, do the shelves seem to be mysteriously restocked? Depending on where you live, these and other practices might be against the law. The majority of states have some kind of statute regulating going-out-of-business sales. An example is New York, where state law requires a closing business that wants to hold sale to apply for a license (it's good for 30 days.) To get the license, the business must supply a list of the inventory it's putting up for sale--and it doesn't get to add to this list later on.

But a number of states don't have any laws regarding going-out-of-business sales, and instead leave them up to localities. These states are Arizona, Colorado, Mississippi, Nebraska, North Dakota, Nevada, Tennessee, and Wyoming. That means some areas in those states have no rules in place. "A lot of the smaller towns don't have any regulations," says Barbara Read of the Better Business Bureau in Colorado. A few states states--Alaska, Arkansas, Georgia and South Dakota--prohibit going-out-of-business sales if a company is not actually going out of business.

Clarified on 03/24/2009: Although CompUSA was never liquidated as a whole, the company held liquidation sales at more than 100 closing stores in 2007.