Chia-An Chao, Joyce A. Young, Paul W. Clark
Levi Strauss & Co.: Are Traditional Marketing Channels at Risk?
This critical incident examines a marketing channel decision faced by Chip Bergh, CEO of Levi Strauss. The fact that Levi’s owned and operated e-commerce sites accounted for only 4% of the company’s net revenue, much lower than its competitors, was unacceptable. Levi’s overall direct-to-consumer (DTC) sales offered better profit margins and lower prices compared to traditional independent retail channels. The company reported strong earnings in 2018. Levi’s attributed some of its success to its diversified marketing channels. However, changing market conditions and the potential risks of continued decline in traditional retail stores coupled with Levi’s reliance on independent retailers as its primary marketing channel were all factors that Bergh needed to address for his shareholders. Past aggressive DTC efforts alienated many of its independent retailers and caused conflict in their relationships. Students are asked whether Bergh should risk these relationships once again by expanding its online presence.