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Comment by tibbon | Hacker News Reader

I wonder if this type of business behavior explains some of the places in Boston I saw that were always "going out of business" only to reopen the next day, as practical the same thing. There was a rug store on Boylston that was like that. I swear it must have had 10 going out of business sales.

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Many states (and some cities) require companies to obtain "going out of business sale" permits for this very reason.

It's considered a deceptive and fraudulent practice to have a final liquidation sale when the firm is not really going out of business.

See, for example, the form required in TX (a state not known for heavy regulation compared to say, CA):

http://www.window.state.tx.us/taxinfo/taxforms/50-290.pdf [pdf]

§ 17.82. Prohibited Conduct (a) A person may not conduct a sale advertised with the phrase "going out of business," "closing out," "shutting doors forever," or "bankruptcy sale"; the word "foreclosure" or "bankruptcy"; or a similar phrase or word indicating that an enterprise is ceasing business unless the business is closing all of its operations in a county and in all of the counties immediately adjacent to that county and follows the procedures required by this subchapter. (b) A person may not fraudulently represent that the person is conducting a going out of business sale.

In high school I was working at a failing grocery store that decided to go out of business. In the weeks prior to the going out of business sale we marked up everything in the store by at least 33%. Then we had the "sale".

I remember the manager telling me we were making $30,000 a day during the week-long sale. I guess "going out of business" is good business, haha.

Yeah, I remember a few years back when a lot of businesses were going out of business reading online accounts of these tactics.

One that especially sticks out is when the Circuit City chain went under. I remember reading about how they brought in an outside company to handle the sales, and the first order of business was to raise all the prices on everything in the store. DVDs that they couldn't sale at $10 were suddenly flying off the shelves at $20 (don't remember the exact numbers).

It makes you realize what a fine line (which each person has to draw for themself) there is between clever marketing and slimy, manipulative tactics.

This practice is an interesting play on expectations; namely, that a fire sale implies deep discounts on goods. It is similar to the tactic used at Black Friday at just about every major retailer: have a few major loss-leaders in your ad, and discreetly mark up everything else in the store.

Is this manipulative? I wouldn't call it that, at least not more than any other retail tactic. Consumers have more price information available to them than ever before, yet they are still amazingly susceptible to the idea that they are getting a good deal, nevermind that the widget that they are saving 25% on costs half as much on Amazon. If using psychology as a sales tool is unethical, then the idea of advertisement and "sales" must be as well.

Free markets are only efficient if consumers act rationally. In addition to being unethical, manipulative marketing is bad for the economy. It's in everyone's long term interest to regulate false advertising.

This happens at a smaller scale all the time, too. One example that stood out at me was my local grocery store's store-brand salsa (which is surprisingly good). Used to go for $2/bottle. After a while, they bumped the price up to $3/bottle, and then put it "on sale" for $2/bottle. No idea if it increased sales at all, but that "sale" has been a permanent fixture ever since.

People's perception of prices can be really malleable, so it can pay off a lot to have a high price in a location where people will be expecting the price to be better than usual.

I went into Circuit City during their sale and was not at all surprised at how expensive everything was. What I was surprised by, though, were the people who were paying those prices in a store that wouldn't be around to provide any service.

This is common supermarket practice in the UK, they buy product in and put it on sale at a high price and then after 30 days they're allowed to slap sale signs around them. It's most obvious with wine (the amount of £5 reduced from £10 bottles which are clearly not worth £10 is astonishing).

Pretty much every furniture store in the area has been going of out business for the last 5 years. Then they move down the street and then go out of business again. It is like a game. Is there a school where all the furniture store owners go and it teaches that specific business practice?

I'm guessing that is done to get out of a lease. commercial lease costs have tanked throughout much of the country over the last few years.

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