Men’s Wearhouse finds full price doesn’t suit Jos. A. Bank
When Men’s Wearhouse acquired rival menswear retailer Jos. A. Bank in 2014, management vowed to wean shoppers off of the deep discounts the acquired retailer had grown famous for. BOGO (Buy One Get One) deals and even Buy One Get Three sales on suits had become the bread and butter of the Jos. A. Bank appeal, but the Wearhouse ownership saw the model as unsustainable. Now, according to reports, Men’s Wearhouse’s decision to nix Bank’s deals has done significant damage to the retailer.
Men’s Wearhouse announced that Jos. A. Bank had experienced a 14.6 percent drop in sales over the last quarter, despite sales being up 5.3 percent at Men’s Wearhouse, according to USA Today. Men’s Wearhouse did a valuation on Jos. A. Bank that led to a $90.1 million non-cash impairment charge, according to the article.
Furthermore, according to Business Insider, the quarter-to-date-same-store sales through the first week of December at Jos. A. Bank were down 35.1 percent.
In light of Jos. A. Bank’s poor performance, CEO Doug Ewert issued a statement acknowledging that killing the Jos. A Bank deal model was to blame for the recent drop.
Source: josbank.com
"When we acquired Joseph Bank, we knew that we needed to correct the promotional model," Mr. Ewert said in the statement. "However, we underestimated the impact to the near-term performance as we began to execute the difficult, but necessary, corrective steps.’
The company’s ousted founder and one-time advertising frontman, George Zimmer, chimed in on the situation in an interview with Business Insider.
Mr. Zimmer said that when board members proposed the acquisition of Jos. A. Bank during his tenure at Men’s Wearhouse, he stood against it. He told them that the two brands were too similar, and it did not make sense to own both.
"I think they thought they could position Jos. A Bank differently than Men’s Wearhouse, and apparently they are not able to," Mr. Zimmer said.
Men’s Wearhouse plans to try to bring back shoppers who have moved away from Jos. A. Bank including the use of a loyalty program.
According to the Baltimore Business Journal, Men’s Wearhouse has begun to bring back some of the Jos. A. Bank BOGO promotions after the announcement.
- Jos. A Bank continues to be a drag on Men’s Wearhouse sales, shares plunge – USAToday
- Can Jos. A Bank wean its customers off BOGO sales? – RetailWire
- Men’s Wearhouse, George Zimmer is waiting for your call – Business Insider
- As Jos. A. Bank sales tank, ‘Buy one, get one’ promotions return – Baltimore Business Journal
Discussion Questions
What would a Jos. A. Bank marketing program to win back old customers have to look like in order to get the company back on its feet? How could Men’s Wearhouse reposition Jos. A. Bank to make it a successful complement rather than a direct competitor?
Poll
BrainTrust
Frank Riso
Principal, Frank Riso Associates, LLC
Naomi K. Shapiro
Strategic Market Communications, Upstream Commerce
Two words: Ron Johnson. Why do so many retailers think they should/must destroy — er, change retailers to something they are not?
Looks like J.C. Penney all over again. Customers are loyal to a brand because of the way it does business. Suddenly new management does away with promotions and consumers shop elsewhere. A new loyalty program is not going to fix this. Men’s Wearhouse should quickly acknowledge that made a mistake and let Bank return to its promotional gimmicks.
First things first: Both companies (whether owned together or separately) need to do a better job identifying and cultivating their target consumer. Men’s Wearhouse has always struck me as having a younger, more updated brand position while Jos. A. Bank appeals to an older, more traditional consumer. The merger of the two companies has not made this brand positioning any clearer in the last year.
Second: Retailers that try to “abandon ship” on a high/low promotional strategy often pay a steep price. (Just ask J.C. Penney.) I think there is a valid argument that Jos. A. Bank carried their “deals” to extremes (who wants to buy four suits at a time?), but there isn’t much doubt that the tactic drove sales among loyal customers. Men’s Wearhouse has a lot of work to do in order to fix this problem.
Men’s Wearhouse has two choices. It can bring back the Jos. A. Bank marketing programs and accept the lower margins and higher sales, or it can convert the Jos. A. Bank stores to Men’s Warehouse stores and offer a not-so-drastic marketing program to all its customers. The conversion should have started back in 2014 but could still work for them.
I believe that customers were responding to the “Buy One Get Three” concept (literally), not necessarily the price, so the company should keep the concept but use a base cost that is sustainable.
And what’s wrong with competing with yourself if you end up with big business at both of your properties?
