Beware: Wolf/Ritz "going out of business" sale. A few things you may not know.

There is usually a liquidation company hired to sell the merchandise and fixtures. Always when a bankruptcy or a large retail company is going out of business. The regular employees and management do not have the expertise to run a going out of business sale properly.

One liquidation company uses signs with red and yellow on a white background. The liquidation company will advertise and announcing the sale and progressively offers higher discounts until everything is sold that can be sold.

Liquidation companies will first close the story for several days to get ready for the sale. They may or may not keep some of the regular employees to work the sale. If they do, then the employee will work and get paid by the liquidation company. Usually they bring in their own employees and their management will always manage the sale.

When the story reopens the merchandise will be marked up by a set amount. When you buy something the discount will be taken off the marked up amount. The liquidation company makes some of their money from the contract they get to conduct the "going out of business sale" and the markup. If the markup is 10% then they make 10% over what the item sells for.

Several factors go into what the markup amount will be. These are generally but not always: The type of merchandise and condition of the merchandise being sold. The geographical location of the retail story. Some areas can demand more markup then others. A store in Beverly Hills would have a higher markup then say a store in Podunk, TX. The liquidation company's contract always includes a time limit on how long the liquidation will take. The sales volume determines the timing and the amount of the discounts given to meet that time limit. The contract also determines the amount of money the liquidation company will need to give the bankruptcy court for creditors or owners if not a bankruptcy. The difference is the profit the liquidation company makes. This prevents the liquidation company from just selling everything at whatever price they want too and pocketing the money.

Liquidation companies want the public to think that the going out of business company is conduction the sale not a specialty company that only does "going out of business" sales.

Going out of business sales work because many people tend to believe that they are getting a good deal because it IS a "going out of business sale" and they are getting a big discount. People tend to buy items that they do not need simply because they think they are getting a good deal. People also assume the company going out of business is conducting the sale when in fact it is a company that specializes in liquidations and makes their money doing these types of sales.

You can generally get some good buys but you need to know what you can buy the items for somewhere else. Realize that the sale is final and you may not even get a warranty from the manufacture so try to test out the item before buying.

Remember. There is no such thing as a free lunch. There are almost always strings attached. It is "Buyer Beware".

When Borders went under, Borders employees stayed on until the very end, and they were paid by Borders Group, not the liquidation company. Prices were never marked up, but at the beginning of the liquidation, prices were only marked down 10-40%, depending on the merchandise. During the final four days, prices were marked down "up to 90%" but there really wasn't anything left that anyone other than a garage sale specialist would want.

That surprises me but there are exceptions to everything.

The bankruptcy courts normally insist on a liquidation company because employees cost more and normally are terminated before the sale starts. If employees are used they usually have been terminated from the bankrupt company and rehired by the liquidation company at an hourly rate and with no benefits.

It is all about preserving money for the creditors. We live with exceptions. The judge is in control in a bankruptcy and they have wide decision.

Our benefits at Borders lasted well beyond the final closing. The #1 store, right here in San Diego's Mission Valley, wasn't the final store to close. Five others went a couple of weeks longer, but our benefits didn't end until December 31, 2011, a little more than three months after the final store closed. After that we got COBRA, of course, and unemployment benefits from the Borders account.

We thought the Mission Valley store was going to be bought by a company in Texas, but the creditors ultimately said no. I thought it was interesting that creditors didn't really want to save anything; they just wanted their money as quickly as possible.