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Why You Should Avoid “Going Out of Business” Sales

going out of business signs on storefront
Carolyn Franks/Shutterstock

Those bold, brightly colored signs pull you in with offers of deep discounts. But are “going out of business” sales really a bargain? The sad truth is no, and here’s why.

Higher Prices

Believe it or not, going out of business sales often have higher prices than before the sale.

How is that even possible? Well, failing businesses usually sell their remaining merchandise to a third party liquidation firm. This firm comes in and does the hard work of selling the stock. Discounts are often set based on the manufacturer’s suggested retail price (MSRP), which in many cases is much higher than the store would normally charge. These firms don’t care about customers; they’re there to make a profit.

Some stores will purposely raise their prices before going out of business, as much as 20-50%. Then several weeks into the liquidation sale, they can boldly announce that everything is slashed 50%. That’s the kind of signage that brings in Black Friday type crowds. Who can resist 50% off? But the savvy shopper knows that those items aren’t priced correctly and moves on.

By the time prices drop to a reasonable level, most of the good stuff has been snatched up by the desperate shoppers.

Gift Cards and Coupons are Useless

gift cards spilling from wallet
anmbph/Shutterstock

Have you been piling up those gift cards, waiting to make a big purchase? If you catch news of your favorite store potentially going under, head down there immediately to use those gift cards. Some businesses will stop accepting them right away, whereas other businesses will give you a set time frame. For example, Toys R Us gave one month’s notice for people to use their gift cards. 

Most businesses will stop accepting any type of coupon after announcing they are going out of business.

No Refunds or Returns

If you’re a fickle shopper, then this type of sale is not for you. Since the liquidators are invested in moving stock fast, there is no room for changing your mind. Make sure that dress fits or that blender is everything you’ve dreamed of because you’re locked in

Also, stores aren’t required to uphold their warranties after closing their doors permanently. Be wary of purchasing such warranties from stores that aren’t looking at a long, stable future. This does not apply to manufacturer’s warranties, which are valid regardless of whether the store goes out of business.

Mixed Inventory

Liquidation firms have multiple businesses they’re managing. Often, they’ll bring in the unwanted stock from a previous going out of business sale. You’ll see the rejects that nobody wanted scattered among your favorite store’s stuff. If you like a store’s particular style or quality, this can be confusing and misleading.

Sometimes, They’re a Scam

One trick that smaller businesses (especially furniture stores) use is to declare they’re going out of business and hold a large liquidation sale. However, what they’re really planning is to close the business, start a new similar business, and then go on selling all the same stuff—often in the same location.

After all, “new” stores tend to get a lot more traffic.

If You Do Decide to Shop One of These Sales

We warned you of all the things to avoid, but you’re still tempted by those bright, neon signs. We don’t blame you—those signs are hard to resist. Proceed with caution, following these key tips.

  • Use an app to scan barcodes: This will check for the best available price, letting you know if you’re holding a real deal or a scam. Amazon Price Check and Google Shopper are some popular options
  • Only search for items you need: These sales have a way of making your heart race, grabbing random items off the shelves because the price is unbelievable. But remember; that’s part of the gimmick! Only enter the store if you have a clear idea of what you want, and what you’re willing to pay for it.
  • Time it just right: Don’t go in right away—prices will still be too high. But don’t wait until the end when all the good deals are gone. Try for the middle ground, maybe a week or two into the sale.
  • Use your credit card: This is just an extra layer of security. Say you order something to be shipped, it never arrives, and now the store is closed. You can still file a claim with your credit card company. Some credit card companies also offer refunds for faulty items if the store doesn’t accept returns.

The next time you see a big flashing “going out of business” sign, don’t get weak in the knees. There are probably a few good deals, but it’s rarely going to be as amazing as the signs promise. Use a scanner app to double check prices, keeping you one step ahead of the other bargain hunters.

Jill Chafin Jill Chafin
Jill Chafin is a freelance writer, aerialist, dancer, food enthusiast, outdoor adventurer, and mama, based in Chapel Hill, North Carolina. Read Full Bio »

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