Closed retailer has a liquidation plan in bankruptcy alternative

When a brick-and-mortar retail chain goes out of business, it usually has an extended liquidation sale. That generally starts with a period where customers get a final chance to use gift cards and other credits.

After that, merchandise gets discounted and begins to sell with the deals getting better as the selection gets worse. In many cases, these sales aren't run by the original company. Instead, an outside liquidation expert gets hired to maximize returns.

Related: Popular fast-food chain closing without a bankruptcy filing

In most cases, the sale continues until there's basically nothing left. At that point, the liquidation company may bring in merchandise that wasn't sold by the store in the first place as the once-proud retailer limps to a final week where store fixtures, computers, and anything not owned by the landlord gets sold.

When an online-only retailer closes, the process isn't quite as established. Sometimes there's a going-out-of-business sale, but, on other occasions, closures happen suddenly, and any assets the company had end up in limbo.

That's what happened when Zulily closed. The retailer had started a going-out-of-business sale but that ended abruptly in December leaving customers in a lurch and creating major questions about what would happen to the company's remaining inventory and assets.

Zulily fell from great heights

While Zulily had a sad fall from grace, it was once a huge digital success story with a value of around $4 billion. The company had a long, slow decline, however, since it was purchased by Regent, a private equity firm for $2.4 billion in 2015.

The retailer started as a niche company serving moms and their children. That was a lucrative niche and the company had a unique business model using a limited amount of flash sales each day.

It was a model that made the site a destination. People literally set alarms so they could see what items were being put on sale at the set time.

As Zulily moved away from that model, the company lost what made it special. It continued to expand beyond its original focus of young moms and generally became just another site with slower shipping than Amazon and nothing that made it overly special.

It wasn't one thing that forced Zulily into bankruptcy and liquidation, instead it was a combination of bad choices that led to a slow collapse.

When the company abruptly fired most of its staff late in 2023 it was a surprise, but really only because of the suddenness of it. Zulily was once a differentiated retailer with a dedicated fanbase. Those days, however, passed many years ago and the company  — ahead of its shutdown — was really just a shell of itself running on fumes.

Zulily has a liquidation plan

When Zulily abruptly stopped its going-out-of-business sale, the company still had $85 million in unsold merchandise. Gordon Brothers has now been contracted to sell off that inventory as well as "the assets of two 775,000-square-foot fulfillment centers on behalf of Zulily ABC LLC," according to a press release. 

This move comes about a month and a half after Zulily entered an Assignment for the Benefit of Creditors in December to complete the orderly wind-down of the business and maximize revenue recovery for its creditors.

"The inventory available for sale includes nationally branded consumer products, including apparel, footwear, small appliances, beauty and housewares. The available fixed assets include material handling equipment, racking and other warehouse support machinery," Gordon Brothers shared.

It does not appear that Gordon Brothers intends to sell the inventory piecemeal to the public. Instead, it's likely that it sells the inventory in lots to other retailers which sell discounted and distressed merchandise. 

The sale will be a "private treaty sale," basically an auction where merchandise is sold in lots. All items, including machinery from the retailer's warehouse, are being sold "as is," with no warranties or guarantees.