Levi Strauss & Co.: A Marketing Channels Balancing Act
For Chip Bergh, CEO of Levi Strauss & Company, the fact that Levi’s own e-commerce sites accounted for only 4% of the company’s net revenues in 2018 was unacceptable (Levi Strauss & Co, 2019). Levi’s overall direct-to-consumer (DTC) sales from its company-owned Levi’ branded stores, factory outlet stores, shops-in-shops, and e-commerce sites, accounted for 35% of its net revenue in 2018 (Levi Strauss & Co, 2019). The DTC channels sold products at the manufacturer’s suggested retail price resulting in greater profit margins compared to sales to traditional independent retail channels (Reagan, 2019). Levi’s envisioned DTC reaching 50% of its net revenues with e-commerce playing a critical role (Garcia, 2019). Bergh stated, "Growing our U.S. [DTC] business allows us to move towards premiumizing the marketplace,” an important strategy to control pricing and address the decline in traditional retail store shopping by consumers (Howland, 2019b, para. 4). However, a past e-commerce effort had alienated many independent retailers to the extent that Levi’s stopped online sales for several years due to Levi’s undercutting the retailers prices (Collett, 1999). As the calendar approached 2020, what should Bergh do to expand Levi’s e-commerce and maintain productive relationships with its independent retail channel members?
1. Analyze a company’s approach to marketing channel structure design
2. Demonstrate an understanding of external environmental factors
3. Construct a SWOT analysis related to a marketing management decision
4. Discuss potential causes of conflict involving marketing channel members
5. Recommend a chosen course of action for a given channel management decision