A discount retailer takes its rivals to court. It’s all about reputation.
When the first Liquidation World opened its doors 20 years ago, the owners subscribed to a simple business plan: search for companies in the midst of bankruptcy, buy their remaining inventory at a deep discount, and then turn around and sell the products at slashed prices. It worked. With 90 stores and counting across the country, Liquidation World Inc. is now the largest retailer of its kind in Canada, attracting nearly two million bargain-hunting shoppers every year.
Last Christmas, like it does every year, the company enticed holiday shoppers with its trademark slogan: “Santa Doesn’t Pay Retail ...Why Should You?” As the big day approached, and checkout lines grew longer, employees in Calgary noticed another flyer floating around, this one from a new crosstown competitor: Liquidation Supercentre. “Why Pay Retail?” the advertisement asked. “Santa Doesn’t!!!”
People flocked to the address on the flyer, including lawyers for Liquidation World, armed with a lawsuit demanding at least $600,000 in damages for trademark violation (the company is also suing two other businesses in Red Deer and Lethbridge, which operate under the name Liquidation Centre). “We’ve gone through a lot of effort to build a brand—a lot of effort, a lot of cost, a lot of advertising, a lot of marketing dollars,” says Andrew Searby, Liquidation World’s
executive vice-president and chief financial officer. “And when you have somebody that consumers are confusing for yourself, then you are opening yourself up to the potential of having your reputation damaged.”
At first glance, it seems laughable: a liquidator suing another liquidator for spoiling its status as the store of choice for cheapskate shoppers. But for Liquidation World—which sells everything from couches to groceries to designer luggage—the emergence of an alleged copycat comes at a bad time. After recording its first-ever annual loss—$6.5 million in 2005—the chain is trying hard to redefine itself, renovating many of its old stores in the hopes of appealing to all types of shoppers, not just the kind who love to brag about the deal they got on a $4 tie. “We stock brand new, brand name merchandise,” the company’s website proclaims. “Many of the items we carry are the same as those you’ll find in other stores around town. Some you won’t find anywhere else. The fun is in discovering something new, unexpected, and at an unbelievably great price.”
The last thing the company needs now is an imposter tarnishing its makeover. One of the defendants, for example, recently made headlines for selling illegal switchblades. “The main concern is the protection of our name,” Searby says. “It takes a long time to create goodwill, and a very short time to destroy it.” None of the defendants has filed a response to the lawsuit, but if Liquidation World gets its way, all three stores will be ordered to demolish their signs, pay some form of compensation, and think of a new name. And, of course, a new Christmas ad. M
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