Jos. A. Bank: Men’s Wearhouse offer ‘undervalues’ company
Hampstead, Md. – The correspondence between Jos. A. Bank and The Men’s Wearhouse continues, and it’s not all love letters. In response to a letter sent Jan. 30 from the Men’s Wearhouse board urging Jos. A. Bank to reconsider its recent all-cash offer to acquire Jos. A. Bank for $57.50 per share, or about $1.6 billion, Jos. A. Bank — which rejected that offer on Jan. 20 — does not sound anxious to revisit it in the most recent letter it sent to Men’s Wearhouse president and CEO Doug Ewert.
In the letter, dated Feb. 2, the directors of Jos. A. Bank state they think Men’s Wearhouse’s offer continues to undervalue the company and is not in the best interest of stockholders, so they see no reason to commence negotiations. This last point is key, as Men’s Wearhouse indicated in its Jan. 30 letter that it would consider raising the $1.6 billion offer if Jos. A. Bank can demonstrate or Men’s Wearhouse can discover additional value through discussions or limited due diligence.
Jos. A. Bank also raises specific concerns, such as an antitrust risk Men’s Wearhouse said might exist when Jos. A. Bank proposed buying Men’s Wearhouse in November 2013, a second request from the FTC to review the antitrust implications of the Men’s Wearhouse offer, and what it says are misleading statements about the value of combining the two companies and potential conflicts on the Jos. A. Bank board.
Furthermore, the letter says there are questions about whether the real reason Men’s Wearhouse is pursuing an acquisition of Jos. A. Bank is to avoid a proxy fight with Eminence Capital, its largest shareholder.
“We continue to take our fiduciary duties to our stockholders very seriously,” the letter concludes. “As we have stated consistently, our Board is engaged in a careful and thorough process to determine the best strategic alternative to maximize value for all of our stockholders. Given the fact that the Men’s Wearhouse’s tender offer does not expire until March 28, 2014, and given the uncertain delay involved in responding to the second request from the FTC, our Board’s thoughtful process is causing Men’s Wearhouse no delay whatsoever. We will not compromise on devoting the necessary time and effort to exercising our best business judgment on behalf of the Jos. A. Bank stockholders.”
Men’s Wearhouse has not yet replied to the letter. In yet another twist, Bloomberg reports that Jos. A. Bank has held preliminary talks to acquire outdoor clothing retailer Eddie Bauer. Eddie Bauer, which has more than $1 billion in annual sales, was purchased by current owner Golden Gate Capital in 2009.
The omnichannel imperative for manufacturers
Our industry has talked so much about omnichannel that it seems only the “aha” gets our attention anymore. Here’s the problem: Our talk is well ahead of our ability to execute. And execution is what matters.
Omnichannel isn’t sexy. It’s not about “Wow.” It’s about making it easier for people accustomed to an anything-anytime-anywhere world to do business with us. That’s primarily a question of organization, commitment and execution, for manufacturers as well as retailers.
Retailers need manufacturers to step up to new, flexible ways of doing business. Otherwise, retailers risk doing everything right and still getting it wrong. The fundamentals of omnichannel retailing will be the norm within another year or two. So far, though, few if any retailers are really there, let alone their manufacturing partners. I know this both from consulting with hundreds of retailers and manufacturers throughout the past 15 years, and from a telling personal experience with Home Depot (one of the most open promoters of omnichannel service) this past summer.
I went to Home Depot to buy a grill. They did not have enough choices in the store, so a rep advised me to go online. I did a bunch of research and price comparison and bought a $700 Broil-Mate model. After prompt delivery, I ended up with 400 pounds of grill parts spread across my three-bay garage for nearly two months — all because a packet of 130 nuts and bolts was missing from the original shipment.
I made multiple trips to the store, talked and exchanged email with HomeDepot.com customer service four times, and at their direction talked with the manufacturers’ customer service three more times before being informed the parts I needed were back-ordered. After six weeks of frustration and waiting, I received my shipment — of the wrong parts. In a last ditch effort for service, I visited my local store again to speak with a manager. Much to my dismay, he told me only HomeDepot.com customer service could help me. So I returned the grill and went directly to Lowes, where I bought another brand (and gladly took advantage of their free assembly offer).
That’s a colossal breakdown in one of the most fundamental omnichannel mandatories — offering service wherever and however the consumer wants, regardless of where they researched and/or purchased. At the core of the issue was the manufacturer, which likely had not properly anticipated the demand that Home Depot was driving. This is often the case when no structure or process is in place for effective real-time communication between a retailer and manufacturer.
What’s the lesson in this? Getting omnichannel right in practice requires a broader view from both parties, and more granular, tactical support than manufacturers are accustomed to providing. Until now, manufacturers have approached the anywhere-anytime desire principally through marketing communications. Now they are being forced to confront it head-on through product delivery and customer support.
To be successful, this must include merchandising at an unprecedented micro level. Manufacturers need to examine the elements of forecasting more broadly and more deeply. That means including more details on promotion and placement into the distribution strategy. For example, in the case of my problematic grill, demand forecasting needed to take into account precisely how Home Depot was going to market the item (it was the top featured natural gas model on HomeDepot.com).
Where is the item featured in TV, print and digital promotion? Is the product featured in marketing spots on the website and how does the product perform in on-site search? How competitive is the price in comparison to other models? What does the social community have to say about the product in reviews and other user generated content? All of these factors have a huge determination of how certain products will sell.
