HOW DID LEVI’S MANAGE

ITS COMEBACK?

AN ANALYSIS OF HOW A STRUGGLING

COMPANY REVIVED ITSELF

Prepared for
Melanie Wise

Prepared by
Anna Sandgren

July 29, 2010

 MEMORANDUM

TO: Melanie Wise

FROM: Anna Sandgren
DATE: July 29, 2010
SUBJECT: How Did Levi’s Manage Its Comeback? An Analysis of How a Struggling
Company Revived Itself

Here is the report I wrote about how Levi’s was able to turn around its business after a
little over a decade of losing market shares.

Levi’s is a well-known organization and they enjoyed great triumphs in the last century,
especially from the 1960s to mid 1990s. Maybe the company was doing a little bit too
well, and they took their success for granted. Levi’s lacked innovation and stuck to what
they knew, which morphed into offering few product lines that also were out of style. By
not being up-to-date, Levi’s lost sales when they missed and failed to forecast trends in
the 1990s. Young people associated Levi’s as a baby boomer brand and turned their
backs on the organization. By having a small range of product lines, Levi’s also failed to
meet the needs of different market segments. As new rivals entered the market,
consumers could choose from designer jeans to more affordable jeans at retail stores.

In order to turn things around, Levi’s widened their product range and created more
product lines. Different lines could be bought from different distributors; premium jeans
at high-end specialty chains and a less expensive line at retails stores. By doing this,
Levi’s expanded their availability and could reach more consumers and different market
segments. To prevent from being looked upon as a brand for old people, Levi’s put
increased effort into repositioning themselves in order to appeal to younger consumers.
Part of the repositioning was to be seen as a trendy brand and follow what was in style,
not only when it came to fashion, but also trends in society. To communicate with
younger consumers, Levi’s now uses mobile shopping technology and social media
outlets such as Facebook and Twitter.

It is amazing to look back at the history of Levi’s and see how they reinvented
themselves. In order to not risk repeating the less successful times in the company’s
history, Levi’s needs to constantly come up with new ideas on how to deliver value to
consumers, while remaining socially and fashionably relevant. I recommend the
following:
• Strategic alliances and licensing. By collaborating with other companies in other
industries, Levi’s could enter new product categories and expand beyond clothes.
• Fast Fashion. By speeding up design processes Levi’s could create the absolute
latest in fashion trends, which translates into loyal and happier customers.
• Customization. Now that Levi’s is doing better, the Personal Pair program could
be relaunched and would probably be very successful in an era where customers
(especially Millenials) are looking for more individuality from their clothing
purchases.

I am glad I had the opportunity to write this report. I have gained a lot of insight into not
only an exciting company like Levi’s and their comeback, but also into the fascinating
jeans industry as a whole.
 TABLE OF CONTENTS

Introduction..........................................................................................................................1

Reasons Why Levi’s Lost Market Share .............................................................................2

Failure to Meet Fashion and Consumer Trends.............................................................2
New Entrants into the Jeans Market ..............................................................................3

Levi’s Comeback .................................................................................................................3

A Revamped Business Strategy .....................................................................................4
Repositioning .................................................................................................................5

Conclusions and Recommendations ....................................................................................6

References............................................................................................................................8
 - AN ANALYSIS OF HOW A STRUGGLING
COMPANY REVIVED ITSELF

INTRODUCTION

The business world is littered with stories of successful companies losing their way and
succumbing to failure. Every so often, among these stories of impending failure, there
comes along a fascinating story about an organization that is able to turn itself around and
not only succeed, but thrive. Levi’s, one of America’s oldest and most esteemed brands,
is just this type of success story. According to the essay “A Short History of Denim” by
Lynn Downey, entrepreneur Levi Strauss and tailor Jacob Davis started to make copper
riveted waist overalls in 1873, which they sold to gold miners during the California Gold
Rush (3). These waist overalls later became better known as “jeans” and by 1960 they
were worn by most of America’s youth and the Levi’s 501 became an American classic
(6). Levi Strauss & Co. achieved great success for more than a century, but the business
took a different turn in the late 20th century. As stated by Vauda Aich in her case Levis
Strauss in the US (Part B): The Great Turnaround Plan, Levi’s “steadily [began] losing
market share in the US [in] 1996.” Levi’s would experience this negative trend for a little
more than a decade, and it was not until April 2007 that the Los Angeles Times would
report that “[the company’s] fiscal first-quarter profit rose 61%, providing the latest sign
that the long-suffering jeans maker [was] finally on the mend.”

