Historically, if a store suffered a fire, they would have to either sell the items they could salvage or throw them away. In addition, the store needed the money from sales to make repairs to the store and restock the inventory. Because the items that were able to be sold were typically smoky and sooty, the prices would be reduced. To facilitate these fast cash turnarounds, the prices were often slashed drastically to move the merchandise quickly. These events became known, quite literally, as a “fire sale”.

Today’s retail market still uses the term fire sale to indicate a sale that features prices slashed below standard retail, and often below the wholesale price. Sometimes called a ‘blow out sale’ or a ‘close out’, the perception for the customer is that the prices will be dramatically reduced – giving opportunity for some great deals.

No longer confined to being held after a fire, the fire sale can be held after any type of disaster that may cause a store to have a large amount of slightly damaged goods they wish to sell. While in today’s market the store will most likely be reimbursed by their insurance company for any damaged items, they are still able to sell the less-than-perfect materials to customers who are willing to do a little repair or cleaning in exchange for a great deal.

Another use of the fire sale terminology can be seen when a company is attempting to reduce the number of assets they have, anticipating a bankruptcy proceeding. This allows the company to generate some much needed cash to work through the financial crisis.

Fire sales are beneficial to both consumers and retailers. The retailer eliminates inventory and gets cash, the buyer receives needed items at substantial savings. Fire sales are often heavily advertised in local newspapers and television media, in an attempt to bring more consumers to the sale.