How to Have a Successful “Going Out of Business” Sale
COVID-19 has impacted our lives in many ways. Some of them are temporary while others are most likely permanent.
While online shopping is booming, brick-and-mortar retailers are forced to restructure their business model, with the majority struggling to keep their stores open. Retail research firm Coresight reports that, in 2020, more physical stores will close their doors than ever before.
While this may seem like bad news, it is one of the best ways to minimize damage, while providing fast cash to support the remaining store locations.
If you are wondering how to have a successful “going out of business” sale, you’re in the right place. This post will outline the exact steps you need to follow to make the most from this difficult situation.
How to Have a Successful “Going Out of Business” Sale
To maximize the rewards of an otherwise costly decision, you will need to create a “going out of business” sale plan. The purpose of this plan is to sell all of the store’s remaining inventory in the most effective (and rewarding) way.
The process may seem pretty straightforward. Simply slap some large discount stickers on the store’s windows and call it a day. The higher the discount the better.
While this may have worked in the past, it no longer offers any guarantees. Today, the process requires strategic planning and targeted advertising.
The following walkthrough may not be a guarantee to success, but it helps you structure a plan and remove the guesswork. Let’s take a look at the steps you need to follow to create your plan:
Step 1 - Analyse customer data
The first and most important step of the process is to analyze existing customer data. This will give you useful insights, such as :
- What type of items are sold more frequently
- Which segments are responsible for the majority of purchases
- Your best-performing promotion channels
Why is this important?
- To help you create more targeted advertising tactics.
- To strategically position less popular items where they are visible.
- To understand how heavily you need to discount particular items.
Where to get the data from
- POS (Point Of Sale) system reports
- Email marketing software metrics
- Foot traffic analytics
Step 2 - Establish a promotional budget
Before you structure your sale plan, you will need to make a data-based decision on the budget you can allocate towards your promotional efforts.
Why is this important
- To know which advertising channels to prioritize
- To know the limitations of your marketing efforts
- Maximize exposure while spending the least amount of money
How to estimate an advertising budget
While it is difficult to give a “one-size-fits-all” answer, companies will usually establish a promotional budget based on expected and past revenue numbers. Estimations can also be made by looking at data from previous discount/sale seasons.
The final budget varies from business to business. Depending on the industry, it can range from 1% of (expected) sales to over 20%. And with “going out of business” sales, there is usually not much data to elaborate on.
Step 3 - Develop the strategy
With a solid budget and hard data, you can now think of creative ways to inform your audience about the upcoming sale. This is usually done by creating a report with a detailed explanation of the strategy.
Why is this important
- To get approval and support from the decision-making parties.
- To create an overview that will streamline the execution process.
What the strategy report should contain
- Limitations and constraints - budget, timeframe, location, state laws, etc.
- Changes in policies - coupons, gift cards, and item returns.
- Selection of promotional channels - based on prior data.
- Steps of execution - in case another team or the store’s employees take over.
- Expected outcome - based on data-driven estimations.
- Follow-up tasks (e.g. Remove the store from Google My Business).
Step 4 - Implement the plan
It is now time to put the plan in action. Educate all involved parties on how to have a successful “going out of business” sale” through the strategy you created. Your high-level tasks will be broken down into detailed steps that all involved parties are expected to follow.
After the plan is executed and the sale is concluded, measure results and see if they align with the expectations. You can also measure the effectiveness of your plan at particular points during the sale to determine how high your discounts should be.
The information you gather will give further insights that can be used in case other store locations have to go through a similar process in the future.
If you want to get even more insights (quantitative data) into the customer experience, you can send surveys through followup email marketing campaigns. Here is an easy way to do this:
Going Out of Business Sale advertising tips
Most retailers focus the majority of their efforts on digital, value-driven advertising. Many of these promotional practices can be applied in this type of sale as well. You need to keep in mind, however, that the priority of this particular sale is to attract the local population. This means that you will need to implement marketing tactics that focus on a particular segment of your audience.
Consider doing the following
Emphasize the fact that your store is closing and that the goal is to sell off everything. There are different methods that you can use for this:
- Allocate part of the budget for old-school advertising, like radio commercials, regional and major city newspapers, as well as billboards. To understand which mediums perform best, review previous marketing campaigns.
- Develop and deliver flyers (direct mail promotion) to addresses in close proximity to the store. The leaflet may contain additional discount coupons to further motivate potential customers to visit the store.
- Create email marketing campaigns for relevant segments of your list (based on geographic location).
- Place sign walkers and standing boards outside the store to increase foot traffic.
- Promote the sale on your social media channels for further exposure.
After all the above is considered, you can place those large and colorful discount stickers on the store’s windows and open up your doors for one last time!
How long can you run a Going Out of Business Sale?
Liquidation sales usually last between 8 and 10 weeks, with some stores stretching the duration up to 12 weeks. This doesn’t mean that the customers should be aware of the timeframe. Many stores choose to keep this information private to create an increased sense of urgency.
The timeframe of the sale also affects the pricing of items. Discount numbers usually increase as the sale is progressing. Towards the end of the sale, some items could even be sold at production cost.
For example, if you plan to host a 10-week liquidation sale, offer a small discount (e.g. 10%) off normal prices during the first 4 weeks. Then, as the sale comes to a close, increase the discounts accordingly (30%-50%, etc.).
Should you find another word for “Going Out of Business”?
The term “going out of business” and “liquidation” is often used internally to describe the final sale of a store’s branch.
Using the term to boost your advertising efforts is a gamble when other store locations remain open. And the odds are usually against you. While it may increase foot traffic temporarily, it can hurt the reputation of your brand.
Instead, consider using short terms that instill a feeling of urgency and excitement. Here are a few options to consider:
- Final Sale
- Store Closing Sale
- Clearance Sale
While it may seem obvious, don’t forget to highlight the store and location in all your promotional material. Customers often misunderstand liquidation sales as a brand-wide phenomenon.
You should now have a clear overview of how to have a going out of business sale. The walkthrough above should give you sufficient information to structure the sale without missing out on any important details. To summarize, here are the points we touched upon:
- The importance of data analysis
- Establishing a budget
- Creating a strategy
- Implementing the plan
- Promotion & terminology tips
Now it’s your turn. Take the information you learned in this post and develop a strategy for your upcoming sale. The more detailed the plan, the less surprises you can expect.
Frequently Asked Questions
If you still have questions on how to have a successful “Going Out of Business” sale, make sure to skim through the following Q&A section.
Which stores are going out of business in 2020?
To get a complete overview of the 6000+ US stores that are closing their doors in 2020, check this post. You can get a lot of ideas for your upcoming sale by further researching the liquidated stores individually.
How do retail stores restructure their business models?
Many brands still have a weak online presence. By restructuring their business models, they place more emphasis on their e-commerce stores, which are currently performing better than their physical alternatives. Due to that, they may decrease the number of people they currently employ in the latest.