Low sales lead to a lift in liquidation

Marketplace Staff Feb 5, 2009

Low sales lead to a lift in liquidation

Marketplace Staff Feb 5, 2009


BOB MOON: There are plenty of other ideas swirling around Washington to give the economy a quick fix. Today, the National Retail Federation reiterated its call for Congress to give consumers an extended sales tax holiday.

Would you buy right now if you knew your could save 6, 7, 8 percent of those big purchases by acting fast? Of course, steep post-holiday discounts didn’t seem to persuade shoppers to spend last month. Retailers have been left to unload a glut of apparel and other goods. And that’s where the liquidators come in.

As Joel Rose reports, business is booming around the businesses that aren’t.

JOEL ROSE: The central New Jersey distribution center of Liquidation.com is a pretty good snapshot of the disastrous holiday shopping season, even more than a month later. Pallets are stacked up to the ceiling, loaded with apparel, flat-screen TVs, even food. There are more goods moving through this warehouse than ever before. And it’s not just the scratch-and-dent stuff you might be thinking.

BILL ANGRICK: You’d see higher-end brands, and you’d see higher value merchandise.

Bill Angrick is the CEO of Liquidation.com. He doesn’t like to talk about particular brands. But I saw Polo, Calvin Klein, Levi’s, Sony, Xbox — first-tier stuff. The company uses online auctions to dispose of overstock, returns and anything else retailers want to get rid of.

Angrick: They order product as far in advance as six or nine months. So they don’t have the dexterity to react to what’s really been a cliff in the drop in consumer demand.

That drop in demand means plenty of work for companies that make inventory disappear. The retail liquidation business is estimated to be worth at least $80 billion annually — a figure that’s almost certain to rise this year.

Some liquidators specialize in dismantling store chains in bankruptcy, like Circuit City or Linens ‘n Things. Others get their goods directly from manufacturers.

Richard Jaffe is a retail analyst at the investment bank Stifel, Nicolaus.

RICHARD JAFFE: When the department stores see business slowing, they cancel goods. They push it back onto the manufacturer. In turn, the manufacturer has to find a new outlet for it.

In the apparel industry, manufacturers often wind up selling to low-price retailers like TJ Maxx and Ross stores. But this year, there’s so much extra stuff around that even bargain-basement retailers can’t absorb it all. So some liquidators are going to extreme lengths to make that inventory go away.

IRWIN JACOBS: We’re in Europe, we’re in Africa, we’re in the Middle East or Pakistan, India. Shipped some goods to Siberia.

Irwin Jacobs is the chairman of Jacobs Trading Company in Minnesota. He’s been in the liquidation business for 50 years. Jacobs’s company buys name-brand apparel, removes the original tags, and then sells it — either in the U.S. or overseas.

Jacobs: We try and keep it under the radar screen so it doesn’t compete with our customers’ products here. You know, you can’t avoid it completely. And there’s some customers who say, “Look, even if I get less money for it, I want it exported. I don’t want it in this market.” And we’re capable of doing it.

But most retail misfires wind up closer to home. Back at the Liquidation.com warehouse in New Jersey, Anita Luczaj and Ezequiel Lascares are picking up cast-off electronics for their mom-and-pop store outside New York City.

Anita Luczaj: We purchase DVRs, combos with DVD and DVD players and VCRs.

Rose: And it was cheaper than you could have gotten anywhere else?

Ezequiel Lascares: Totally. We check in the Internet. We check different places. We got the best prices from here.

Which means Circuit City’s loss could be the couple’s gain.

In Cranbury, N.J., I’m Joel Rose for Marketplace.

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