How GOB and Store Closure ‘Augment’ Efforts Benefit Both Retailer Stakeholders and Suppliers

Consumer desire for convenience, speed and the resultant increase in online shopping has dramatically altered the retail landscape. With greatly diminished foot traffic in stores and retail spending now strapped by inflationary pressure on consumer pocketbooks, we've seen record numbers of retail bankruptcies, restructurings, and associated store closures in 2023.

When a retail operator goes out of business or strategically closes certain stores, sales events are conducted in those stores to sell off remaining inventory. The goal in such instances, of course, is to sell as much merchandise as possible within a limited time frame, while maximizing return for the business or its creditors and stakeholders before ceasing associated operations.

Third-party providers specialize in the monetization of these assets and are brought in by operators to assist with this process. In addition to assessing the quantity, composition and value of the inventory on hand, these experts help set the pricing strategies that will be most effective in enticing consumers to purchase the remaining inventory during the limited store closing sale period. Additionally, they frequently assist with modifying the store layout, placing displays and signage associated with the event, and marketing it to consumers to maximize foot traffic.

There's also another very highly specialized aspect of these closures that plays a critical role in delivering the best possible outcome for retail operators and, at the same time, can greatly benefit their suppliers and other manufacturers/distributors in possession of excess inventory.

When a retailer declares bankruptcy and plans to close its stores, these third-party providers are frequently called upon to help augment the merchandise that an operator has in stores and at distribution centers. This augmentation serves to ensure there will be enough merchandise and variety to appeal to consumers over the course of the going out of business (GOB) or store closing sale.

Whether an operator is shuttering all its retail stores, is simply closing nonproductive and end-of-lease locations, or is exiting a geographic portion of a state or the country, augmenting existing inventory is an important part of a liquidation strategy for retailers. Supplementing that inventory with relevant merchandise that's consistent with the type of items loyal shoppers have seen and purchased over their years of shopping in those stores (and that first-time shoppers coming specifically for the event might expect to find) is critical to ensuring successful GOB and closing event execution. This augment of merchandise can include highly desirable third-party brands, the store’s own private-label brands and, under certain circumstances, merchandise that has been meticulously de-branded to avoid conflict.

Interestingly, while retailers under these circumstances need this merchandise to ensure a successful outcome for closing sales, their suppliers frequently have a need to dispose of certain merchandise that can be an ideal fit for that purpose. Saddled with completed inventory that was never shipped when POs were cancelled by their distressed customers, manufacturers are often in possession of the very merchandise that can be used to augment closing stores. Due to its specialized nature and certain competitive restrictions, we've seen that recovering value from this type of branded and private-labeled merchandise can present quite a challenge for a supplier, manufacturer or distributor on their own.

Integrating an augment strategy into liquidation efforts is an obvious significant benefit to retailers and increasingly to suppliers to quickly monetize these unproductive assets, thereby freeing up valuable warehouse space and enabling the redeployment of capital toward the production of new customer orders and other profitable endeavors as well as to customers who have the benefit of the expanded inventory from which to purchase.

Raymundo Armendariz is CEO of Hilco Wholesale Solutions, a company that assists retailers, manufacturers, and trademark holders in re-marketing unproductive, aged, and out-of-season inventory. Katie Feodoroff is senior vice president of Hilco Wholesale Solutions.