This report will analyze how a company on the brink of failure was able to get back on its
feet after years of struggling to once again become a fashionable and profitable brand.
The report explains what led to Levi’s downfall and what they did to revamp themselves.
Recommendations to maintain and grow a successful brand are also provided.

In preparing this report, several articles and reports have been analyzed and evaluated.
Information was gained from well-known sources such as Bloomberg Businessweek,
Time, and Levi’s corporate website. The readings also include an analysis of the jeans
industry, which is incorporated into the report.
 REASONS WHY LEVI’S LOST MARKET SHARE

After experiencing more than a century of positive sales trends and market growth, Levi’s
began to lose market share in 1996.There were several reasons that set off the downward
trend which lasted for more than a decade, including a lack of innovation, failure to
anticipate consumer trends and an influx of fashion forward competitors willing to do
what Levi’s either couldn’t or wouldn’t.

Failure to Meet Fashion and Consumer Trends

In his book Consumer Behavior, Michael Solomon states that in 1993 Levi’s was ranked
the most stylish brand in the world (222) and ironically, just three years later, consumers
started to abandon the company in droves. One of the main reasons for consumer
abandonment seems to be that Levi’s began to be perceived as no longer being stylish
and having lost touch with what consumers wanted. As mentioned in Stacy Perman’s
Time magazine article, “Levi’s Gets the Blues,” Levi’s failed to respond to trends in the
90s such as the wide-leg pant. It seems that Levi’s thought they could ride the wave of
their success from earlier decades, instead of focusing on innovational strength in order to
keep consumers loyal to their brand.
In her Bloomberg Businessweek article, “Why Levi’s Still Looks Faded,” Louise
Lee writes that many women turned their back on Levi’s because they felt the company
did not have any jeans models “that quite fit women’s curves,” because Levi’s created
“women’s jeans from men’s patterns.” This is clear evidence that another area that
became a detriment to Levi’s was their lack of cutting edge designers.
Interestingly, it could be that Levi’s longevity as a brand actually contributed to some of
its problems. It seems that the fact that Levi’s was such a thriving brand from the 1950s
until the mid 1990s, caused teens and young adults in the late 1990s and 2000s to
associate the brand with their parents, which translated into a reason for them to not buy
their jeans. Ellen Neuborne reports for Bloomberg BusinessWeek that Generation Y did
not see Levi’s as a very hip brand, and recognized it as a brand that their parents, the
baby boomers, would buy.
It is clear that Levi’s took their earlier success for granted and lost touch with the
needs of their consumers and market trends. When they did not have what consumers
asked for they lost their loyalty and in turn market share.

New Entrants into the Jeans Market

In the 1990s the jeans market changed dramatically and Levi’s faced stronger
competition than it had in the past. The new entrants into the market were two types:
high-end designer jeans manufacturers and retail chains (Perman). The designer jeans
came from fashion houses such as “Donna Karan, Tommy Hilfiger, Ralph Lauren and
Versace” and other “edgy upstarts.” These style-conscious rivals stole sales from Levi’s
and had stylish jeans models that followed—and sometimes even set—fashion trends;
something that Levi’s jeans and models did not. Many consumers were willing to pay a
premium price to obtain a pair of these much hipper jeans.
Around the same time period, retail stores like Gap Inc., J.C. Penney and Sears
started offering affordable jeans, cheaper than Levi’s, which attracted the younger
population and chipped away at even more of Levi’s share of the jeans market.
Levi’s was confronted by competition from two different directions and they were
stuck in the middle between their new rivals—rivals who went after niche customer
segments and were able to earn profits from them. As a result, both fashion and price
conscious consumers abandoned the Levi’s brand.

