LEVI STRAUSS & Co. announced last week that it would close half of its manufacturing plants in the United States and Canada and lay off 5,900 employees -- 30 percent of its North American work force -- as it shifts more production to overseas contractors.
The fabled jeans maker was reacting to a sales falloff -- down 13 percent last year -- as younger consumers abandoned their classic 501s for trendier styles from designers such as Ralph Lauren and Tommy Hilfiger or lower priced versions from retailers like Target and J. C. Penney.
Where did Levi go wrong? Did it hang on too long to its commitment to significant U.S. production? Or did complacency lead it to ignore the shifting style trends -- like bell-bottoms and cargo pants? Can it regain its pre-eminence?
President, Charles Gilbert Associates Inc., a Marietta, Ga., consultancy for the textile industry
Levi didn't always treat their customers the best. Large companies like Sears, Penney -- Levi didn't necessarily give them what they wanted.
So then Sears and Penney started doing their own private-label jeans, cutting into Levi's market share. And Gap made significant gains into Levi's market share with their denim products.
If you look back even five years ago, neither Penney nor Sears had their own private-label jeans.
I guess maybe Levi was a little bit slow in recognizing the opportunities offshore with lower wage rates. Maybe they maintained their plants longer than they should have.
Over the last 10 years, they've probably gone through four or five major reorganizations.
In that process they weeded out a lot of their senior, experienced people.
They brought in a lot of young, maybe bright people who didn't know a whole lot about the industry. I think that hurt them also.
They're still a strong company, and I don't think they're going to go under. Getting reacquainted with their customers would be a major, important step for them.
Associate director of research, Teenage Research Unlimited, Northbrook, Ill.
We measure Levis in two different ways. We ask teens the brand of jeans they purchased the most often in the last year, and we ask which are the coolest brands out there.
On the purchase end, Levis is still the No. 1 brand purchased by teens. A lot of that is because they are still so national.
But in coolness terms, Levis used to be the No. 2 or No. 3 brand for a number of years.
And it had about a 16 percent, which means 16 percent of teens mentioned them as a cool brand.
But last year they dropped to 8th position, and only 7 percent of teens said they were a cool brand. A dramatic drop, definitely.
Some of the things we hear from kids is, "My dad wears Levis. I don't want to wear anything my dad wears."
Partner, Colton Bernard Inc., a San Francisco apparel marketing consultancy
They held on to all their traditional methods of operating, many of which had become obsolete.
The way they looked at the market place. The way they dealt with it. They dealt with their business as a denim jeans-related business as the world was looking at it as a fashion arena.
They really believed their own press that they were the greatest marketing entity going at their end of the business.
Unfortunately, I think they confused marketing with advertising and public relations, as opposed to finding what people wanted to buy and then interpreting that within the image of their business.
Levi's company culture was very positive, but it turned out to be a double-edged sword. The company is historically known for being compassionate, for being one of the best places in America to work, with very strong community ties.
This meant that they were very nice, and maybe they stayed too nice too long.
While they were being good to their people and good to their communities, their competitors were taking their operational requirements offshore in order to survive.
They allowed their competitors not only to walk away with more of the market, but they seemed to be unaware that there was a brand-new set of competitors out there, gobbling up the market. The denim business became not a commodity business, as it has been, but a very large part of the fashion business.
President, Barnard's Retail Trend Report, Upper Montclair, N.J.
Levi is one of the two or three absolutely best brand names around the globe.
People in remote corners of Tibet have heard of Levi, and you know that they associate Levi with America, where the streets are paved with gold.
But though Levi is one of the best and most revered brand names, at home more and more people wouldn't be seen dead in Levis.
And the reason is very simple. Levi jeans are stodgy workhorses.
They are the same as they have been forever. It's not cool to wear these stodgy workhorses.
If kids do buy jeans products at all these days, they go to the Gap. They go to Old Navy. They go to Tommy Hilfiger. They go to Sears and they go to Penney's. Those jeans are articles of fashion. They are not stodgy workhorses.
The Levis people assumed that the extraordinary name of the brand globally would keep the name uppermost in people's minds and that sales would never slacken as a result.
That was a mistake, because the world changes, and Levi didn't change along with the world.
They need to turn themselves from a production company into a marketing organization that will bombard you with marketing messages about how fashionable their product is.
Pub Date: 2/28/99