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Real Deal

When A Competitor’s Going-Out-Of-Business Sale Lasts Four Months, A Jeweler Takes Action

For this retailer, the question is … to sue, or not to sue?

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It came as no surprise to local competitors last Nov. 15 when the signs went up at Glenwood Jewelers announcing their going out of business sale. Charles Glenwood had run the city’s oldest and most prominent fine jewelry store for nearly 40 years after taking it over from his father. His friends knew that he had been ready for retirement for some time, but just the thought of closing the fourth generation Southern store had him putting the decision off as long as possible. With their only child a pediatrician up north, no other family members interested and no outside buyers on the horizon, Charles and his wife had finally chosen to engage the transition sale company with whom they’d been talking since the beginning of the year. 

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected]

Dale Van Ander was not particularly happy with the timing of the sale. Only one strip center separated his store, Van Ander Diamonds, from Glenwood’s. He knew that it was smart of Charles to run his GOB sale over Christmas, but he hated that his sales would surely take a hit — with his store possibly finishing behind the previous year for only the second time since they opened in 1999. 

In fact, Van Ander Diamonds had long been a thorn in Charles Glenwood’s side. Though Glenwood’s was the “traditional” store and Van Ander’s the more contemporary and modern, Charles still saw them as fierce competitors. Rapid growth, numerous awards and a steady rise to local, state and even national prominence did little to change Charles’ perception of Dale and his company. He still considered them “tawdry newcomers” — a sentiment he was fond of sharing with both vendors and customers.

Despite their challenges over the years, Dale decided to take a philosophical approach to Glenwood’s sale. He and his team set what they believed to be reasonable goals for the season, and worked hard to put their best game forward, relying on their strong client relationships, unique designs, and (in his opinion) superior service and sales ability.

Glenwood’s transition company had done a great job getting the word out for the event, playing up the store’s long reputation for quality while advertising deep discounts, contests and other promotional efforts. Dale couldn’t begin to imagine what they must have spent on online and traditional marketing, banners, billboards, mass media and direct mail. At the end of December, despite their best efforts, Van Ander’s was off nearly 50 percent for the six-week season, and although they’d gone into November up six percent for the year, they finished 2017 two percent behind 2016.

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Dale and his team were not happy, but they knew that with Glenwood’s closing, they would get back everything they had lost during the sale and then some. Except that Glenwood’s didn’t close. The sale was originally advertised as “through Dec. 31 only.” In early January, however, they began promoting that the sale was being extended “by popular demand.” Shortly after Valentine’s Day, with the sale still running and his sales off nearly 40 percent year to date, Dale decided to take action.

He learned that city and state laws governing Going Out of Business sales contained very specific regulations designed to protect both consumers and other local businesses. According to the rules, businesses running GOB sales must secure a permit from the city. By state law, GOB events could not last more than 60 days (unless the merchant applied for a maximum 30 day extension), and could not offer new or supplemental inventory brought in specifically for the sale. In fact, businesses are required to post an inventory list with the state prior to the start of the sale. By Dale’s calculation, even if all of the other requirements had been met (and he was sure they hadn’t), the last possible day for their sale would have been Feb. 13. At the end of February, they were still advertising.

A call to the city’s records department confirmed that neither Glenwood’s nor the sale company had gotten a permit for the event and it seemed nothing was on file with the state either. Unfortunately, subsequent calls to the city solicitor, state’s attorney, attorney general, city police and sheriff’s departments proved to be nothing but a game of “pass the buck,” with no one wanting to take responsibility for the situation, even though Glenwood’s was clearly breaking the law.

On March 5, Dale took the city and Charles Glenwood to court, seeking a restraining order and cessation of the sale. Rather than shut the sale down, the city granted Glenwood’s the permit they were missing for the price of a small fine. Threatened with continuation of the lawsuit, Charles agreed to shut the sale down on March 15, remaining open “only for pick-ups and repairs.”

Glenwood’s did close, and since mid-March, Van Ander’s has seen somewhat of a rebound in their sales. The uptick, though, has not been enough to help Dale cover the nearly $300,000 in gross profit he lost during the four months of the sale. The loss has put Dale in a tenuous financial position for the first time in his company’s history.

