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Price is not right for many shoppers at Circuit City closeout sale

Customers are angry that many items are being discounted only 10%. Liquidators say markdowns will increase in coming weeks.

January 20, 2009|Andrea Chang

Many irate Circuit City shoppers discovered the hard way this weekend that going-out-of-business sales don't always mean bargain-basement prices.

Tensions have been running high at many of the chain's 567 U.S. stores after the electronics retailer announced Friday that it was ceasing operations and would begin liquidation sales the next day.

The news that all merchandise would be discounted 10% to 30% drew throngs of customers to stores across the nation over the three-day weekend. But many shoppers left angry and empty-handed.

"What happened to 30%? Lies!" shouted customer Gabriel Ifrah, 52, at the Circuit City on La Cienega Boulevard in Los Angeles on Monday, where most items were priced at 10% off.

Another customer, Bob McGinness, 48, said he had come to the store three times since Friday but hadn't found any good deals.

"I've been waiting in line for half an hour each day based on employees' promises that prices could come down, but they haven't," said McGinness, a TV commercial producer from Los Angeles. "It's very disappointing."

It is too early to know when prices will fall to jaw-dropping levels at the nation's second-largest consumer electronics chain. Liquidators said discounts would increase each week as inventory levels shrank and some could reach as much as 90% in the final days.

Closeout sales are commonplace in today's weak economy, but liquidation pricing and procedures often leave customers feeling frustrated. Several Times readers wrote in e-mails and blog comments that they were being "scammed."

Some of the confusion stemmed from Circuit City's abrupt collapse, which left liquidators scrambling to begin sales the next day. The Circuit City closeout is one of the biggest retail liquidations ever to take place in the U.S., experts said, with more than $1 billion worth of inventory to move by the end of March.

Like many large retailers, Circuit City appointed a group of professional liquidators to run its going-out-of-business sales, which includes setting sale prices. The company's liquidated assets will be used to pay off its creditors.

At Circuit City stores Monday, most big-ticket items were marked down only 10%, including digital cameras, large flat-screen televisions, printers and cordless phones. Less pricey items, such as wiring, video games and video game accessories, were priced at 20% or 30% off.

"You have to start somewhere, and we have commitments to a lot of people -- banks, creditors -- who are expecting a certain amount of return, so it's not like we can go out there and go to the deepest discounts right off the bat," said Billy Nichols, senior vice president and director of merchandising at Great American Group, one of four liquidators involved in Circuit City's closeout. "This is a big financial risk for a lot of companies. We have to be economical on our discounts."

Shoppers said they worried that the liquidation companies were offering markdowns from prices that were higher than what Circuit City had been charging. But liquidators insisted that prices were not being inflated.

"We are absolutely not raising the price that Circuit City has in the system," said Dan Kane, a principal at Tiger Capital Group, another Circuit City liquidator. "It's not possible. The Circuit City everyday low price is what we're offering our discounts off of."

Nonetheless, retail experts said customers should be savvy when shopping at going-out-of-business sales. A chain's usual policies often don't apply once a company collapses because liquidation companies have the authority to implement their own rules.

At Circuit City, for instance, all sales are final during the liquidation process, meaning returns and exchanges are not allowed. The chain is no longer honoring its usual price-matching policy or offering home theater installation services.

Although liquidators said prices would become lower in the coming weeks, some customers said they might not be back.

"I was looking for a printer, but 10% off -- I can do better online," said Alan Silverman, 61, at the L.A. Circuit City store. "It's not like I expect them to give it away, but I would expect to see more attractive prices that are competitive."

Jim Schaye, chief executive of Hudson Capital Partners, another Circuit City liquidator, said although "10% may not sound like a lot," it was still better than the prices found at many of the chain's rivals.

"Customers who say 10% isn't enough for me, they're free to walk out and come back when the discounts are greater," he said. "If they're lucky, the merchandise will still be there."

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andrea.chang@latimes.com

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