You simply cannot organize a business around functions and channels and somehow execute omnichannel right. Scroll through the list of titles in an organization chart of the 500 largest manufacturers. You’ll find people dedicated to grocery, mass market, specialty, online and mobile. You’ll even find functional specialists — marketing, sales, product, distribution, research, customer service — dedicated to specific channels. Each has a unique set of siloed business objectives, responsibilities and incentives.
Most companies are trying to address omnichannel through committees. They bring silo chiefs together to create common policies and procedures — which amounts to trying lots of mini-initiatives or picking something “easy” to execute.
There are two glaring problems with that approach. For one thing, it is typically not enough. Omnichannel has to be an ethos and a commitment. It has to be the culture. That can’t happen unless the orientation of the company takes a profound turn. For another, the committee members are still being compensated based on their functional and/or channel performance. The line “you get what you pay for” applies to incentive in business. Without an empowered leader and structure for delivery, omnichannel ends up being an empty promise. It’s everyone’s responsibility but no one’s job.
While there is no panacea, there is a simple first step. Top management needs to appoint and empower an omnichannel champion — someone with both the responsibility and the authority to bring product, marketing, sales, fulfillment and customer service in line with each retail customer. That person has to create and manage a central database — so everyone can see the full spectrum of distribution and customer service — and wield the ultimate authority to direct changes in production, distribution and fulfillment. That point person has to work out the performance measurement and reward structure for unit and function leaders, so omnichannel has real implications for individual performance.
Also, that point person will need to adjust the company’s approach to some core disciplines. For example, in marketing, creating loyalty efforts that engage people with content, contests and offers before they even make their first purchase; or in promotion, supplying product videos to retailers’ mobile applications so consumers can research and compare more fully in store. But innovations like these are moot if the foundational support and service are not there yet. And that foundation is a function of organization, alignment and commitment.
You might be tempted to say this is more a retailer’s than a manufacturer’s job. It’s both. But retailers can replace manufacturers much more readily than manufacturers can replace retailers. So manufacturers need to think like retailers and step into the leadership role. My Home Depot experience showed loud and clear that the manufacturer is a critical link in the omnichannel vision.
Paul Elliott ([email protected]) is managing partner at Rosetta, a customer engagement agency and independent brand in the Publicis Groupe.
Accenture: More shoppers to purchase in-store
New York — Even as online shopping continues to grow, more U.S. shoppers are planning to make purchases from physical stores in 2014, according to a survey by Accenture. In the “seamless retailing” study, 21% of U.S. shoppers said they plan to increase their in-store purchasing, up from just 9% in last year’s study.
But there is plenty of room for improvement in physical stores. Asked what retailers need to improve the most, 40% of respondents ranked improving the in-store shopping experience first, compared to just 16% who said the same of online shopping.
“The survey results indicate that retailers have an opportunity to increase in-store sales but only if they make the experience worthwhile for consumers,” said Chris Donnelly, global managing director of Accenture’s Retail practice. “Consumers are looking for the conveniences of shopping online, such as information on product availability, to be available in-store.”
Donnelly said that while the lines between the different shopping channels are blurring, the good news for traditional retailers is that the store continues to play an important role.
“In order to ensure that they offer shoppers a seamless retail experience, bricks and mortar/high street retailers must work hard to differentiate the shopping experience they offer compared to the online pure-plays,” he said.
In a key trend, the study found that more shoppers are looking to take advantage of seamless retail services involving the store: Nineteen percent of shoppers said they are using “click and collect” services more often than in the previous year. Additionally, more shoppers (14% compared to 7% last year) are buying in-store and having the product shipped to their home.
Here are some other key findings of the survey:
• The ability to check product availability online before traveling to a store is the service that would most improve the shopping experience for 31% of U.S. shoppers surveyed. And, the vast majority of respondents (89%) said they would either travel to a store to make a purchase or buy online if retailers offered real-time information on product availability.
• More than half – 57% – of respondents said that waiting for free delivery was the most important delivery option. Of those shoppers looking for next-day delivery only 38% said they were willing to pay more than $10 for that convenience, and 14% said they believe the service should be free.
However, more shoppers expect the length of time they have to wait for free delivery to be reduced. In Accenture’s 2012 study, just 25% of respondents said they expected a free-delivery purchase to arrive within one to five days. In the latest survey, that number jumped to 44%.
“Services from the online pure-play retailers that offer faster delivery in return for an annual subscription, are having a profound impact on shoppers’ expectations,” Donnelly said. “Free delivery remains a crucial factor for a significant number of shoppers but they are not always willing to wait as long to get it.”
• Seventy-eight percent of shoppers had webroomed (browsing online and then going to a store to make their purchase) in the 12 months before the latest survey, while 72% had showroomed (going into a physical store to see a product and then searching online for a better price and making their purchase online). The proportion of shoppers who engaged in webrooming for making consumer electronics and home improvement purchases increased significantly from 2012 – from 39% to 48%, and 25% to 35%, respectively.
• Fifty-one percent of shoppers expect a retailer’s product offerings to be the same across different shopping channels, up from 43% in 2012. More than half (57%) also expect promotions to be the same across channels and 69% expect prices to be the same.
However, only 31% of shoppers said that their customer accounts were completely connected across in-store and online channels, and just 32% said that they were able to earn and use loyalty points across multiple channels. In addition, the proportion of shoppers who believe they will secure a better price online rose from 21% to 31%.
“Delivering a seamless experience across all retail touch points remains both a key challenge and prime opportunity for retailers today,” said Donnelly. “Those retailers able to integrate the physical store with the rest of their digital capabilities, and who also use analytics to support new models of customer engagement and personalized service, can gain a true competitive advantage.”