LEVI’S COMEBACK

Levi’s failed to meet consumers’ demands in the 1990s and the business overhaul to
make up for this lack of customer focus took them a decade to accomplish. They chose
certain ways to get back on track again, which included introducing additional product
lines to reach more market segments and making their products more available by
improving their distribution channels. Levi’s also repositioned their brand so that
consumers would see them as trendy and up-to-date, something that had been sorely
missing for decades.

A Revamped Business Strategy

As Levi’s faced increasing competition from designer brands and retail stores they finally
decided to counter their rivals by providing Levi’s products at select discounters and
specialty chains (Lee). Levi’s approach to turn the tide of lost market share and consumer
loyalty was to develop new product lines to be distributed in different types of stores. In
2003, the company launched their new Signature line, which Levi’s website describes as
a brand that “offers high-quality, fashionable jeans at affordable prices to value-conscious
consumers at [discount] stores like Walmart, Target and Kmart.” According to Jenny
Strasburg’s article in The San Francisco Chronicle, titled “Levi's treats itself to an image
makeover / Once-workaday jeans to challenge designer lines,” Levi’s also made their
way into high-end specialty chains such as “Saks Fifth Avenue, Neiman Marcus,
Bloomingdale's and Nordstrom ” with their premium product lines.
More than offering their jeans at discount and specialty stores, Levi’s also tried to
make themselves more attractive to younger consumers by making their jeans available at
Pacific Sunwear of California Inc. and other stores frequented by younger shoppers
(Lee).
An important, and risky, move in Levi’s reinvention was to become more
obtainable and offer something to different market segments. Rather than worry about the
risk of thinning out the brand by spreading themselves too thin, Levi’s saw the benefit of
diversifying their products to engage with customers who had varying needs and
expectations. Creating a line for selected retail stores was a bold move because Levi’s
could have tarnished their brand in the minds of consumers and degraded their legacy of
good quality. The same could have happened with regard to more upscale stores had
patrons of those establishments perceived Levi’s jeans as lacking sophistication. Yet
Levi’s understood that if executed well, they could expand their range of product lines,
increase their availability, and by doing so be seen as consumer focused and as a result
become profitable once again.

Repositioning

After seeing sales decrease in the 1990s and 2000s due to their failure to respond to
market trends, Levi’s also chose to reposition themselves. They began to be seen as being
out of style and out of touch with current trends. In order to prevent further loss of market
share and counter these perceptions, Levi’s took the innovative step of “ship[ing] in
staffers from its more fashion-oriented European division and [holding] brainstorming
sessions to suss out what [consumers wanted] in their clothes” (Lee). As a result, the new
product lines were in vogue and Levi’s enjoyed a triumph with new, trendier products
such as their low-rise jeans. The company became better at responding to trends and once
again gained popularity among younger consumers. Levi’s also became better at teasing
out trends, not just in the apparel industry, but in society. As pointed out in the online
article “Dressed to impress?” at CMDGlobal.com, Levi’s created the Eco jean, “made
with organically farmed cotton” that responded well to the environmental movement
taking place in our society in the last decade.
Levi’s also uses technology to connect and communicate with younger
consumers. Products have been designed to meet their needs, e.g. some models have
pockets for iPods, and Levi’s also interacts with their younger customers through the web
(CMDGlobal.com). As stated in Sara Inés Calderón’s article “Levi’s Uses New Facebook
Plugins to Reach Potential Jeans Purchasers” in Inside Network, “Levi’s […] was one of
the first web sites to debut Facebook’s new social plugins [in April of 2010].” When
asked why Levi’s was one of the first companies asked by Facebook to integrate with the
new plugins, Megan O’Connor, Levi’s director of digital and social marketing, explained
that “Facebook […] approached us because they knew we had a reputation as being a
pioneer not just in the social space, but also with technology.”
Levi’s managed to lure consumers back by positioning themselves as a brand that
is up to date; not only when it comes to their products, but also when it came to grasping
trends in society such as social and environmental movements and technology.
 CONCLUSIONS AND RECOMMENDATIONS

