What is a Closeout Sale?

Published by Thomas Herold in Economics

'Closeout Sale' is explained in detail and with examples in the Economics edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

A closeout sale represents the last sale for a given item from a retailer. It could also refer to the last offers from a retailer in its inventory it provides to the public or another company. Sometimes certain items simply are not selling effectively. Other time it may be that a retailer is forced to sell off its inventory thanks to a fire, moving to another location, or too much inventory. In many cases, the company has simply gone bankrupt and has to liquidate everything. In these last cases, this type of sale is also referred to as a “going out of business sale.”

Car dealerships also offer these types of inventory-moving events following hail storms. These are called “hail sales” in this case because the car dealership inventory has suffered extensive damage from the inclement weather. In any of these last chance scenarios, stores or outlets make an effort to get the word out to their customers and the general buying public.

A closeout sale should never be confused with a closeout store. These outlets are stores that concentrate their efforts on purchasing wholesale closeout items off of retailers. They then sell them to their own customer base for a price discount. In the United States, there are several nationally known examples of this type of operation. Closeout store chains include Big Lots, Marshalls, Ross Dress for Less, TJ Maxx, and Value City. They mostly specialize in goods that are house ware or clothes related.

It is a well-known fact that many times, items purchased in closeout sale offers cannot be returned according to the company policy of many stores. The goal is to move these items, not exchange them for other closeout sale items. In the cases of store closing and liquidation efforts, this is usually the policy. In other jurisdictions outside of the United States, like the United Kingdom, the buying customers maintain their typical rights of return in any sale. This means that they are allowed to return defective goods under the country’s Distance Selling Regulations.

Holiday-themed merchandise is often the subject of closeout sales in the U.S. and other Western nation economies. This is because it is expensive and space-intensive to store Christmas merchandise for the better part of a year. Most American stores therefore engage in after-Christmas clearance sales. Some of them even commence ahead of the holidays. The discounts at such events can typically be 25 percent or more, though they actually range from five percent to as high as 50 percent. Sometimes stores will later boost this discount from 75 percent to even 90 percent rather than store the final merchandise, allowing it to age. In Canada, these post-Christmas sales are called “Boxing Day sales.” They attract enormous shopping crowds looking for their closeout deals following Christmas.

Merchandise which is specific to a given season is often seen at clearance sales. This is especially true for winter wear or summer time patio furniture. This allows the store to bring out more current styles and fashions in their limited showroom or shelf space.

Thrift stores that are normally better priced than traditional big box department stores also practice what they call “rolling” closeouts. In these stores, they simply take all of the merchandise which they offer in a particular week and tag it with a special color or sometimes letter to make it clear which items are part of the closeout sale. In these cases, they rotate out the clearance goods once per month.

In the more traditional department stores, they also utilize closeout sales in their physical locations. They will take merchandise they wish to discontinue and place it on their clearance racks. The price will continue to drop until the point that a shopper finally takes the item to buy it. Stores have taken this concept and reproduced it on online in recent years. The first Internet-based operation to imitate the retail store clearance idea was the now-failed Drop.com. They permitted sellers on the site to auto reduce the price of their items for the online customers.

Free Download (No Signup Required) - The 100 Most Important Financial Terms You Should Know!
This practical financial dictionary helps you understand and comprehend the 100 most important financial terms.

The term 'Closeout Sale' is included in the Economics edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.