Discussion Questions

1. Discuss the external environmental factors that are affecting Levi’s sales?

Macro factors:

 Economic: Unfavorable economic conditions reduce consumers’ consumption of

apparel. 

 Political: Levi has a plan to expand to international markets. International trade policy

changes such as tariffs affect Levi's business operations. Weak intellectual property and

trademark laws in foreign markets also adversely affect Levi’s brand.

 Technology: With the development of technology, shopping online has become more and

more popular, but Levi’s e-commerce is still weak. 

Micro factors:

 Customer Demand: Customer tastes and preferring fashion always change. There is a big

challenge for the rise of athleisure apparel.

 Competitors: Levi faces many strong competitors such as American Eagle, the Gap, Lee

jeans, and so on. 

 Partners: Traditional retail stores where Levi’s primary marketing channel continuously

decline. Also, Levi does not have long-term contractual relationships with its independent

retailers. 

2. What are the strengths, weaknesses, opportunities, and threats (SWOT) for Levi’s as it

refocuses its marketing channel strategy?

Strengths: 
  Levi direct-to-consumer (DTC) sales kept increasing. DTC channels could bring Levi

more profit margins and it could supplement the lessened independent retail channels.

 Levi had various marketing channels and diversified geographic which could expand its

brand quickly.

 Levi expanded its business to women’s wear and enriched merchandise categories rather

than denim.

 Levi updated its products’ style to better fit for millennial customers’ preference.

Weaknesses:

 Levi’s e-commerce was weak, only 4% of its net revenue come from e-commerce.

 The majority (65%) of Levi’s revenue came from independent retailers.

Opportunities:

 Levi planned to offer in-store tailor shops so the customers can add some personal

designs.

 Levi updated its e-commerce system which would offer online shoppers product

suggestions based on their needs.

 Levi had already allowed customer in-store return items that were purchased online.

 Levi updated its inventory tracking system which would increase operational efficiency

and strengthen data analysis.

Threats:

 The lessened traditional independent retail channels reduce Levi’s revenue. 

 The unstable political and economic in foreign countries will affect Levi’s international

trade.

 Unfavorable economic conditions will reduce customers’ demand for apparel. 

 There are many strong competitors such as Wrangler, Lee jeans, the Gap, and American

Eagle.

 Levi did not have long-term contractual relationships with independent retailers.

3. Discuss the potential causes of conflict between Levi’s and its independent channel

members if Chip Bergh goes forward with his plan to aggressively grow Levi’s ecommerce

operation? Use provided articles to begin your research.

 Different Goals: When Levi and its independent channel do not share the same

objectives, both work in different directions to arrive at their ends, it will cause a channel

conflict. For example, Levi wants to get a large market share by offering a product at a

low price, whereas the retailers like to achieve a high profit by selling products at a high

price. 

 Change Resistant: When Levi want to modify the distribution channel, the independent

retail may not accept this change, it may result in a non-cooperation. For example, Levi

may like to promote e-commerce by offering a discount at online shops, while retailers

may feel the negative impact of discount. 

 Ambiguous Roles: The channel partners may not have a clear picture of their roles. For

example, Levi’s direct-sale and retailers may sell the same product in the same areas. 

 The huge dependence of intermediaries on the manufacturer: if Levi makes any changes,

it will immediately affect its retails sales. For example, Levi wants to cut costs by

reducing advertisements, but retailers find that it is difficult for them to sell products

without enough advertisements.

does not communicate about any change with its retailers on time, it will hamper the

retailer’s business operations. 

4. Discuss the pros and cons of (a) adding a second e-commerce distribution channel and

(b) keeping the current distribution channel structure. Should Chip Bergh go forward with

his plan to aggressively grow Levi’s e-commerce sales? Justify your decision.

Adding e-commerce

Pros:

 With traditional stores decline, e-commerce is the wave of the future. Adding its e-

commerce will bring more profit for Levi corporate. 

 The retailers may have their own brands to compete with Levi’s products. Adding e-

commerce can help Levi reduce the threat from the retailers’ competition.

 E-commerce will attract more millennial customers. They prefer shopping with smart

phones or laptops.  

Cons:

 Levi needs to invest extra money to manage e-commerce.

 E-commerce may cause a conflict between Levi itself and its retailers because e-

commerce may take away its retailers’ profits.

Keeping the current distribution channel

Pros:

 It will minimize the conflict between Levi and its retailers.

 Levi does not need to spend extra money on e-commerce.

Cons:
  Levi will lose a lot of customers due to the declined in traditional stores and lacked long-

term contracts with traditional retailers. 

 Levi will lose its competitiveness because it does not combine its business with

technology. 

 Levi will lose a lot of revenue because only 4% of the company’s net revenue coming

from e-commerce. With the traditional channel becoming weak, it is hard for Levi to sell

many products.

Decision:

Levi should add a second e-commerce distribution. 

For the long-term development of Levi, Levi needs e-commerce to keep its revenue when the

traditional channel is becoming weak. E-commerce can help Levi to reduce the dependence on

independent retailers. To some extent, retailers are also Levi’s potential competitors who will

take away Levi’s market shares. If Levi develops direct-sale e-commerce well, it will bring Levi

more net profits. Even though, in the beginning, Levi needs to invest much money to build its e-

commerce, Levi will get much return in the future. If customers’ 80% to 90% consumptions are

online in the future, Levi can take away all the independent retailers and save much money in

rental fees and employees’ salaries.