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The Undertakers Of The Retail Industry
Originally published on Wed January 4, 2012 5:13 pm
When the internet kills a big box retailer, Gordon Brothers is the undertaker.
"They're stuck with selling the things that are inside the box," says bankruptcy lawyer Steve Jakubowski.
Gordon Brothers specializes in retail liquidations. When a store dies, they put on a suit, greet the guests and sell them whatever remains. And that means everything — not just books and clothing and DVDs, but shelves, lighting fixtures, even the chairs.
The liquidators can make a lot of money off the stuff inside the box. Jakubowski says when Borders was liquidated, liquidators bought the merchandise at 72 percent off inventory cost to Borders.
"But remember when they sell it at retail, let's just assume that everybody marks it up double, " says Jakubowski.
Any deals that the store was already offering, the liquidators erase that and start from the top. As the days tick by to closing, the price is methodically slashed.
One thing the liquidators don't have is their own staff to run the store or their own accounting department to pay out the last checks. They use the staff of the store that's closing.
Sym's is a sister brand of Filene's Basement, and they're going out of business together. Teresa Soto worked at Sym's in Secaucus, NJ for 23 years. Here last day was a week ago, and she told me there was one thing she wanted to get at her store's liquidation sale.
"I think I'm going to buy my chair, " said Soto. Soto worked in the store's accounting department, and she sat in the same chair for decades.
Right now is a perfect moment for a liquidator. The economy is bad enough that big companies are going out of business, but good enough that customers will come and buy the stuff that's for sale. Of course, it's not a perfect moment for anyone to be out of a job.
ROBERT SIEGEL, HOST:
Sears has it rough, but it's still in business. This year, we've seen a string of major retailers going bankrupt - among them Borders, Blockbuster and Filene's Basement. It's been especially hard for retail businesses that couldn't keep up with changes in the way we shop online. Borders, for example, never offered a tablet or an E-reader to compete with Amazon and Barnes & Noble.
But this economy is a gold mine for one kind of company. All week, we're running a series on who's had a good year, and Zoe Chace of NPR's Planet Money team tells us that that group includes the liquidators.
ZOE CHACE, BYLINE: When the Internet kills you, Gordon Brothers is the undertaker.
STEVEN JAKUBOWSKI: The undertaker shows up when the company's professionals realize the game is over. There's no other options, let's call in the liquidators.
CHACE: Steven Jakubowski is a bankruptcy lawyer. He's worked with Gordon Brothers. They specialize in retail liquidations.
JAKUBOWSKI: They're stuck with selling the things that are inside the box.
CHACE: So that's CDs, books, clothes, DVDs. Listen, somebody dies, it's awful. But it would be worse if there were no undertaker, the sole discretion who handles the death of a business in a practiced, systematic fashion. That's what liquidators do. They put the suit on and greet the guests. I met Leti Rad(ph) in a wet, grey parking lot outside a Syms Department Store in Jersey.
LETI RAD: I got some bras, and I got a belt and seven pairs of sunglasses.
(SOUNDBITE OF LAUGHTER)
CHACE: Why did you need seven pairs?
RAD: They're 70 percent off.
(SOUNDBITE OF LAUGHTER)
CHACE: Syms is a sister brand of Filene's. They're going out of business together. You've seen these, the big, neon going-out-of-business posters on the windows, shoppers running in and out the door after rooting through $5 blazers.
Did you see the wedding dresses?
AIESHA GULGOU: I know. It's crazy cheap. It's - I want to get married again.
(SOUNDBITE OF LAUGHTER)
CHACE: Aeisha Gulgou(ph) bought a black cocktail dress, instead, for 30 bucks.
What do you think of the job that the liquidator is doing?
GULGOU: What do you mean by - I don't know what liquidator means.
CHACE: A liquidator is supposed to be invisible. But they are actually running this business. Syms sold all their inventory to Gordon Brothers. Gordon Brothers, along with another firm Hilcois, is running this sale, and the liquidators are the ones making money off it. That's why in a going-out-of-business sale, you'll also see the shelves for sale, the lighting fixtures, the chairs.
GULGOU: They even sell those shopping baskets for $30. Who's going to buy this? I don't know.
CHACE: Our bankruptcy lawyer, Steven Jakubowski, says take the case of the Borders liquidation, so major the five biggest liquidation firms in the country went in on it together.
JAKUBOWSKI: The liquidators came in and bought the merchandise at 72 percent of Borders' cost.
CHACE: So, like, 72 cents on the dollar.
JAKUBOWSKI: But remember when they sell it at retail, let's just assume that everybody marks it up double.
CHACE: Sure, Borders couldn't afford to keep the stores running. But that doesn't mean the actual books are valueless. In fact, any deals that Borders was already offering, the liquidators erase that and start from the top. So how do they figure out what people will actually pay for this stuff?
JAKUBOWSKI: The liquidators have a database, a retail database.
CHACE: A database with millions of barcodes in it. The liquidators have a secret book with all the prices you would ever see in a store.
JAKUBOWSKI: A nine-ounce bag of Lays Potato Chips, a basketball by Wilson for a child's size, every single variation of an item.
CHACE: So everything is priced by the book, and then they start cutting. Sunglasses that were $30 become five. As the days tick by to closing, the price is methodically slashed.
Is there a point where you would just burn everything?
JAKUBOWSKI: Oh, yeah. Absolutely.
CHACE: It's a pretty small bonfire. The liquidators know better than anyone that there's a market for almost everything.
Here's one thing the liquidators don't have: Their own staff to run the store, their own accounting department to pay out the last checks. So they use the staff of the store that's closing.
(SOUNDBITE OF LAUGHTER)
CHACE: Yup, that's what a newly fired accounting department sounds like. I stopped by the Feelgood cafe, in downtown Secaucus, where the Syms was closing. The ladies were eating apps(ph) and drinking margaritas. For the past few weeks, they've been let go basically one at a time. Teresa Soto worked at the Syms for 23 years.
TERESA SOTO: When is going to be my day? Maybe today, maybe tomorrow. And, you know, last Friday was my day.
CHACE: She sat in the same chair for decades.
SOTO: And I think I'm going to buy my chair. It's a good idea. You know, I think it's a good idea to buy.
CHACE: You're going to buy your chair?
SOTO: Yes, I'm going to buy. I'm going to go - tomorrow, I'm going to buy my chair. I'm going to take it with me home.
CHACE: Right now is a perfect moment for a liquidator. The economy's bad enough so big company's go out of business, but good enough so that customers will come and buy the stuff that's for sale. Of course, it's not a perfect moment for anyone to be out of a job. Zoe Chace, NPR News. Transcript provided by NPR, Copyright NPR.