Sometimes you just shake your head at executive decision-making.
When you obliterate the primary reason people shop at Jos. A. Bank — and apparently this is a huge surprise for the leadership of Men’s Wearhouse — they tend not to shop there any more. At least Jos. A. Bank had a dominant reason to shop there. What is the unique compelling reason to shop at Men’s Wearhouse? IMHO it’s not quality, it’s not selection, it’s not price. I can’t think of what it might be.
I have to assume that even with their crazy “Buy One Get Three or Five or even Seven” “sales” events, Jos. A. Bank still made money. What Men’s Wearhouse didn’t seem to realize is that a lot of us bought suits there when they were the last thing we needed. We don’t care that the suit lasts only a year or two. Or that we put on weight so of course we have to go get more suits and donate the old ones.
One of the most poorly-handled business transactions universally is the merger and acquisition of another entity. Bob Phibbs has it right — for some reason the acquiring CEO feels the need to do something macho and kill the very asset that attracted them in the first place. When will executives ever learn?
Let’s see. We bought them because we loved their sales volume. Their sales volume was built on offering a variety of deep discounts that their customers responded to. We quickly changed their business model and we are now surprised their volume dropped. Did I miss something?
I am not sure the damage can be undone, but certainly returning to what was successful seems like a reasonable idea to try. Perhaps the discounts don’t have to be as deep and the promotions may not have to be often but keeping the course isn’t going to work.
Dick Seesel is right. It’s all about positioning. I shop at both stores. Bank is all about personal service and higher price points, but with massive deals for the customer who shops infrequently. Give each brand a unique identity and watch both succeed.
Well, it wouldn’t start with hiring Ron Johnson.
And bringing back the promotions, while probably the right thing to do, won’t win back the patronage of the heavy deal shoppers who felt “betrayed” by the abrupt shift in Jos. A. Bank strategy by Men’s Wearhouse. I think the biggest error acquiring companies make is the same as the biggest error aspiring spouses make — they go into the relationship assuming they can change the other company/person.
Two questions that need to be answered:
If the answer to both is yes then the company should have taken the back room and purchasing efficiencies and moved forward with little change other than reviewing under-performing locations. The identity that Jos. A. Bank had was the reason that people shopped the stores. Did Men’s Wearhouse have to justify the purchase by trying to change the identity or was this an ego trip? Either way it has gone very wrong. The latest Men’s Wearhouse ads that I have seen now offer BOGOs. Could it be that the whole enterprise is going to price its way to the bottom? Sometimes there is nothing wrong with competing with yourself if you are more efficient and still making an acceptable profit.
Has any retailer successfully made the transition from high/ridiculously-low back to a more stable pricing strategy? I can’t think of one, but maybe I’m missing something.
There’s also something to be said about customer strategy. Price and the customer who is willing to pay the price are strongly linked. You change the price strategy, you have to seriously consider how that will impact the customers you get vs. the customers you are targeting. For Ron Johnson and J.C. Penney, I think that was a double whammy: you changed the pricing model and you tried to change your customer base all in one go.
Is that what happened to Jos. A. Bank as well? I don’t know. But it’s something to consider. If you ultimately want to change both target customers and price strategy, that may well need to be some kind of two-step dance. Either that, or just shut the company down and relaunch the brand to a whole new customer base all at once. That can’t cost the company too much more than the results they’re getting now.
Oh, heck, bring back the BOGOs but raise the prices some (slowly) so it’s sustainable as a business. And bring back that barker who used to pompously intone “JOSEPH … A … BANK!” Made me laugh out loud every time. I miss it.
It was both arrogant and myopic that Men’s Wearhouse thought it could “fix” Jos. A. Bank’s promotional bent, especially over such a short timeframe. The damage has been done and menswear customers used to only buying on sale certainly have other options to shop promotionally (e.g., Macy’s).
Rather than the flash-cut away from “Buy One, Get X Free,” Jos. A. Bank could have been promotional through private channels to its existing customers and could have taken a more transitional approach to becoming a less aggressive discounter.
The whole sector is soft right now and at this point, short of combing both brands into one, Bank needs to gets its promotional groove back on in both mass and targeted terms. That said, it could very well be too late for them given how tough the business is right now.
Full disclosure, I bought my last two suits at Jos. A. Bank at 70 percent off and in the final analysis got a good deal, but not a great one compared to competitive options. The point being, what attracts me and many others to clothing sales is the excitement and sometimes false impression that we are walking away with a tremendous bargain for a quality suit. Even with these drastic discounts, I was never under the impression that Jos. A. Bank wasn’t making high margins on the sale, but I still felt good about the deal.
