Is Levi Strauss about to do a Nike NKE

The denim brand has not announced it is ending its wholesale relationships with large numbers of retailers. It has, however, made clear that it sees a bigger opportunity to expand its business by selling its clothing directly to consumers.

Direct-to-consumer (DTC) sales represented about 40 percent of Levi’s LEVI total sales in 2020 and the company is looking to grow that to 60 percent this year, CEO Chip Bergh told CNBC.

Some experts on the RetailWire BrainTrust were bullish on Levi’s DTC moves in an online discussion last week. 

“Levi’s (and Nike) are training the consumer,” wrote professor Gene Detroyer. “They are building habits that will eliminate competition in the customer’s mind. The decisions will not revolve around which of several brands to buy. They will have established the ‘go-to’ place. It will become an automatic habit for the customer. If they go Levi’s (or Nike) and are satisfied, there is no chance for the competition. That is clearly the objective.”

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“There are just not any apparel retailer brands that are ‘must shop’ anymore, so brands like Levi’s are taking it upon themselves to own the narrative,” wrote Dave Weinand, CCO of Incisiv. “Smart. Other brands will be doing this as well.”

Others were positive, but more reserved in their endorsement. 

“Levi Strauss needs to regain control of its brand – from pricing to merchandising – and consumer-direct is a great way to do it,” wrote Ryan Mathews, CEO of Black Monk Consulting. “Risky? Maybe, but the alternative is a slow and inevitable downward spiral into the gaping maw of a commodified denim hell.”

Levi’s online sales grew 25 percent during the first three months of this year, representing 10 percent of  the company’s total, Mr. Bergh told analysts on an earnings call last week.

The brand’s DTC also includes company-operated outlets and other stores. Levi’s has focused on expanding and improving its omnichannel capabilities. The company rolled out ship-from-store, associate ordering and two-day shipping last year in the U.S. and is now taking those services global.

The denim giant is looking for more space to grow and plans to add 40 stores and 200 outlet locations across the U.S. Mr. Bergh said that high commercial vacancy rates provide the company with opportunities to find space at favorable prices.

“Levi’s is one of those rare brands that have the brand strength and loyalty to go down this route,” wrote Andrew Blatherwick, chairman emeritus at Relex Solutions. “They are being smart by covering online, owned stores and third-party stores so they can get the best coverage by using technology and their brand to build the connection with the consumer in store and online together. Not many brands have this strength, which makes this something for the few and not the many. It will not become a major trend and will not threaten the traditional retail operations.”

Creating better experiences in stores and online is critical to Levi’s consumer-direct push.

“We recently saw our largest week of sales from associate ordering, a capability that helps ensure we don’t miss a sale and caters to how younger consumers are shopping, behaviors we expect will stick beyond the pandemic,” Mr. Bergh told analysts. “We’re just scratching the surface as these omni-capabilities scale, they [are] becoming increasingly more meaningful.”

Levi’s use of artificial intelligence technology is helping to “accelerate” its digital transformation, according to its CEO.

“A new product recommendation engine on levi.com now personalizes the individual experience online based on consumer profiles and browsing and purchase patterns showing increases in revenue and conversion,” he said.

Levi’s loyalty program membership grew 35 percent during the first quarter to more than five million members. Mr. Bergh said that revenues coming from Levi’s mobile app has exceeded internal expectations and shown month-over-month growth.

“We are reaching a younger consumer who is engaging with us more times per month and longer per visit,” he said. “We’re using the app as a seamless connector for the online to off-line experience and are piloting new convenience-oriented in-store features like contactless returns and self-checkout.”

One BrainTrust member, however, cautioned about tilting too far toward one brand strategy in particular. 

“Levi’s is going to do just fine this century, as long as they don’t open too many stores,” wrote Lee Peterson, EVP of thought leadership and marketing at WD Partners. “Careful on that one!”