Slow Sales Mean Big Business For Some Liquidators

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Warehouse stocked up almost to the ceiling in Illinois. i

Boxes of merchandise are stacked almost all the way to the ceiling in warehouse space Enable Holdings leases in Naperville, Ill. Jennifer Brandel for NPR hide caption

itoggle caption Jennifer Brandel for NPR
Warehouse stocked up almost to the ceiling in Illinois.

Boxes of merchandise are stacked almost all the way to the ceiling in warehouse space Enable Holdings leases in Naperville, Ill.

Jennifer Brandel for NPR
Conveyor belts full of merchandise in warehouse. i

Boxes full of merchandise zip along conveyer belt arteries to waiting trucks at the warehouse where Enable Holdings leases space. More that $2 million worth of electronics comes into this warehouse each week. Jennifer Brandel for NPR hide caption

itoggle caption Jennifer Brandel for NPR
Conveyor belts full of merchandise in warehouse.

Boxes full of merchandise zip along conveyer belt arteries to waiting trucks at the warehouse where Enable Holdings leases space. More that $2 million worth of electronics comes into this warehouse each week.

Jennifer Brandel for NPR
Unloading a truck at liquidation warehouse. i

Items purchased by consumers are loaded into truck trailers for delivery at a warehouse in Naperville, Ill. Jennifer Brandel for NPR hide caption

itoggle caption Jennifer Brandel for NPR
Unloading a truck at liquidation warehouse.

Items purchased by consumers are loaded into truck trailers for delivery at a warehouse in Naperville, Ill.

Jennifer Brandel for NPR

Retailers suffered through an awful holiday season, and for many, the trouble is far from over. But for some companies, a dismal retail environment can actually be good for business. It's a high time for companies that specialize in offloading inventory, like Enable Holdings.

You might say that Enable Holdings is in the "after retail" business — it takes on the items stores don't sell and markets the stuff itself — often at a major discount.

"Anything you see on the market," says Peter Gayton, a project coordinator with Enable Holdings, "it's going to be here."

At Enable's leased warehouse in Naperville, Ill., forklifts move around merchandise stacked almost to the ceiling. Gayton says more than $2 million worth of electronics comes into this warehouse almost every week.

"Mitsubishi, Nokia, LG — let's see — there's Yamaha, and pretty much a lot of brand names," Gayton says.

Right now, there are a lot of flat-screen televisions in the warehouse, and Enable Holdings gets the products either directly from retailers or from the manufacturers that supply them.

"Let's say the new model comes out and they have a whole bunch of boxes full of last year's model still in a warehouse. They need to sell those, get that asset off the books, and they need to clear out space in the warehouse to take shipment of new product," explains Jeff Hoffman, the company's CEO. "So there's a lot of reasons that they can't afford to have this stuff just pile up in a warehouse somewhere."

Enable Holdings turns around and sells the products directly to consumers through its Web sites, ubid.com and redtag.com. It also holds warehouse sales and sells to discount retailers.

Hoffman says that once the post-holiday sales wind down, his company will be very busy. And, if predictions about retail bankruptcies become a reality, he expects to get calls from suppliers left in the lurch by stores that are shutting down.

"And then suddenly you have all these creditors that suddenly own warehouses filled with inventory, so we're getting flooded with inventory from all sides in the retail world right now," Hoffman says.

'This Is Liquidation Time'

Howard Davidowitz, a retail analyst, has been one of the loudest voices predicting store closings and bankruptcies in 2009.

"This is liquidation time," says Davidowitz. "In January and February, we'll see lots of announcements — and it will be very ugly."

That's where liquidators like Hilco Merchant Resources come in. It has a different business model from Enable.

Hilco comes in and takes over a store that's set to close. It keeps the employees on and rapidly tries to sell everything in the store, right down to the fixtures on the walls.

Hilco is currently closing down 150 stores for Circuit City and wrapping up the liquidation of Linens 'n Things.

"It is great to be in liquidation in the sense that we're going to have a lot of business," says Cory Lipoff, co-owner of Hilco.

But he's nervous about how the lousy economy is going to affect the liquidation industry.

Hilco hires people to stand on street corners and hold signs advertising liquidation discounts. The discounts start out small and work their way up as the merchandise thins out.

But these days, Lipoff says consumers are ultra price-conscious and they aren't responding to sales the way they have in the past.

"If you see a sign that says 30 to 60 [percent off], historically, that's a tremendous discount on wonderful items," says Lipoff. "And in many instances it still is." But now almost every store in the mall is offering discounts like that or better, so liquidation sales aren't as much of a draw.

Lipoff says even the market for fixtures — like shelving and cash registers — is weak because so many stores are currently closing their doors.

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