Warehouse sales undergo wholesale decline

Beth Salzl used to drop about $100 at the Thymes warehouse sale every year.

She loved the discounts so much that for the past several years she took a day off work to be one of the first of hundreds in line to get the best selection of eucalyptus-scented bath oils, perfumes and soaps. "You can't beat the deals," said the Roseville resident.

She'll have to look elsewhere for bargains. Thymes is among a growing number of Twin Cities companies that have dropped their warehouse sales, along with Europa Import near White Bear Lake, Manhattan Toy in Minneapolis and Illume Candles in Bloomington.

Retailers have long seen the sales as a great way to clear out unsold inventory while generating buzz among customers. But changes in the supply chain mean there's less unsold stuff, and the Internet offers new and often easier ways to get rid of it.

"Everyone is getting sharper about inventory control," said Jim McComb, a Minneapolis retail expert. "It trickles down from retailers to wholesalers to manufacturers. It's a permanent change."

Both Thymes and Europa indicated that they canceled their fall sales because of a lack of excess inventory. Unwanted merchandise -- last year's models, the scratched and dented, the overruns -- is more likely to show up online now.

In its e-mail to sale regulars saying that a fall sale would not be held this year, Minneapolis-based Thymes directed its customers to its website, where a handful of clearance items are sold.

"So much of the overruns and the closeouts have moved to the Web," said George John, a marketing professor at the University of Minnesota's Carlson School of Management. "The Internet is now the outlet of choice."

While that's cold comfort for frugal fans used to seeing scores of items on clearance tables, manufacturers and wholesalers see it differently. Bill Douglas, the owner of Europa Import, said canceling a warehouse sale because of a lack of merchandise is "a good thing."

Douglas, whose company is a wholesaler and importer of giftware, candles, candleholders and glassware from Europe and Asia, said he's much more careful about what he buys now. "We're 10 to 20 percent lighter in inventory now. In a tighter economy, you take fewer chances."

Inconvenient, but profitable

Stroke of the Heart, a greeting card manufacturer in Minnetonka, has had semiannual warehouse sales for 20 years, but Chief Operating Officer Kristin Noraker said she'd like to be able to drop them. "It disrupts our warehouse for a week and a half while we get ready for the sale," she said.

Gage & Gage Inc., a retail packaging re-distributor in Shakopee that sells bows, ribbons and decorative boxes, usually breaks even at its sale, said owner Deborah Gage Schmitz.

She's considering dropping the sales when the warehouse lease is up in a couple of years but will still have the problem of what to do with discontinued colors and styles.

"Certain colors will always fall out of favor and need to be liquidated," she said. "I could try to sell the excess online, but then I'd have to sell in full cases and deal with handling and freight."

Not giving up

Retailers, wholesalers and manufacturers who don't have enough leftovers to hold a sale may be bowing out, but several owners said that warehouse sales can serve purposes other than liquidating discontinued merchandise.

"We used to get rid of only distressed merchandise when we first started," said Carla Warner, director of sales. "Now it's a different animal. Ninety percent of the inventory is new merchandise brought in at special prices just for the sale."

Even though the merchandise is purchased specifically for the sale, Warner said it's still necessary to offer cut-rate pricing or shoppers would walk away.

North Aire Market, a dried soup and gourmet foods manufacturer in Shakopee, also plans to maintain its warehouse sales.

Big Lots has expressed an interest in its overstocks, but the nationwide liquidator usually wants more product than the Shakopee manufacturer has to sell, said North Aire co-owner Maggie Mortensen.

It isn't poor inventory management that gives Mortensen enough product for two to three sales a year -- it's the frequent change in ingredients. Every time the soup maker has a change in the ingredient deck, it has to change the packaging, she said. Since retailers don't want an old and a new package on the shelf, the company clears out the old packaging at the warehouse sale.

"The sale is an opportunity to get to know our customers," Mortensen said. "They're honest about why they like or don't like a product. Or they tell us what they add to our soups to make it their own. That's important to us."