After a little more than a decade of losing consumers, Levi’s was eventually able to get
back on their feet and in early 2007 the company could announce that profits were finally
increasing again. After being successful most of the 20th century Levi’s had some dark
years at the end of the century and what led them there was their inability to anticipate or
even meet fashion trends as well as the entrance of rivals into the jeans market. Levi’s
could not offer stylish jeans models and the consumers abandoned them for their
competitors. By making some bold moves and utilizing smart business strategies Levi’s
was able to turn itself around and is today no longer thought of as a baby boomer brand
and has gained popularity among younger consumers. Levi’s effectively developed more
product lines and increased their availability to meet the needs of more market segments.
In order to interact with and maintain an ongoing relationship with their young buyers,
the organization makes huge efforts to remain technologically up-to-date and responsive
to societal trends.
Levi’s has hopefully learned their lesson to not take success for granted.
Upholding a relationship with consumers and keeping them loyal to their brand is a
continuous task and Levi’s needs to be innovative and create new ways to maintain these
relationships. Different ways to do so could be:
1. Strategic alliances and licensing. Levi’s has often teamed up with different
organizations to give back to society, e.g. the White Knot and Goodwill, but
could take it further and join forces with other parties to create more Levi’s
products than just clothes. Levi’s logo could be seen on products such as
furniture and home accessories such as sheets, blankets etc. Since Levi’s
sponsors music festivals, camping gear could also be part of their product
range.
2. Fast Fashion. Levi’s could meet trends faster and enjoy higher consumer
satisfaction by speeding up the process of spotting trends, manufacturing and
distribution. Similar to Zara, Levi’s could engage in “Fast Fashion” and would
develop products quicker and have them in stores more rapidly.
3. Customization. Levi’s offered the Personal Pair program to consumers from
1994 to 2003. People got measured at Original Levi’s stores and could a few
weeks later enjoy their own customized jeans. Levi’s decided to discontinue
the program to put efforts into restrengthening the brand. Now that Levi’s has
improved their brand, the program could be relaunched.
 REFERENCES

Aich, Vauda. “Levis Strauss in the US (Part B): The Great Turnaround Plan.” IBS Case
Development Centre 2006.
http://www.ibscdc.org/Case_Studies/Strategy/Restructuring%20Turnaround%20S
trategies/RTS0112B.htm>.
Calderón, Sara I. “Levi’s Uses New Facebook Plugins to Reach Potential Jeans
Purchasers”, Inside Network 27 Apr, 2010. 23 Jul, 2010.
<http://www.insidefacebook.com/2010/04/27/levi%E2%80%99s-uses-new-
facebook-plugins-to-reach-potential-jeans-purchasers/>.
Downey, Lynn. “A Short History of Denim.” Levi Strauss & Co 2007.
<http://www.levistrauss.com/sites/default/files/librarydocument/2010/4/History-
Denim.pdf>.
“Dressed to impress?” CMDGlobal.com 20 October, 2007.
<http://www.cmdglobal.com/analysis/brand_experts/levis>.
Lee, Louise. “Why Levi’s Still Looks Faded,” Bloomberg Businessweek 22 Jul, 2002. 23
Jul, 2010.
http://www.businessweek.com/magazine/content/02_29/b3792068.htm>.
“Levi Strauss earnings rise 61% in 1st quarter” Los Angeles Times 11 April, 2007.
<http://articles.latimes.com/2007/apr/11/business/fi-levi11>.
Neuborne, Ellen. “Generation Y,” Bloomberg Businessweek 15 Feb, 1999. 23 Jul, 2010.
<http://www.businessweek.com/1999/99_07/b3616001.htm>.
Perman, Stacy. “Levi’s Gets the Blues,” Time 17 Nov, 1997. 23 Jul, 2010.
<http://www.time.com/time/magazine/article/0,9171,987368-1,00.html>.
“Signature.” Levi Strauss & Co. <http://www.levistrauss.com/brands/signature-by-levi-
strauss>.
Solomon, Michael. R. Consumer Behavior. Upper Saddle River: Pearson, 2009. 222.
Strasburg, Jenny. “Levi's treats itself to an image makeover / Once-workaday
jeans to challenge designer lines”, The Chronicle 15 Aug, 2002. 23 Jul, 2010.
<http://articles.sfgate.com/2002-08-15/business/17556016_1_levi-strauss-
neiman-marcus-saks>.