Levi Strauss & Co. is putting more of its hopes into digital and mobile channels — and online culture — to expand revenue and its brand profile, and make up for declining wholesale sales. The success of that ongoing effort could provide lessons or warning for other venerable clothing brands as consumers of all types increasing use the web to buy apparel.
Levi’s late Tuesday (Oct. 8) released its third quarter financials, and though the company’s performance in the Americas — a 3 percent year-over-year revenue decline — reportedly disappointed investors, eCommerce increased 21 percent for the global business. Total revenue for Europe increased 14 percent, and for Asia by 9 percent. Global direct-to-consumer (DTC) sales increased 12 percent — marking the 15th consecutive quarter of double-digital growth for that category, according to Charles Bergh, president, CEO and director, on the post-earnings conference call.
Digital Growth Engine
He set out some engines for future growth: “Expanding our pure play digital and wholesale dot-com business, while maintaining brand integrity and healthy margins, and growing with our partners in the mass channels bringing quality products to consumers at great price points,” he said.
Growth also will come from DTC sales, he said — and that will also have a big digital component. In the U.S., DTC eCommerce sales increased 7 percent year over year, with more growth very likely to come, assuming Levi’s strategy pans out. “Our DTC strategy in the U.S. will include testing some smaller footprint stores in great locations around the country in the coming quarters,” Bergh said. “Growing our U.S. direct-to-consumer business allows us to move toward premiumizing the marketplace, and remains one of our important strategies to offset headwinds in U.S. wholesale by continuing to reduce our concentration in that channel.”
Wholesale now accounts for about 30 percent of the company’s business, down from about 50 percent eight years ago, he told analysts. “This will continue to trend down as other parts of the business grow at a faster pace,” Bergh said.
The Levi’s effort to become more digital — and digitally relevant — also extends to offering more personalization and customization tools to consumers willing to pay extra for such services.
“We continued our investment in digital innovation by launching Future Finish,” Bergh said, “an online customization experience on Levi.com that leverages our FLX technology which makes it easy to create a custom pair of Levi's and puts the power of personalization directly into the consumer's hands, and we're premium pricing it.”
But customization doesn’t mean Levi’s intends to go it alone — in fact, it is hoping for big results by working with another major U.S. brand, one that has been expanding its digital presence over the last few years in ways that are already being imitated. “At the end of the quarter, we again collaborated with Nike showcasing the power of these two celebrated brands this time with a focus on customization,” Bergh said. “We worked with the ‘Nike By You’ program to allow consumers to create their own case custom Nike's with Levi's fabrics and trends using our FLX technology.”
Levi’s is also working with Google in other digital efforts — work that looks past the current clothing landscape and to the emerging ecosystem of connected vehicles, wearables and the Internet of Things.
In their newest collaboration, Google and Levi’s recently announced versions of the Levi’s Trucker Jacket that are Jacquard-enabled. A dongle in the jacket’s cuff links up with conductive yarns in the jacket. Users then swipe over their cuffs, hold their hands over it or tap it to make commands to their phones. They tap into the Jacquard phone app for Android or iOS to set up the meaning of each gesture with commands that span from skipping the next song to saving a location. The app also enables users to set a gesture to turn on or off noise cancellation if they have Bose noise-canceling headphones. And users can take the dongle from garment to garment.
Levi’s is also trying to drum up more sales to China, and a big part of that is not only digital and mobile channels, but social media and online experiences as well. “On the heels of our recent rollout of Levi's customization services on WeChat,” Bergh said, referring to the massively popular China-based messaging app, “we have joined forces with the hugely popular music and dance game QQ Dance to create a 3D-rendered wardrobe for its game characters, so consumers will be able to dress like their game avatars.”
Bergh told the analysts on that earnings call he has big expectations for those efforts. “Not only do partnerships such as these provide consumers with a fun, interactive shopping experience, allowing them to define and design their own cool,” he said, “but they also support our endeavor to position the Levi's brand at the center of culture.”
The success of that and other digital and mobile programs by Levi’s — or lack thereof — promise to provide lessons and even case studies for many retailers, both here and in China.