Factory closeouts occur when a business needs to unload merchandise to make room for new merchandise. This will usually happen after a holiday or after a season. Many businesses use this selling tactic to sell what they can make some money. They will reduce the prices very low to encourage people to purchase their items. As they make room for new merchandise, old items and new items will mix together. Many times when a person visits a store for a factory closeout, they will find some new merchandise that is appealing and buy it as well. The store will make more money and sell more items. Advertising a factory closeout is a way to get more people to visit their place of business.

Businesses from car dealerships to furniture outlets run factory closeout sales. Items that have not sold will be reduced in price so that people will buy them. Car dealers hold these sales at least twice a year, once in the spring and once in the fall. Since they receive new model cars at the end of the year, it makes sense to hold these sales. Buying a car is a huge investment and people want to get the most for their money. If they can save money along the way, they will try a factory closeout sale if they find one.

Furniture stores run the same sales at least twice a year also. This is done to move seasonal furniture like patio furniture quickly before winter arrives. Few people will want to buy patio furniture in the wintertime. This furniture can take up valuable room for other furniture people might want to purchase. If the furniture is not sold during the factory closeout, it will have to be stored either on site or in storage which can cost a company money. It is less expensive for the store to sell the item for less money than pay to store it during the winter months.

Other stores such as lamp stores and other decorative home improvement stores will hold factory closeouts at least once a year. When a manufacture goes out of business, the home improvement store will cut prices in an effort to sell the items. They will have to find new manufactures to fill the spot and will need to make room for new merchandise. Electronics stores also hold factory closeouts for products that are going to be upgraded or no longer produced. Since the technology industry moves very quickly and keeps introducing new products, these stores do not have much time to sell their older products. Before they become undesirable, they are sold at reduced prices. This way, they can at least make some of their money back before new products are introduced.