Taking those kind of high-impact promotions away from the shopper, hoping that the customer understands the value is being replaced with better everyday pricing, quality suits and better service is a provable recipe for disaster. J.C. Penney is just one example. Other carnage is available upon request.
The advertising cache that Jos. A. Bank has established with BOGOs and other “Buy X and Get Y” type deals has become its calling card. Removing it without developing and communicating a new compelling reason to shop there sounds like the idea came from a CFO or other financial whiz whose spreadsheets assumed that the customer is stupid.
As a long time Jos. Bank shopper I think Men’s Wearhouse could have tweaked the promo model gradually. Currently their promotions are like buses, wait a few minutes and a different one will come along. They could have lessened the frequency, limited it buy one, get one instead of four, etc., and could have still kept their established customers. A little training for their associates will help as well.
As if more proof was needed that it is very hard to retreat from a deep discount price image …
Evidently, Jos. A. Bank must restore many, if not all, of its BOGO promotions if its near-term goal is to recapture volume. But it needn’t worry that it has lost loyal shoppers because they respond to the deal, not the brand. With store visits so infrequent, many regulars may not even be aware of the interruption.
Longer-term, the company should refine its positioning as a purveyor of classic style that’s less pricey than Brooks Bros. but a big cut above J.C. Penney or even Macy’s. Taper off the wacky discounts by eliminating the three-for-ones first. Those undercut the brand image. Instead, build a story around the right cut, quality-of-make and prompt, precise alterations.
Then go large with BOGO promotions about four times a year to kick up excitement and draw new customers. For incentives at other times offer free alterations, a shirt or tie or even a golf sweater. Finally, Jos. A. Bank should work hard on its loyalty program to keep a channel open between store visits that may be a year apart or longer.
It is extremely difficult to change a promo strategy that has become part of the brand. Just ask Ron Johnson how hard….
What Jos. A. Bank and their owners need to do now is to bring back the promotions, but with an aggressive, rigorous testing plan to figure out which work and which don’t. Then they can test more aggressive innovative moves that might slowly wean customers from being quite so promo driven. However, they don’t have the runway for strategic innovation without making the promo strategy work in the meantime.
Men’s Wearhouse overestimated their influence when they decided to eliminate Jos. A. Bank’s BOGO. They are finding out how strong the program was and the now negative effect it is going to have on their new bottom line. I have shopped both brands. Yes, I am one who misses George Zimmer and his guarantees. I think that also had a negative effect on sales at Men’s Wearhouse.
Going back to Jos. A. Bank, their customer service was always a strong point when shopping there. It has not changed. What needs to be changed is returning to the BOGO sales and if necessary, slightly increase the pricing. Remember, I said slightly.
We’re seeing history repeat itself. When brands are acquired, new owners and management often make the mistake of overcorrecting what they see as an issue and alienating the core customer base.
Before you make radical changes, you have to understand what makes customers loyal to the brand. Moreover, if the intention is to reduce the amount of deals, it should be a gradual process that gives customers time to adjust and not all of the promotions should be eliminated entirely. At this point, there needs to be public acknowledgment that a mistake was made, feedback has been heard and the company is taking immediate steps to address the issue.
It needs to become Jos. A. Bank again. While the brands are similar, they used to have a distinct point of difference. While BOGO will never be considered a brand builder, it will deliver the traffic needed to remain viable.
Men’s Wearhouse needs to approach the issue as portfolio managers. Ultimately it might help enhance the image of Men’s Wearhouse stores by positioning Jos. A. Bank as the deep discount provider.
In this case, Men’s Wearhouse needs to move the Jos. A. Bank brand back to the value offering that it was. For me, Men’s Wearhouse was the higher quality mens suit and jacket for people going to work, while Jos. A. Bank was more the short-term disposable variety (The old Navy of suits). Management needs to get their repositioning done, like Gap did with Banana Republic and Old Navy, so each have their niche and contribute to revenue and profit.
Transitioning to fewer discounts can’t work unless Jos. A. Bank is offering something new. Otherwise, it just seems like shoppers are getting less for their money. Of course sales are going to drop if a retailer’s value is dipping in the eyes of consumers. Shoppers have come to know Jos. A. Bank for its marketing tactics and now it’s Men’s Wearhouse’s job to find a way to make those deals more profitable instead of just trying to cut them off suddenly.