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2/11/2009

Washington, DC – Retailers across the country are being hit by the declining economy and some big brand names such as Circuit City and Linens-N-Things are closing doors and liquidating assets in order to pay debtors. To customers' ears, a going-out-of-business sale means huge discounts, but the Better Business Bureau (BBB) is warning bargain-hunters to be on the alert for bogus deals when shopping liquidation sales.

The holiday shopping season, which often accounts for more than a third of a retailer's annual sales, failed to deliver in 2008. Retail sales in the U.S. fell 2.8 percent, the first decline since 1995. Due to sluggish sales in 2008, a number of national retailers entered into bankruptcy and, ultimately, held liquidation sales. And consumers can expect that there will be more bankruptcies and liquidation sales to come from both national and local retailers.

The BBB warns that even though the "going-out-of- business sale" advertisements are everywhere, caution is deserved. When a retailer decides to liquidate its assets, the actual sale will be undertaken by a liquidator. The liquidator will set the prices and attempt to sell the items quickly and at the highest profit. As a result, some items will actually be marked up for the sale. A BBB investigation shows that many of the going-out-of-business advertisements fail to meet the BBB's Code of Advertising. The Code is a document that lays out what is considered to be acceptable advertising practices.

In 2008, an ABC News report revealed that many items sold during a national retailers' liquidation sale were marked up by as much as 14 percent. More recently, according to a mystery shopping trip by Consumer Reports, a liquidation sale included such "deals" as a big-screen TV that had been marked up by more than $400 dollars and computer printers that had been marked up by as much as 100 percent.

Before being lured into some not-so-good deals at a liquidation sale, the BBB offers the following advice to consumers:

Confirm that a deal IS a deal. Not only will some liquidators actually mark up prices for going-out-of-business sales, a business's competitors will sometimes drop their prices in order to compete with a liquidation sale, so the BBB strongly advises consumers to beware of the hype and shop around.

Use a credit card.
Credit cards include built-in consumer protections if the company does not deliver on promised goods and the BBB recommends making purchases with a credit card instead of checks or cash.

Don't count on customer service.
Customer service is not a liquidator's priority and consumers expecting the same level of customer service might be very disappointed. Staff on the floor will be limited and consumers might be on the hook for delivery of large items. Also, since the company won't be around in the future, consumers need to understand that all sales are final and that they don't have many options if they aren't satisfied with the purchase.

Know the status on warranties.
Warranties are often maintained by a manufacturer or a third-party, which means that the warranty will still apply if the retailer goes out of business. However, the consumer should always confirm the status of the warranty before buying.

Use those gift cards ASAP.
Businesses that have entered into the liquidation process will not be around for very long and the BBB advises that any consumers who are holding gift cards spend them as soon as possible or risk getting stuck with a worthless piece of plastic.