How to Lose $1 Billion, the Jos. A. Bank Way
(This post originally appeared on Fox Business)
A few times a year, whenever I need a new suit or button down shirt, I go to a Jos. A Bank store near my home. I have no complaints. The selection is good. The salespeople are knowledgeable. They have an in-store tailor that’s part of the deal. To me, it’s the go-to place for a guy who needs clothes for work. So why are they losing so much money?
In its earnings release last week the chain’s parent, Tailored Brands, said it will “shut 80 to 90 standard Jos. A. Bank stores, as well as 58 Jos. A. Bank and Men’s Wearhouse outlet stores. Between 100 and 110 MW Tux stores also will be eliminated.” The company’s operating loss was more than $1 BILLION for both the quarter and the year amidst a 31% decline in sales at Jos. A. Bank last quarter alone.
The real question is why. Why did the company lose a billion dollars? Why did the company have to close so many stores? It doesn’t make sense to me. There are millions of men who work in offices and other professional spaces every day. Granted, dress codes have relaxed over the years. But professional attire is still required at most businesses. Dress pants, button down shirts, sport jackets, ties and suits are still the norm in most business environments. Designer clothes are too expensive. Sure, department stores and big box retailers like Target or Walmart also sell work clothes. But Jos. A. Bank and Men’s Wearhouse just seem to be a natural place for a guy to go to get his clothes for work. How could the company lose a billion dollars? In one quarter?!
Attention small retailers: don’t learn this lesson the hard way.
A few reasonable explanations are given. Boring styles. Online competition. The changing tastes of Millennials. Too many stores cannibalizing each other, ala Radio Shack. These are all factors. But they’re not the biggest factor.
But as I see it, the biggest factor is the company’s discounting. The clothes there are too cheap.
Yes, too cheap. The last time I went to a Jos. A. Bank store to buy a suit, the salesperson told me that they were running a special sale and for every suit I bought they would give me two additional suits. I didn’t need three suits. I only needed one suit. And yet there I was needlessly picking out two more suits. It seemed unbelievable. Was this an SNL skit?Apparently….yes! And it goes on all the time at Jos. A. Bank. In fact – it still goes on. As I write this, Jos. A. Bank is still running insane discount programs. Today on their website suits that are “regularly” $795 are selling for $199. And if you buy one you still get two free! I just bought two travel dress shirts because one cost $79.50, but if you buy one you get one free!
Management knows this. Since Tailored Brands purchased the Jos. A. Bank chain for $1.8 billion a couple of years ago, they’ve struggled to change the company’s long-time-heavy-discounting pricing approach. So why am I still being offered $795 suits for $199 when the company is losing a billion dollars? Doesn’t seem like management is acting fast enough.
As a customer, you know how this makes me feel? It makes me feel stupid. Stupid because I’ve purchased full price shirts from them before and now they’re giving them away. Stupid because now I wonder how much they must be profiting from me if they can be offering such huge discounts (OK, I’ll admit it’s probably not very much given the news reported above). Stupid because I’m made to feel that unless I closely watch out for these huge promotions I’m going to overspend. Stupid because, as a typical Jos. A. Bank business/professional customer I’m busy and don’t have the time to become an expert in the store’s sales programs to maximize my spend.
If there’s anything to be learned from the mismanagement of Jos. A. Bank, it is that discounting is stupid. It devalues your products and services. It creates confusion. It drives away customers like me who hold back on buying because I’m waiting for a promotion where I’ll spend less money with them or just give up and buy from somewhere else that’s selling a little cheaper. I get it that some retailers like to hold special sales once in a while and that’s fine. But to do it as frequently and pervasively as Jos. A. Bank is a bad practice. It’s 2016 for God’s sake. I don’t offer a “three hours for the price of one” discount program to our service clients. A distributor of industrial bolts doesn’t offer a special “two-for-one” discount on industrial bolts for President’s Day. Even my most profitable clients that sell B2C limit their promotions.
Management at Tailored Brands will need to act much faster on its plan to cut back on the company’s aggressive promotions. Yes, they will lose customers who are used to the deals. But really, were these profitable customers? Wouldn’t it be better to make the buying experience better for all customers?
Here’s a hint: whether you’re a nationwide chain or just a Main Street merchant, just consistently sell quality products at a reasonable price and stop with all the crazy promotions. Otherwise you, too could lose a billion dollars.