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Levi’s CEO Chip Bergh: How Denim Giant is ‘Building for the Future’

Heritage denim brand Levi Strauss & Co. is no stranger to weathering storms at retail. The all-American label has been doing so since the mid-1800s, and is taking on 2020’s challenges with a forward-looking strategy to pandemic-proof its business.

At the WWD virtual Apparel and Retail Summit on Wednesday, CEO Chip Bergh said that although Levi’s went into the Covid crisis with little knowledge about what its end impacts might look like, he set the goal to “emerge from the pandemic stronger” through a “focus on building for the future.”

The denim giant is doing so by “doubling down on consumer connection,” he said, in a time when shoppers have been learning to do more with less. “I think the days of conspicuous consumption are gone,” he said. “Consumers are much more focused on conscious consumption—they’re buying fewer things but they’re buying brands that they know and trust.”

Levi’s has the benefit of having built a reputation on its storied history, as the brand’s classic 501 silhouette remains a favorite of Gen Z influencers and sartorial tastemakers. But despite its sizable store footprint and wholesale presence, the denim giant has had to make new investments to guarantee connection with shoppers during a period of sporadic retail lockdowns.

“Obviously, there’s the hard pivot to digitization,” Bergh said, characterizing tech enablement as the company’s utmost priority in recent months. “When we went into shelter in place we doubled down hard on building out e-commerce and omnichannel capabilities,” which contributed to the quick third-quarter bounce back after a Q2 that was painful for much of retail, he added.

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What’s more, the company has invested heavily into digital processes to streamline its overall operations. “We’re talking about doing everything from designing digitally all the way through our entire supply chain—manufacturing and finishing a pair of jeans,” he said.

While the denim industry “has historically been very analog,” Bergh believes it’s essential that brands embrace more efficient processes throughout the value chain. Levi’s has invested in AI tools to help predict store traffic patterns and thus inform staffing needs. It has also been employing data-driven technology to inform its promotional strategy, hitting shoppers with the styles they want, when they want them, to avoid unnecessary discounts and margin hits. “My belief is the pandemic [has] accelerated what might have taken five or 10 years, and it’s compressing into this short period of time,” he said.

Embracing new technology helped the Levi’s quickly build out the omnichannel capabilities—like curbside pickup, BOPIS, and shipping directly from stores—that have helped reach consumers even through stay-at-home orders and coronanvirus-induced store shutdowns.

The ship-from-store program allowed Levi’s to sell through products that might otherwise have languished on stockroom shelves, keeping store staff engaged and employed at the same time. “Twenty percent of our e-commerce orders in the second quarter and third quarter were filled from our retail locations, and that helps us optimize inventory and reduce markdowns,” Bergh said.

The pandemic has also illuminated shoppers’ increasing appetites for circularity, he said, prompting the launch of Levi’s SecondHand, its official take-back and resale program. Shoppers can sell their pre-worn Levi’s jeans and jackets for credits to be used toward future purchases, while the company sells the pieces—some contemporary, and some vintage—on its SecondHand microsite or in stores across the globe.

“People will go out and hunt for authentic, vintage Levi’s, or just older Levi’s that have been worn in,” Bergh said. “It really is a signal of just how powerful this brand is that a consumer will come into our store and buy a 25-year-old trucker jacket,” and pay two or three times the cost of a new product, he added.

These types programs have strengthened Levi’s direct-to-consumer business in recent seasons, Bergh said, and that’s a trend he believes will continue. When he joined the company more than nine years ago, U.S. wholesale channels were responsible for nearly half of Levi’s global revenue, while DTC hovered at around 21 percent. “Fast forward to today,” he said, “and our total direct-to-consumer business is now almost 40 percent of our global revenue, and U.S. wholesale is under 30 percent overall.”

Wholesale will always be important to us,” Bergh added, as it represents a large-scale, profitable side of the business that’s run with relatively small teams. “But in the direct-to-consumer world, in both brick-and-mortar and e-commerce, we’re in much more control of how our brand shows up.”

The ability to steer the ship is an important one during turbulent times, which is why Bergh is pushing the company’s DTC-led strategy. “It’s a real clear opportunity for us,” he said, to be “in direct contact with the consumer” and establish a one-to-one relationship built on both product and service.

“We’ve really tried to build our stores to be very experiential,” Bergh said, citing the implementation of in-store tailor shops that allow shoppers to customize their perfect fit, and  reserve-in-store capabilities and wardrobe styling help. “It provides some in-store theatre, and a way to engage the consumer beyond just a transaction.”

As 2020 comes to its long-awaited close, Levi’s will continue forward in looking for new ways to make inroads with its fans. DTC will play an inarguable part in that strategy. “So we’re going to continue to focus our investments there, and continue to work on becoming a great vertical retailer,” Bergh said.