The Big Questions

  • Is there anything Dale and his team could have done to better prepare for the impact of Glenwood’s sale?
  • Since the sale was illegal, Dale does have an opportunity to sue Charles Glenwood for loss of business, relying on a statute that has been untested in the state — but Dale is concerned about the expense with no assurance of success. Should he move forward and try to recover at least some of his loss?

Expanded Real Deal Responses

Mark R. Seneca Falls, NY

Every business should get to know the “going out of business” laws for the state or locality. If the ads are not correct, call the jeweler and the city to complain right away. File a complaint with the state attorney general. Keep copies of ads or record commercials. We experienced the same thing back in 2011. We opted not to sue and weathered the downturn. 

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Drue S. Albany, NY

I think the best thing that Dale can do is to look forward and never look back. He must stand tall and not discuss what Glenwood did to his clients.

I understand his frustration; in our area, we had a jeweler do the exact same thing, our Christmas sales were impacted slightly and he decided to continue the sale until after Valentine’s Day. It all worked out in the end and we are stronger than ever. I will not work on the pieces that were purchased during the sale for repairs, since once you touch it, you own it.

So Dale, don’t acknowledge any of the jewelry from the sale and put your best foot forward by offering the great service and product that you have had for years. 

Marc F. Houston, TX

I’ve had this experience several times in the last 33 years. The best promotions I used were (and if it didn’t start to work in two days, I would switch them out)

“Going Out For Business,” “We’ll Be Here To Serve You When Others Fail,”

“Sell Us Your LOSING Lottery Tickets Today,” and “Free GIA Graduate Appraisals On Your Diamond Purchased From XYZ Sore Here.” All of these are traffic builders, and when you have traffic, you will have sales.

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Let’s remember it is a free market. If your neighbor fails, be kind to them, wish them well and thank them for the golden opportunity they are giving you! 

Buddy B. Merion, PA

My advice is move on. The store that closed did his best to close the store and perhaps he had more inventory left that he needed to unload. The fact that he did not apply for a license or permit in my opinion is noteworthy but should not be cause for a suit or legal action. There are some vague rules that differ from state to state and city to city, and most of them go unenforced. I would just suck it up, move on and look to the future. 

David B. Calgary, AB

I have had GOB sales around me many times over a 38-year history and they will happen again. They do hurt and they often last far longer than advertised. In some cases, I have seen them last a full year. Our city has no laws anywhere near as detailed as those in the story. One thing I learned from a very protracted litigation I was involved in was that you never want to litigate an issue in a courtroom. It is like rolling dice but far more expensive. Don’t send more money down the drain when you are already feeling the pinch. Now when I hear of a GOB sale, I use a strategy from a book INSTORE recommended: have a big sale of my own.

As an aside, I think one of the nastiest sales I had to deal with was a “Going Out For Business” sale. It lasted a year and was very misleading. 

Allison L. Rock Hill, SC

He should spend the money on advertising rather than paying legal fees. A great header would be, “We will handle it from here,” with a message that anything purchased from the closed store can be brought in for repair and inspections going forward and wish the owners happy retirement!

Never let ‘em see you sweat … and we are all sweating something! 

Kay D. Andover, MA

It is understandable that Van Anders would be unhappy over the impact and timing of the sale, but it is doubtful that it was intended to be intentionally damaging to Van Anders. Glenwood might not have known about strict state guidelines or permit requirements for a GOB sale, but the transition sale company should have known and discussed state regulations with Glenwood. Other factors extending the sale could have also been in play (e.g., staying open through the end of a lease). Even though the GOB sale damaged Van Anders’ bottom line, a lawsuit is risky for multiple reasons. Customers will find out and feel Van Anders is picking on those poor people who didn’t want to close a decades-old family business and may decide to purchase their jewelry somewhere other than the store conveniently located across the street. Van Anders might consider advertising an event welcoming new customers from Glenwood with a special discount; they may well make up all of their losses and then some. Might as well take the high road. 

Elysia D. Spencer, NC

I like to be ahead of the game. As soon as rumors of a sale hit the wind, I would have researched the laws and ordinances and made sure they were followed through from day one. I admire that Dale was insistent enough to follow through legally, but only after the bulk of damage was done. I would have played up repairs — quick turn-around sizings and signage welcoming his customers, maybe with a contest, like bring in your Glenwood’s receipt to win a gift card, spa day, whatever. Get bodies in, collect contact info then clientele (hey, Walgreens just did it with Rite Aid!). 

