June 2006
The next time you pause at a strip-mall furniture store, tempted by banners proclaiming "Everything must go," you should don your flim-flam detector. Going-out-of-business, or liquidation, sales promise tantalizingly deep discounts. But you could wind up with overpriced and inferior merchandise, no warranty, and no way to get your money back if that new timepiece turns out to be more cuckoo than clock.
"People need to be very wary of ads offering major discounts of 20 to 50 percent, when they have no way of knowing the original price," says Richard Blumenthal, Connecticut's attorney general. "All sales are likely to be final, so consumers should know that when they buy something they'll likely be stuck with it."
What customers may not know is that going out of business is itself big business. Stores hire liquidation experts to manage every aspect of the sale, including setting prices, running ads, and bringing in salespeople. They may augment existing stock with their own inferior merchandise or with leftovers from previous liquidation sales.
What customers may not know is that going out of business is itself big business. Stores hire liquidation experts to manage every aspect of the sale, including setting prices, running ads, and bringing in salespeople. They may augment existing stock with their own inferior merchandise or with leftovers from previous liquidation sales.
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To keep the store from going out of business perpetually and from duping buyers by selling them goods shipped in by the liquidator, states and cities may require stores to apply for a license, file a list of inventory, and limit the duration of the sale.
In March we checked out a liquidation sale at the Hitchcock Chair Company, a 180-year-old manufacturer of handcrafted furniture in Connecticut. Signs in store windows proclaimed "Closing our doors forever" and "Don't miss out." Inside, merchandise had tags with fine print saying that items were "as is" and might never have been sold at the original prices shown.
We saw a Viewpoint Madison leather chair and ottoman marked down $300 from $2,989. After some haggling, a salesperson offered it to us for $1,950 plus a 6 percent delivery charge. Later, we found the same item online at CSN Sofas for $1,864 with free shipping. The online product was new; the one in the store was a floor model. A matching couch that the salesperson offered to us at $1,797 cost $1,419 online.
One customer negotiated a bargain on a Howard Miller grandfather clock. She persuaded the salesperson to reduce the discounted $2,475 price to $1,847. We couldn't find a better price online or at a local store.
The sale was managed by Planned Furniture Promotions, a Connecticut liquidator that paid $255,000 in December 2001 to settle claims brought by the Massachusetts attorney general. The suit charged PFP with creating fake original prices and phony markdowns on more than $800,000 in new merchandise illegally trucked in during the sale. We checked the Hitchcock items we saw against the inventory filed with Connecticut officials and found no nonstore merchandise, meaning that the goods were the real deal.
You should be particularly cautious at liquidation sales for electronics, jewelry, and carpet stores. "Probably 95 to 99 percent of all oriental rug liquidations are scams," says James Ffrench, director of Beauvais Carpets in New York and a rug appraiser on TV's "Antiques Roadshow." "I often see the same merchandise, supplied by the same importer, with the same sales staff, all around the country."
IF YOU'RE TEMPTED
Here are some tips for smart shopping at liquidation sales:
Check for complaints. Phone the local Better Business Bureau or state consumer agency and ask about the liquidation sale.
Haggle. The salespeople need to sell the inventory, so don't settle for the first price.
Comparison shop. Write down model numbers and check prices with competitors both online and in the area. Include shipping, delivery, and setup charges.
Check for a warranty. Ask to see the product warranty to learn whether you'll be covered if something goes wrong.
Pay with a credit card. You'll have more standing to get a refund than if you pay by cash, check, or debit card.
In March we checked out a liquidation sale at the Hitchcock Chair Company, a 180-year-old manufacturer of handcrafted furniture in Connecticut. Signs in store windows proclaimed "Closing our doors forever" and "Don't miss out." Inside, merchandise had tags with fine print saying that items were "as is" and might never have been sold at the original prices shown.
We saw a Viewpoint Madison leather chair and ottoman marked down $300 from $2,989. After some haggling, a salesperson offered it to us for $1,950 plus a 6 percent delivery charge. Later, we found the same item online at CSN Sofas for $1,864 with free shipping. The online product was new; the one in the store was a floor model. A matching couch that the salesperson offered to us at $1,797 cost $1,419 online.
One customer negotiated a bargain on a Howard Miller grandfather clock. She persuaded the salesperson to reduce the discounted $2,475 price to $1,847. We couldn't find a better price online or at a local store.
The sale was managed by Planned Furniture Promotions, a Connecticut liquidator that paid $255,000 in December 2001 to settle claims brought by the Massachusetts attorney general. The suit charged PFP with creating fake original prices and phony markdowns on more than $800,000 in new merchandise illegally trucked in during the sale. We checked the Hitchcock items we saw against the inventory filed with Connecticut officials and found no nonstore merchandise, meaning that the goods were the real deal.
You should be particularly cautious at liquidation sales for electronics, jewelry, and carpet stores. "Probably 95 to 99 percent of all oriental rug liquidations are scams," says James Ffrench, director of Beauvais Carpets in New York and a rug appraiser on TV's "Antiques Roadshow." "I often see the same merchandise, supplied by the same importer, with the same sales staff, all around the country."
IF YOU'RE TEMPTED
Here are some tips for smart shopping at liquidation sales:
Check for complaints. Phone the local Better Business Bureau or state consumer agency and ask about the liquidation sale.
Haggle. The salespeople need to sell the inventory, so don't settle for the first price.
Comparison shop. Write down model numbers and check prices with competitors both online and in the area. Include shipping, delivery, and setup charges.
Check for a warranty. Ask to see the product warranty to learn whether you'll be covered if something goes wrong.
Pay with a credit card. You'll have more standing to get a refund than if you pay by cash, check, or debit card.
You Could Be Stuck if a Store Goes Under
If you have store credit, gift cards, or returnable merchandise, or have made deposits for merchandise, the store may be under no obligation to honor them, even if it remains open during a liquidation. When the Wiz, a large electronics retailer, went bankrupt in 2003, customers held about $4.5 million in gift certificates that were fulfilled only after the attorneys general of Connecticut, New Jersey, and New York applied pressure. If you have credit at a bankrupt store, file a claim with the bankruptcy court. If the store has merely closed or gone out of business without issuing a refund or delivering the merchandise, lodge a complaint with your state's consumer protection agencies and dispute the charge with your credit-card company.
Copyright © 2002-2006 Consumers Union of U.S., Inc.
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