There’s a good argument to be made that when a store’s merchandise is always on sale, it’s never really on sale. The retailer is just employing fake prices that no one ever pays. The prices exist only to make discounts seem tempting. This strategy certainly can be confusing and annoying. But is it illegal? That’s the contention of a class-action lawsuit recently filed against one retailer that’s renowned for its “ridiculous” sales.
The retailer is menswear specialist Jos. A. Bank. Through June 10, it was offering one of its patented sales: Buy any suit, and two more suits, as well as two dress shirts and two ties are thrown in for free.
It’s the existence of such sales that makes shoppers wonder if anyone, in fact, ever pays full price for goods at Jos. A. Bank. There is always some sort of over-the-top promotion going on at Jos. A. Bank, so there certainly doesn’t seem to be any reason to pay retail. And if prices are listed at figures that no one pays, the situation amounts to “misleading, inaccurate and deceptive marketing,” according to accusations from a class-action lawsuit filed against the retailer in New Jersey. The complaint alleges that Jos. A. Bank merchandise is “perpetually on sale and the sale price is actually the price at which the merchandise is regularly offered,” and that it should not be allowed to retain profits on goods that were “unlawfully marketed, advertised and promoted.”
The retailer creates “a false sense of urgency,” the suit states, by advertising such sales “as being of a limited duration, thus creating the false impression that the price of the merchandise will increase back to the ‘regular price’ if a consumer does not make a purchase by the end of the sale.” Only that “regular price” never becomes a reality. It just transforms into yet another “discounted” price thanks to the latest sale.
Even if you’re not a Jos. A. Bank shopper, these pricing schemes may sound familiar. Until recently, JCPenney basically used the strategies described above. Amid the retailer’s ground-breaking makeover swearing off “fake prices,” JCPenney admitted that less than 1% of its revenues had been coming from full-priced items.
JCPenney’s new approach, dubbed “fair and square” pricing, began with the marking down of all merchandise by at least 40% from their original prices—the fake ones that nobody paid. The problem, from Penney’s point of view, is that while consumers say they want retailers to stop playing pricing games, these games succeed in creating a sense of urgency (false or otherwise) among shoppers. Without dramatic, if fake, markdowns, consumers don’t feel the need to purchase. Hence, thus far, amid slumping sales, JCPenney’s makeover has largely been deemed a failure.
Over the last few years, Jos. A. Bank has been anything but a failure. Sales have been growing 20% annually, and 110 new stores have been added since 2008. More recent numbers, though, may be an indication that Jos. A. Bank’s pricing games are getting old: Revenues at existing stores fell 1% in the first quarter of 2012, while operating expenses—which include sales and marketing—increased by 7%. That latter part shouldn’t come as a surprise, because if there’s one thing we all know about Jos. A. Bank, it’s that the retailer puts plenty of time, money, and effort into sales and marketing.
Jos. A. Bank didn’t return requests for comment on its pricing strategies, nor would it provide information as to how much, if any, of its merchandise was sold at full retail price. Soon after the suit was filed, though, the retailer did release a comment noting that it would “defend this lawsuit vigorously.”