I'm hardly brand-loyal when it comes to buying jeans, though if I ever find a company that makes a pair anything like Gap's (NYSE:NYSE) no-longer-available "stovepipe" cut, the winning company may have a customer for life. One brand I haven't considered seriously for years now, however, is good old Levi Strauss & Co. -- a far cry from the times when, as a young teen, the idea of wearing anything but 501s seemed as unlikely as Miami (Ohio) University's current ranking in the college football polls.
The diminishing of the iconic Levi's brand will no doubt be a business-school case study for years to come. For now, however, it's the subject of an interesting BusinessWeek article, "Lessons From a Faded Levi Strauss." Writer Wendy Zellner's short but informative piece presents three reasons for Levi's decline:
- Levi's remained committed to the department-store channel and retailers such as J.C. Penney (NYSE:JCP), not exactly the hottest retail segment over the past few years. It was therefore late to the discount market led by Wal-Mart (NYSE:WMT), not to mention the high-end space. Its own retail efforts, meanwhile, were less than compelling. Now, the article argues, it's all over the board.
- The company failed to maintain its brand as a slice of America as vital as Coca-Cola (NYSE:KO) or McDonald's (NYSE:MCD). The article talks about "emotional associations," but I'd guess few people still feel emotionally about Levi's -- though they may have, say, 10 years ago.
- A commitment to its employees made it reluctant to ship production overseas even as its competitors did so, saving money and making their organizations "leaner." While Levi's is catching up now, it suffered while it waited.
Though Levi's isn't publicly traded, it does release financial information. Its latest missive tells the sad tale of falling sales and profit margins, not to mention significant restructuring expenses. New management, led by former PepsiCo (NYSE:PEP) executive Phil Marineau, has been credited with making some difficult decisions, and has brought in a management consulting company to help out.
The work ahead, however, is significant -- and the lessons learned should be carved into the boardroom tables of fashion companies everywhere. Extending fashion brands is a challenge, as Polo Ralph Lauren (NYSE:RL) and Tommy Hilfiger (NYSE:TOM) know full well. The alternative, though, is remaining small and risking near-obsolescence (which nearly happened to Mossimo, for one) as a niche provider. Levi's had the added challenge of being a large company known best for a commodity product. Its failure, perhaps, was in not acting enough like one.
Dave Marino-Nachison can be reached at [email protected].
