By JENNIFER SARANOW and RAY A. SMITH
Shoppers in Siberia and remote parts of Pakistan and Africa have a chance to get a good deal on clothes that went begging for buyers in the U.S. during the holiday season.
Far-flung locales are among the markets being tapped as liquidators scurry to unload an unprecedented excess of apparel and other goods they are getting from retailers and manufacturers. The retail world’s inventory cleaners, which include liquidators, off-price retailers and mom-and-pop close-out shops, say precise figures for the extra inventory aren’t available. But all say the business is booming.
“There is a historic glut of goods,” especially in clothing, says Irwin Jacobs, the former corporate raider who has been a wholesale liquidator for half a century. His Jacobs Trading Co., in Plymouth, Minn., has long sold outcasts to other resellers around the world. But only recently have his goods wound up in certain distant enclaves such as Siberia.
Crowds seeking bargains mobbed some Circuit City Stores Inc. over the weekend as the 567-store chain began close-out sales, with discounts of 10% to 30%. “People love grand openings and they love the grand closing,” said Jim Schaye, chief executive of Hudson Capital Partners LLC, one of four liquidators handling the chain’s wind down.
Off-price chains such as Loehmann’s, T.J. Maxx and web sites such as Overstock.com that traditionally were the prime beneficiaries of retail misfires have been unable to absorb the huge surplus this year. They also have become pickier about what they will buy as their sales slowed.
“There is a ton of product out there across the board,” says Sherry Lang, spokeswoman for TJX Cos., which runs the T.J. Maxx and Marshalls chains.
The scramble to unload unsold goods caps months of deep discounting by retailers who have tried desperately to get their inventories in line with the plunge in consumer demand.
Their troubles have put liquidators at center stage in the industry’s very anxious search for a home for an unusually rich collection of unsold goods.
Bill Angrick, chief executive of Liquidity Services Inc., which runs Liquidation.com, says the web site is carrying more high-end apparel and accessories — by Michael Kors, Oscar de la Renta, and Coach Inc. Buyers now include a higher percentage of mom-and-pop eBay and Amazon.com power sellers, he said.
Mr. Angrick said he is finding a new market in resellers who cater to Hispanic shoppers in smaller U.S. cities, such as Fullerton, Calif., and in regions such as central New Jersey.
All of this is good news for consumers who are in the financial position and mood to buy. By the time they reach the end of the line, goods typically sell for only a fraction of the price originally contemplated by retailers.
At Hudson Salvage LLC’s Dirt Cheap and Treasure Hunt stores in Mississippi, Louisiana and Alabama, for instance, women’s blouses, dresses and pants initially intended to sell at other stores for as much as $140 each are now priced at $6.99, a bigger discount than in the past.
“For the first time in my memory, we are facing more competitive discounting (by full-price retailers) and so we are having to go further down the discount curve,” says Robert Aaron Roberts, Hudson’s chief executive.
At the same time, the 45-store discount retailer is being bombarded with more offers from retailers and suppliers all looking to unload more apparel than usual, Mr. Roberts said. The increase in available merchandise “really started in October and is hitting a crescendo now,” he said.
Hudson Capital Partners, meanwhile, is turning down some requests from manufacturers to add inventory to its store-liquidations, says Mr. Schaye. He recently refused to give many suppliers to department-store chain Mervyn’s LLC the chance to include their excess apparel in the chain’s going-out-of-business sale.
No one really knows when consumers will start routine spending again although industry experts expect retailers to have their inventories in line with demand by late summer or early fall.
But with sales still running way below last year’s levels and retailers canceling orders for spring and early summer goods, the pipeline is expected to remain full, at least for the short term. “Spring will be bad, but not quite as bad” as the holiday season, says Antony Karabus, chief executive of consultant Karabus Management.
In the meantime, even off-price retailers may add to the pile. Inventories at some off-price chains appear heavier than a year ago, analysts say.
“Every retailer you can imagine has had inventory problems,” said Hudson Salvage’s Mr. Roberts.
Write to Jennifer Saranow at firstname.lastname@example.org and Ray A. Smith at email@example.com
Printed in The Wall Street Journal, page B1