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Dirty little secrets of Going out of Business sales

Last Friday, I noticed a Marshalls store next to one of our medical centers was going out of business. The signs in the window screamed “Store Closing – 60% Off!”

Going Out of Business sales (GOBs) used to be my kryptonite. I love a great deal. But the more I’ve learned about GOBs, the less attractive I find them.

There can be great finds, but buyer beware. The people running GOBs are pros, and shoppers are easily deceived.

In the 1980s I joined my family furniture business after working as a CPA for a few years.

To expand, we purchased a store from a retiring business owner in a nearby town. We ran a going out of business sale as the previous company to raise cash and pay off the loan. We later reopened under our name.

My family was in the business of running stores, not closing them, so we brought in a consultant who knew how to profit using the social psychology of GOBs. The consultant was a former furniture store owner who became a traveling promoter making a tidy fortune closing other people’s stores.

He was a shyster. His attitude was

“You can make a lot of money from someone who is trying to pick your pocket.”

He had some good tips but mostly very shady advice. It opened my eyes to the dirty underbelly of the GOB industry.

Here are some of his suggestions. We only used a few of his ideas. Many are outright illegal.

  • Create mystery. Cover all of the windows with brown paper so that no one can see in. Let the customer’s imagination run wild.Paint the windows with Going Out of Business FOREVER and close the store for a week. Build anticipation of the sale. Advertise that the store will be closed until 11 AM on Saturday so that all of the prices can be reduced and the warehouse stock cleared.
  • Get a line of people waiting outside. Hire off duty police officers for crowd control, and only allow a trickle of people to come in at a time. It’s all about building the impression of a mob scene. Make a big show of providing drinks and snacks to people in line. Nobody plays this game of anticipation better than Apple.
  • Advertise Heavily. In the 80s, newspapers were important. Run full page ads with a picture of the former owner in the paper and draw a tear coming from his eye. Using a headline of “After 40 years of devoted service, Hudson Furniture is closing forever.” Using heartfelt copy, say the owner is retiring and selling everything to the walls including his private collections of rare and valuable furnishings.
  • Emphasize the fear of loss. Never just say Going out of Business, Say Going Out of Business FOREVER.
  • Remove all previous price tags from all merchandise and hand write large price tags with three prices crossed off in descending order. The current “sale” price should be a nonsense number such as $238.27 that makes no logical sense to the consumer and is hard to memorize.
  • Plant Easter Eggs. Intentionally put different prices on identical items so that the customer can “discover” a special price on one of the items.
  • Crowd mentality. Reduce operating hours to a few hours per day. Put signs on the doors, “We are marking items down and will reopen at 2 PM – 8 PM.” The point is to have crowd mentality and create urgency.
  • Shuffle. Rearrange the entire store every two weeks so that everything looks different. Confusion in the customer’s mind is your friend.
  • Bring in high margin goods. Buy low end merchandise specifically for the GOB. Much of the furniture you see at a GOB is purchased specifically for those sales and is not particularly well made.
  • Jack up or invent service and handling fees, because the customer is often so excited about getting a deal that they don’t feel the pinch of add ons. Charge a premium for delivery. Our stores had always included delivery for free, but during the GOB, the higher volumes necessitated charging a fee to encourage cash and carry.

We refused to implement the deceptive aspects of the GOB, but still ran a very profitable sale. A year later, a national chain purchased all our stores, and we did it again.

Here’s the bottom line.

Buying furniture at a going out of business sale is like playing poker against a table of pros. You might win, but the odds are stacked against you.

  1. Terry PacelliJanuary 20,15

    Hi Dick,

    Great article, I remember years ago when attending GOB’s that most of the items for sale were not very good deals. Plus it seemed some GOB’s took close to a year to finaly close! Now I see why.
    Two thoughts, sign is a auto sales conference room, “Its not the deal he got, it’s the deal he thinks he got.” Two, Andy Rooney, “Nothing in fine print is ever good news.” lol Take care. Terry

    • Dick LarkinJanuary 20,15

      Ha Ha Ha. Love the quote! I remember reading the state laws about going out of business sales, and they were very tough and specific, and rarely enforced.

      Be well, Amigo!

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