Priced to Suit: Jos. A. Banks' Inflated Promotions No Longer Hitting the Mark

By Marcy Bonebright, dealnews Senior Staff Writer

At first glance, Jos. A. Bank seems like a bargain-hunter's dream. In the past year alone we've seen the store take an average discount of up to 66% off in its sales, and an extra 28% off clearance prices. Of course, where Jos. A. Bank really shines, however, is in its BOGO sales; in the past year, we saw 27 separate "buy x items, get y items for free" promotions from the menswear store. That's more than two BOGO sales per month!

And therein lies a potential problem for the merchant. It seems that Jos. A. Bank is always offering huge discounts, practically giving away its stock. (See the "buy one, get seven free" ad below.) How could a store like this afford to stay in business? Unfortunately, the reason why it can offer such deep price cuts is that the retailer's entire business model relies on high initial markups.

According to Business Insider, "The markup is the difference between the cost of a good and the price it's sold at. The higher the markup, the more you can discount [it] and still make a profit." The site then relates this concept to Jos. A. Bank, explaining that, "a typical store might sell you a $400 suit and offer 25% off, [but in] Jos. A. Banks' world, they'd rather price a suit at $1,000 and offer it at 70% off."

This Year, Markups Fall Short

This pricing strategy has been extremely successful for Jos. A. Bank in the past, but recently sales have slumped. In its earnings report for fiscal year 2012, Jos. A. Bank announced that it expects last year's profits to be 20% lower than those from 2011. The retailer claimed that this winter's warmer weather caused customers to shy away from sales.

"[O]ur customers (specifically at our stores) didn't respond as well to our promotional offers as they had in the past," a press release, posted by Yahoo! Finance, read. "Our customers responded well to our suit promotions during this period, but our non-suit customers responded poorly to our holiday season offerings, even at very low prices."

Other retailers, too, have blamed the mild winter for poor sales. We previously mentioned that cold weather-dependent brands like UGG Australia and Columbia Sportswear have a glut of winter-wear stock, forcing them to offer steep discounts. But market analysts seem to think that Jos. A. Bank's troubles may have more to do with their pricing model than the weather.

According to CNN Money, after Jos. A. Bank announced its expected shortfall, trader and blogger David Blair tweeted: "I just told salesman I wanted 3 free suits after buying 1 at regular $ [sic]. He said I could have shirt off his back too."

Do Constant Discounts Become Meaningless?

After years of selling expensive suits at what appears to be a substantially lower price, it could be that consumers are getting wise to Jos. A. Bank. If, as we mentioned before, you can walk into the store on any given day and see a sale for up to 66% off, couldn't that mean their prices are just inflated by 66%? On the other hand, however, now may actually be the best time to buy from Jos. A. Bank. A flagging stock figure is a big incentive for the merchant to offer even steeper discounts in order to lure customers back in.

What do you think, readers? Are you tired of Jos. A. Bank and other merchants offering big discounts on marked-up prices? Or are you a savvy shopper who can easily separate the real bargains from the fake?

Photo credits top to bottom:
Businessweek and Business Insider

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I really like their tailored signature dress shirts. They don't take nearly as much time and effort to iron as normal Kohl's shirts and the signature shirts are thick and soft. I buy them online when they are on clearance for $25 or less. I will never go back to spending the same $25 or so for a shirt at Kohl's or JCP.
They had a buy one get three free shirt deal one day and I needed some dress shirts. But when the shirt was $150, I turned and walked away. I'm not in film or TV and don't need $150 shirts. I'm with olra16 that I'd rather pay $30 for one than pay $150 and get 4 shirts that I really don't need. They're essentially just selling you 4 shirts instead of just one. It used to be marketing genius until shoppers got smart.
Dan de Grandpre (DealNews)
Good point. I also think that Men's Wearhouse suits are equally crappy. If you happen to visit NYC, stop by any Century 21 store (it's like a 5-story TJ Maxx) and you'll find suits of much higher quality for the same or slightly more. I'm talking brands like Hugo Boss and John Varvatos.
I don't find JAB suits to be a good value at almost any price. The brands they carry are not very good (CK, Lauren, etc.). You're much better off hitting Dillard's clearance (or Dillard's clearance center store if you live near one). There you'll find Hart Shaffner Marx, Hickey Freeman, and other higher end brands. They will be the same or just a little more money than JAB but the quality is much higher.
Kind of funny--some here have expressed that they do not like playing games with prices. Just give them an honest everyday price. JCPenney is trying that very approach now, and the over reaction has been unfavorable. Interesting...
I am tired of the 'games' you have to play at most stores so you didn't pay the marked up price. I've bought a suit at JAB before (not many suit only retailers left), but am sick of trying to figure out which day of the week is the sale day. Just offer an honest price, where you make money & I don't feel suckered. --I just found out Kohls is a bad offender in this game too. My favorite Levi's that used to be in the $30 range were marked at $58 and I was told I'd have to hit that store certain days to get the regular price. --Hey stores, QUIT PLAYING GAMES WITH US
Dan de Grandpre (DealNews)
I totally agree with s3hoch: the markups on "list price" at Kohl's are as egregious as Jos. A. (stands for "Joshing Ads"?) or pretty much anywhere else I can think of.
I have never shopped at JAB, and the reason is simple. If I'm in the market for one suit, I don't want two, three or seven. If I'm in the market for two suits, I don't want three, four or seven. Here's the JAB scheme: Buy one suit at our regular highly inflated price of $1,000, and you get two free. But I don't want to spend $1,000 for three suits, I only want to spend $333 for one suit. Same price per suit, but I have to shell out three times what I wanted to spend by having to buy three suits. Sorry JAB, but I'm not a sucker.
Why pick on just Jos. A. Bank? If you buy anything at Kohl's at full price, then you're getting robbed. Wait a week and it will be 60% off. My point is, they aren't the only retailer that jacks up prices just to slash them so it looks like a better deal, and they won't be the last. Retail clothing is not the lone category either. My local grocery store is guilty, as is Wal Mart. You know every time they "Rollback" prices they are rolling them up on something else. The game will never end and "20% lower profits" is still profits.

In most states (I'm in KS) there are laws about how many days out of the year you can call something a "sale" price if it's in fact your regular price. Most stores walk a very fine line on that one. Of course you would have to be very dedicated to tracking that data for an extended period of time, for no personal reward other than consumer protection.
I have bought various items from JAB over the years and the quality has been good, but it is not worth anywhere near what their retail price is. I just removed myself from their email list as the number of sale emails that they send has gotten ridiculous. I would imagine that I can get a "sale" on anything I want, even if it is not their current sale.
I'm pretty sure this is just regular everyday business at Jos. A. Bank
Everyday they have a new sale. The stuff they sell is okay I guess... but I don't think their sales should be posted everyday because everyday they have new "normal sales". I have seen their commercials for years... they are always having a sale. People always want to save money and they overlook the fact that this company is in the business of making money so what do they do? They tell everyone they have a new and exciting sale everday to bring in business. That's my theory.
Mild winter...where the bleep has winter been mild I've been freezing here in New England and I've heard the same for much of the rest of the northern states???
Honestly, I see so many discounts from this seller that it was starting to become too suspicious of their pricing model in general.