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Levi’s Leaders Reveal Most Effective Pandemic Pivots

Retail businesses across the globe have been forced to remake themselves throughout the devastating spread of the coronavirus, often emerging leaner, more efficient, and with more hard-learned lessons than they could have imagined.

At the International Advertising Bureau’s Brand Disruption Summit on Monday, industry experts weighed in on surviving Covid’s complications—and what the retail landscape might look like post-pandemic.

At Levi’s, a move toward DTC has been in the works for more than five years, according to Brady Stewart, senior vice president and managing director of the company’s direct-to-consumer business. During a conversation entitled, “Agility in Action: Leading Rapid Transformation through a Dynamic Environment,” Stewart said that what enabled the legacy denim brand to “really accelerate through Covid” was a “very strong sense for what our consumers need.”

The Levi’s team was empowered to act quickly to meet new demands, pivoting in the pandemic’s early days. The decision to re-fashion stores into mini distribution centers was a move that Stewart called “one of the most inspiring elements of a really difficult situation for us as a brand and as a company.”

The new capability to ship from stores, accompanied by the launch of curbside pickup, buy online pick up in store (BOPIS) and virtual stylist appointment scheduling, changed the game for Levi’s, she said. This set of tools allowed the denim giant to continue to engage with consumers while store shutdowns roiled retail across the country and the globe.

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“Consumers were looking for authentic brand connections, and they were looking to be able to shop and engage with your brand and your company in a seamless way,” she said.

The company’s leadership wasted no time shifting strategies, and that willingness to embrace change without trepidation served the brand well. “Our leadership recognized that if you are going to be relevant in this moment you need to be fast, you need to be agile, you need to kind of throw away the structures that have held you back in the past,” Steward said. That meant funneling capital into fast-forwarding DTC efforts that would give shoppers the optimal brand experience.

“The key learning, I would say, is that for so long we’ve been really tied in very rigorous roadmaps and theories and regimented ways of working—and in this case we just threw a little bit of that out,” she said. “We said, ‘We know what’s right for the consumer, we’re just going to try it, it might not work perfectly right.’”

Levi’s also notably launched same-day delivery, giving consumers the satisfaction of a quick fashion fix while shopping safely from home. Re-training staff to meet these new demands, along with curbside pickup, where they were asked to deliver orders directly to shoppers’ cars, presented a learning curve. But the success of these efforts has only underscored the importance of Levi’s DTC business and the essential role that its stores have to play in omnichannel commerce.

“It’s been really powerful,” Stewart said. “I will give huge credit to our store organizations, they bore so much of the learnings from this.”

On Tuesday, at Morgan Stanley’s virtual Life After Covid conference, Levi’s executive vice president and chief financial officer Harmit Singh echoed Stewart’s assertion that readiness to evolve has buoyed the denim brand through 2020’s constant challenges.

“The digitization of the consumer experience has accelerated, what would have taken probably years is happening very quickly,” he said.

Enhancing Levi’s direct-to-consumer channel is at the heart of that shift, he said. Ten years ago, DTC made up just 26 percent of the denim stalwart’s business. By 2019, that number had grown to 44 percent, and now, it’s even higher. “What we talked in our Q3 earnings is that it’s going to be north of 50 percent of our of our business,” Singh added.

Levi’s e-commerce gross margins are 20 percent higher than wholesale, Singh said, and that’s a big reason to prioritize the channel. But the long-term play is creating a deep, meaningful and unfiltered relationship with the consumer, who now has many avenues to interact with the brand. They can shop Levi’s stores, its own e-commerce site and its app, as well as taking advantage of a growing array of omnichannel options.

Direct engagement with consumers creates lifetime value, Singh said, evidenced by the fact that 40 percent of shoppers currently make repeat purchases.

Wholesale will remain an important part of the Levi’s ecosystem, though, as it continues to drive brand awareness. The denim juggernaut’s wholesale efforts have contracted over the past decade, shrinking from about 50 percent of the total business to around 30 percent—a much “healthier” mix, Singh said. In Q3, wholesale drove just 10 percent of Levi’s overall revenue.

“Our focus with the traditional retailers is all about driving more business to the productive doors,” he said. One fruitful example is the brand’s strategic partnership with Target on it’s Levi’s Red Tab collection, which dropped in 140 stores last year. In October, the companies announced plans to bring the line to an additional 500 doors by fall 2021.

Shoppers have had more time to reflect on their true needs and the impact of their purchases during quarantine, and it’s not just affecting where they shop, but also how they spend. “We believe that consumers are moving from conspicuous consumption to conscious consumption, which really plays to our strengths,” Singh said.

Levi’s announced its own re-commerce program, Levi’s SecondHand, in early October. Shoppers can trade in their pre-worn denim duds for store credit, and the items are sold at drastically reduced prices on the program’s microsite.

Singh said the choice was a natural one for the heritage brand. “Levi’s is one of the few brands that is sold and resold—people collect it.”

The company’s decision to keep pre-owned jeans and jackets in circulation through its own program was both an environmental and economical one. Singh estimated that the resale market represents a $20-$30 billion opportunity for retail, and Levi’s SecondHand represents the brand’s first foray into an effort all its own.

Singh believes brands that keep sustainability at the forefront of their missions could reap real rewards. “It’s all about brands that not only focus on value, but values,” he said.