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Retailing at the End of the World: How Large Chains Liquidate

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Retailing at the End of the World - How Large Chains Liquidate

Photo by Artem Beliaikin from Pexels

There have been times when well known retailers around the world have been forced to announce bankruptcy and shut off their years old businesses. However, these are also the times when retail wind downs can be used to the maximum by certain companies. The eventual course failing chains take to minimize losses is through liquidation.

There are many big names that often buy liquidation pallets from such companies and further resell the products. Organizations like Gordon Brothers, Tiger Group, as well as the Great American dominate the field and help large retail chains liquidate products when they’ve hit a dead end. In a sense, these are the best liquidation companies as well – although things are a little tricky even with them.

Let’s have a look at how large chains liquidate when they hit rock bottom –

1. To be or Not to be

The first decision that the retail chain makes is whether they can risk continuing a failing business. Is there hope for success in the future? Will the market suddenly turn in their favour? Or is it the right time to count your chickens? Back in the day, retailers facing bankruptcy were allowed plentiful time to analyse their business cycles and closely observe the top and bottom lines. However, now retailers only get about 201 days to set their store footprint or make changes in management, store count, etc. If things don’t work still – retailers have no other option than to liquidate most of their products. This often reduces operational and legal expenses and they are an overall cheaper way to get repayment on what is owed to major lenders.

2. Goodwill

Large chains depend largely on goodwill at the stage of liquidation. Good will basically determines the kind of reaction important customers would give to the ending of a retail chain. Moreover, this also determines how much such customers are willing to spend in order to procure the said companies liquidation goods. Goodwill is often determined by the number of years any retail chain has been operational. Needless to say, the company that has been around longer inspires greater trust and performs much better at sales. Naturally, people are more willing to buy liquidation pallets from such names.

3. They Also Want Maximum Returns

The simple fact to note is that every retail chain that is going for maximum liquidation is simply out of cash. And they need the maximum return they can get out of their losses. A retail chain does not liquidate out of charitable feelings. Therefore, you won’t get economically irrational discounts on products that are of high value. It is only when the sale draws towards an end and the products still fail to sell that the discounts gradually begin to increase.

4. They Cannot Function without Liquidation Experts

Most liquidators claim that retailers are practically “married to their merchandise”. Therefore, it is extremely difficult for big retail chains to see their valued products being sold out at less than their deemed worth. However, if retailers began to liquidate products – they would never be able to reduce selling costs given how much they honour their merchandise. Naturally, nothing would sell out – and the liquidation would be a complete failure.

On the other hand, the best wholesale liquidation companies are able to give enticing discounts to willing customers and even make compromises. Their focus is on the overall ultimate monetary returns of the entire sale when most of the goods have been sold out. Usually, these liquidation experts are so well versed with consumer psychology in this area that they are able to give immense returns to the retailer.

5. Dissolution vs Liquidation

There are some instances when retailers simply want to close off their companies, even though they have no major debts. It is also possible that the retailer has simply no assets that need to be liquidated. Then, retailers simply dissolve the company and get it unregistered from the Country House database. If there are no debts, but assets to liquidate then retailers often go for the process known as Members Voluntary Liquidation. Contrarily, if the retail chain is struggling with mounting debts then it is better to opt for a Creditors Voluntary Liquidation process.

In case the retailer has significant debts without any assets then Administrative Dissolution comes handy. Through this process you would be able to clear debts and respectfully close your business. Moreover, once a company is insolvent, the retail chain is no longer allowed to hold independent sales with prices far below the market value. This could lead to accusations of wrongful trading and could have legal consequences.

Conclusion

In this article we have highlighted the basic psychology and minor technicalities that are involved when retail chains liquidate. However, this is merely a brief overview and the topic deserves an even more thorough examination. We shall be uploading much more informative content on this subject – in case this piques your interest.

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