Circuit City and the Psychology of Liquidators

Yesterday I went to Circuit City. All of their merchandise has been turned over to a liquidator and so I thought, especially looking at the huge line to get in, that there must be some good deals inside. I was wrong, but the experience wasn’t a total loss.

I observed the interaction of the person that seemed to be in charge of the liquidation and the people who were eager to find some good deals. Something struck me as odd right away as I was standing in line, but I wasn’t sure until later what it was. Once I got inside after waiting half an hour, I noticed that there weren’t that many people inside the store. The prices listed on items were fairly good, but not that great. I noticed that some people felt some obligation to purchase something after waiting in line so long (even if it wasn’t a great price). I also felt that there must be some deals worthy of purchase. I wanted a new wireless router and I also needed a spindle of compact discs. The prices seemed pretty good until I got to the register where I learned that they weren’t honoring any of the prices listed on the merchandise. Instead they were taking ten percent off of the MSRP. Of course almost no retailer sells this type of merchandise at the MSRP so in many cases the items were actually overpriced and not at all on sale. Still there were people who purchased items (especially if they brought children with them). The items tended to be small or something that they were probably going to purchase anyway. I did hear one lady though commenting that she had paid a lot more for a similar HP laptop as one that was in the store. I asked her about it and soon came to understand that she didn’t really understand how laptops were priced or the differences in the HP she bought and the one that was in front of her in the store. I can guarantee that what they wanted for that HP was way too much, especially given that if it had a problem she would have no support from the store she bought it from.

After I got home I did a little research into other peoples experiences and found that the liquidations of both The Good Guys and CompUSA both had striking similarities.

So here’s the take away from what I learned…

  1. These liquidators are employed by bankruptcy trustees to get the maximum value possible for all of the remaining inventory.

  2. The liquidators don’t care about customer loyalty because all sales are final and you probably won’t be coming back.

  3. The liquidators will often employ whatever tactics psychological and otherwise to get the most money that they can out of as many people as they can. This in my opinion is why they often wait for a line before opening and try and maintain that line to create hype. Having waited in line also gives people a feeling of having a vested interest in purchasing something after investing so much of their time waiting to get in.

  4. Liquidators almost always raise the price to full MSRP which is way too high and take ten percent off per week as time allows until the end of the liquidation.

My conclusion is that you shouldn’t waste your time even looking at these liquidation sales until they are almost finished. Then you can pick over what’s left and see if a really great bargain missed the mobs of bargain hunters that mostly overpaid for what they purchased.

The other thing to keep in mind is that since all sales are final, if you get your item home and it doesn’t work then you’re probably out of luck. You might have even purchased something that appeared to be new but was actually previously returned. In any case you have little recourse but to try and deal with the manufacturer when possible. If you think about all of the potential hassle and the fact that you might not be getting a good deal anyway, the bargains really don’t look so great after all.

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