'Going out of business' is good for business

We've all seen them, perhaps more often than makes sense.

"Going out of business sale" banners or signs draped over a store's entryway or in the window, yet months and even years later the business is chugging along still promising it's really going away.

"Any kind of 'going out of business sale' stimulates business," says Carl Humphries of West Coast Appliance, which has seen his share of such signs in his 20-plus years of retailing. "The first 60 days generally create a lot of activity."

Such signs also raise eyebrows and stimulate questions from some quarters concerning their validity.

Prodded by Portland-area businesses, the Oregon Legislature last spring rewrote the book on going out of business sales and Gov. Ted Kulongoski signed into law this week.

This legislation requires retail stores to notify the Secretary of State when conducting a "going out of business sale" and limits the event to no more than 90 days and only one sale per year. This legislation does not apply to sales conducted by a bankruptcy trustee or court-appointed receiver.

The Secretary of State's Office will serve as a record keeper, not an enforcer, says spokeswoman Mary Conley.

"Once you file notice with us, the store has to put a copy of its notice on the window, door or where it's publicly accessible," Conley says.

Proprietors have 60 days to register with the Corporation Division in Salem and the information will go into a searchable database.

"This will be a tool, I assume, for the competitor," Conley says. "If a shoe store puts up a sign, it's really going to be up to competitors and the public to be the enforcers. They're going to see if the store really posted notice and then complain to the Justice Department, which would then investigate."

Going out of business sales run the gamut from corporate closures such as Hancock Fabrics' store off Barnett Road this spring, to drawn-out efforts such as the erstwhile mattress store on South Pacific Highway across from Bear Creek Golf Course.

"I knew a guy in the Bay Area that did it for a long time with his war surplus store," says Bob Mitchell of Medford Mattress, whose family has been retailing for more than 70 years. "For six months, he'd run a going out of business sale and then for the next six months he ran a grand opening. He got away with it forever."

Stores going out of business typically hire companies that specialize in liquidation sales that bring in additional inventory, Humphries says. He cites a Washington company that was a member of the same buying group as his store.

"They brought in additional inventory, raised the prices and brought in hard-nosed 'closer' sales people," Humphries says.

The scenario starts with 20 percent discounts that incrementally rise to 70 percent as the end nears.

"It's not uncommon for factories, when they know somebody is going out of business, to bring in additional products," Humphries says. "They know it's generally a big sale."

The typical store simply lacks the inventory to keep going much more than two months without restocking, especially when the pace of business picks up.

"We have $3 million worth of inventory, and if we did a liquidation, we would be out of inventory in 90 days," Humphries says. "What a lot of companies do, once they've generated enough cash flow, they don't want to go out of business so they decide to stay open; or they never planned to close."

While consumers might see such sales as opportunities for can't-miss deals, it creates quandaries for other retailers.

"It takes away credibility from people who are ethical in our category of sales," said Diane Portrait of 4 Day Furniture. "It lessens the ethical nature of our business."

Reach reporter Greg Stiles at 776-4463 or at business@mailtribune.com

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