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5 Reasons to Avoid Liquidation Sales

Stocks in this article: CC

There are bound to be a large number of store liquidation sales this year, but you'd be smart to skip them.

Circuit City (CC) recently announced it had hired liquidators to sell off its inventory. While you might think this is a great time to find deals, the truth is that liquidation sales offer few bargains. Keep these facts in mind before spending your hard-earned money.

You don't need it: If you heard about a liquidation sale where a company is selling some type of gadget and now you find yourself wanting one, you did exactly what the liquidator wanted you to do. If you really wanted the gadget, it would have been on your list, after all.

The first rule of smart shopping is that, if you don't need it, it's not a bargain no matter what the price. Liquidation sales are a good way to convince yourself that a want is within reach, and therefore a need.

The prices aren't that good: When people hear the words "liquidation sale," they assume the main purpose is to get rid of merchandise quickly, meaning cheaply. While moving the inventory is one goal, it's not the primary goal. The main point is to make money.

Since "liquidation sales" usually last several months -- Circuit City's will last till the end of March -- there is no incentive to slash prices from the outset. In fact, most liquidators will actually raise prices to full retail or a token 10% off because they know the store will be packed with people. That means prices at liquidation sales are often higher than you could have gotten at the store before it went into bankruptcy. Those "75% off or more" discounts that you are imagining won't arrive until the final week of the liquidation sale -- a time when anything you would really want will already be long gone.

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