S. Maroskos Lynn, MA

Dale will probably lose more in litigation processing fees than he hopes to gain. Lawyers are expensive. Not to mention time away from his store and sheer aggravation. He will also lose potential customers that are loyal to Glenwood. 

Laura S. Indianapolis, IN

An attorney once told us that this type of sale has questionable tactics, but at the end of the day, it’s all about the money that a lawsuit will cost for an uncertain outcome. The state laws are only as good as the state’s appetite to allocate the resources to enforce them. In Indiana, the state is not hungry enough to take action. So, respectfully: suck it up and move on. Or as granddaddy would say, saw wood. 

Joe K. Lantzville, BC

They should have jumped on it way sooner; you snooze, you lose. Litigation will only put him further in the hole. I would just let it go and save paying a lawyer. Work on trying to get the closed store’s clientele by offering to service jewelry, bridal, etc. 

Marcus M. Midland, TX

This situation stinks. Sitting in Dale’s position, I don’t think there is anything you could have done to prepare. How could you know that they would continuously run the sale? And seeing that the city seems like it has a “good old boy” mentality towards Glenwood’s is even more maddening. Question is, do you let it go and move on, seeing that they did finally close? Or do you saddle up and ride their little red wagon? 

Bill U. Fayetteville, AR

Dale should sue, stressing the legal and ethical violation of Glenwood and Dale’s own ethical and honest conduct. This is Dale’s opportunity to polish his own ethics and conduct. 

Jim A. Salt Lake City, UT

At the first sign of the sale, go to the retiring jeweler and ask for an endorsement to his clients, to be deployed after the sale. In exchange, offer the retiree a piece of the action on first sales generated from his list. Now, he can do an “orphan” postcard campaign, letting people know that if they’ve lost their jeweler, he’s happy to “adopt” them.

Jumping on the legal action early may have alleviated the problem. Just asking him if he’d gotten the permit and was aware of the rules may have intimidated him into obeying the rules.

As for lawsuit, the company that did the sale probably knows the rules and since they do these things regularly, a suit against them — or the threat of going public with the complaint — may be enough to coax a settlement. Might not get it all, but get some.

Otherwise, ramp up the marketing and sell your way out of the problem. 

Patrick D. Little Rock, AR

Been there several times. Usually, none of the authorities are sympathetic to the jeweler’s loss. They only consider the harmed party to be a nuisance.

Suck it up, put on your happy face and make the best you can of a bad situation.

We have been harmed by many GOB sales. One jewelry store has gone out three times, reopening in a few months at the same location by the same owners.

Use your energy and precious resources to continually provide great service and quality in your unique manner and at excellent prices. 

Jim C. Fayetteville, AR

I despise lawsuits. I think it’s just pouting because you didn’t get your way or because you lost. It’s good info to know about the laws for a GOB sale. However, they could have offered a price match type of discount or built their own value better. In the long run, he should gain a whole lot of new clients. You have to prepare for those tough months and grind through them. We debunk the sales all the time though. Typically, the items are just marked up more to cover the discount. Especially if he was getting in new inventory. 

Rossi Jewelers Lauderdale-By-The-Sea, FL

Wow. It is clear to me, although very unfortunate, that Dale should move forward and let this go. If Dale takes the proverbial high road and moves forward as “the” jeweler in town, he will only gain more customers, more revenue, and much more goodwill in the town. He could even take it a step further and reach out to Charles Glenwood and acquire his mailing list/customer base. Then, start by marketing a special deal to get them in the store and win them over. So, he has the potential to have the best year ever in business. If Dale decides to sue for his losses (with no assurance of success), it will put the store in a bad light, the news will surely blast it out there and the town will see him as a bad guy. Again, very unfortunate, but I would let it go. Pamela Rossi, P.J. 

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If you’re the owner or top manager of a U.S. jewelry store, you’re invited to join the INSTORE Brain Squad. By taking one five-minute quiz a month, you can get a free t-shirt, be featured prominently in this magazine, and make your voice heard on key issues affecting the jewelry industry. Good deal, right? Sign up here.

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected].

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