How to Prepare for a Shoe Store Liquidation

By Alan Miklofsky, 10/16/24

Deciding to close a shoe store and liquidate its inventory is one of the most difficult decisions a business owner can make. Whether the closure is driven by financial challenges, retirement, or market changes, executing a well-planned liquidation is crucial to recovering as much value as possible and minimizing complications. A successful liquidation requires careful preparation and execution, often balancing the need to maximize returns with maintaining goodwill. This article outlines key steps and strategies to guide you through the process.

1. Assess Your Financial Position and Obligations

Before launching a liquidation, evaluate your financial standing. Determine how much is owed to creditors, suppliers, landlords, and employees. Create a list of financial obligations, prioritizing what must be paid first, such as rent or payroll, and assess any loans or credit agreements that could impact your liquidation.

This is also the time to decide whether to hire a liquidation consultant or firm. Professional liquidators can expedite the process and improve returns but will charge a percentage of the proceeds. If your store has a large inventory, high-value fixtures, or multiple locations, professional help may be worthwhile.

2. Notify Key Stakeholders

Inform key stakeholders about the upcoming liquidation as early as possible to avoid misunderstandings and legal trouble. Notify your:

• Landlord: Review your lease for obligations upon closure, such as penalties or restoration clauses.

• Employees: Provide honest communication about timelines and severance (if applicable). Many states have rules about advance notice under the WARN Act.

• Vendors: Alert your suppliers to any outstanding orders you may need to cancel and coordinate product returns if applicable. Some vendors might reclaim unsold goods through buy-back programs, especially for recent inventory.

3. Analyze and Segment Your Inventory

The heart of any shoe store liquidation is selling off the remaining inventory. Group your merchandise into categories to develop an effective pricing strategy:

• Core Inventory: Shoes that are in season and still desirable to customers.

• Aged or Out-of-Season Stock: Older styles or items unlikely to sell at regular prices.

• Damaged or Defective Merchandise: Items that need heavy markdowns or may be sold “as-is” in bulk.

Keep in mind that all inventory needs to be priced to move quickly. Aggressive discounts should escalate as the liquidation progresses, creating urgency among buyers while ensuring most products are sold by the end of the process.

4. Develop a Marketing Plan to Promote the Liquidation Sale

A successful liquidation sale depends on attracting as many customers as possible in a short time. Your marketing should reflect a sense of urgency and leverage all available channels:

• Email Campaigns: Reach out to your existing customer base with exclusive previews or early discounts.

• In-Store and Window Signage: Use bold, clear signage to advertise markdowns.

• Social Media and Local Ads: Announce the sale online and through local media to reach potential buyers in the area.

• Third-Party Marketplaces: Use platforms like eBay or Poshmark to sell unique or slow-moving inventory.

Some liquidators recommend using tiered messaging: Start the sale at “20-40% off,” then increase discounts weekly or biweekly. This creates a sense of momentum and encourages customers to return for better deals.

5. Sell Fixtures, Furniture, and Equipment (FFE)

Beyond shoes and accessories, your store’s furniture, fixtures, and equipment (FFE) can generate additional income. From shelving units to point-of-sale systems, many items can be sold to other retailers or through online marketplaces. Consider bundling lower-value items to speed up the sale process.

If the landlord is interested in taking over any equipment (e.g., built-in shelving), negotiate a buyout as part of your lease termination discussions.

6. Manage Personnel During the Process

Keeping employees motivated during a liquidation can be challenging. Offer retention bonuses to key staff members who stay until the end of the process. Be clear about their roles and expectations, and provide proper training on handling the influx of customers, returns, and markdowns.

Some employees may feel uncertain or demoralized by the store’s closure. Maintain open communication and show appreciation for their work, even under difficult circumstances. Their dedication during this time will ensure smooth operations and positive customer interactions.

7. Address Legal and Compliance Requirements

Liquidations are subject to various local, state, and federal regulations. Check whether you need a special permit to conduct a liquidation sale, as some municipalities have rules around advertising and sale duration.
Additionally, if you have outstanding loans or obligations with personal guarantees, consult a lawyer or financial advisor to understand your liability during the liquidation process.

8. Keep Track of All Proceeds and Expenses

During liquidation, it’s essential to keep meticulous records of all transactions, including cash inflows and outflows. Track:

• Proceeds from inventory sales

• FFE sales revenue

• Employee payouts (e.g., bonuses, wages)

• Remaining debts and payments to creditors

Having a detailed financial report will allow you to reconcile final accounts, pay off creditors, and prepare any remaining funds for yourself or other stakeholders. You may also need these records for tax reporting purposes.

9. Evaluate Any Remaining Inventory or Assets

As the liquidation sale winds down, assess any unsold inventory. You have a few options for dealing with leftover products:

• Donate to Charity: Some charities accept shoe donations and provide tax deductions.

• Sell in Bulk to Jobbers: Wholesale buyers might purchase leftover stock at steep discounts.

• Offer Flash Sales Online: A last-ditch effort to move remaining merchandise.

10. Plan for the Store’s Closure

Once the liquidation is complete, focus on winding down operations. This includes:

• Settling Final Debts: Pay off vendors, creditors, and taxes.

• Lease Termination: Coordinate the return of the premises to the landlord and ensure compliance with any lease requirements.

• Dispose of Remaining Assets: Arrange for disposal or donation of unsold equipment or fixtures.

Finally, ensure all customer service matters are handled—whether it’s processing returns, managing warranties, or notifying loyalty program members about the closure. Ending on a positive note will protect your personal reputation, which could be crucial for future endeavors.

Conclusion

While liquidation can be a difficult and emotional process, it doesn’t have to be chaotic or haphazard. Proper preparation, transparent communication, and methodical execution are key to maximizing returns and minimizing stress. By following these steps, you’ll be able to close your store with dignity and make the most of the remaining value in your business.

Liquidating a shoe store is not just about selling off inventory—it’s about closing one chapter gracefully and preparing for the next with confidence.