How Jos. A Bank Makes Money By Selling One Suit And Giving Seven Away For Free

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Jos. A Bank is the menswear retailer that offers the most ridiculous discounts you’ve ever heard of.You may have heard of their newest promotion: Buy 1, Get 7 Free.  You buy 1 suit at regular price, and they give you 2 more free suits, 2 dress shirts, 2 silk ties, and an Android smartphone.

And they seem to be running these types of promotions all of the time.  Two common promotions include 70% off all suits and buy one suit, get two free.

So, how can a company like this make money?  Reformed Broker Josh Brown posed this question (of course rhetorically).

Three words: higher initial markups.

You’ll see those three words all over their regulatory filings.

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 and still make a profit.

For example, a typical store might sell you a $400 suit and offer 25% off.  In Jos A Banks’ world, they’d rather price a suit at $1,000 and offer it at 70% off.

Either place you shop, you pay $300 for a suit that might be of identical quality to the one sold at the other place.

But the $1,000 initial price tag gives the perception of higher quality.  And the 70% discount gives the illusion of a great deal.  Combine those two things and it’s no surprise why the bargain-hunting American male would be seduced by Jos A Bank’s offering.

All it took was a little psycho-mathematical salesmanship.

And how’s business at Jos A. Bank?

Well, their recent quarter was a bit disappointing.  But long-term, business has been good.  Sales and profits have been climbing for years.

And more importantly, the gross profit margin has trended up from 58% to 62%.over the last five full fiscal years.

So, that’s how they make money.

jos a bank

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