Levi to Stop Selling Online After Holiday
San Francisco jeans maker Levi Strauss & Co. said Friday it would stop selling online after Christmas--a warning to other manufacturers that Web retailing might not be the bonanza many had hoped.
Levi, which has struggled during the last few years as teenagers eschewed plain-Jane five-pocket jeans in favor of trendier denim looks, said it is shifting e-commerce to its retailers, starting with JCPenney and Macy’s. Levi has been closing factories in response to weak demand.
The Levi’s and Dockers sites, meanwhile, will periodically offer special Levi products, a Levi spokesman said, but will mainly serve marketing and branding purposes.
“The cost of running a world-class e-commerce business is not affordable,” said Levi spokesman Jeff Beckman. “This is a decision about focusing our resources against priorities we think are most important for our consumers.”
Levi originally billed its Web foray as an experiment of better communication with consumers, a chance to present its brands and to deepen the company’s understanding of customers’ needs and expectations.
At the same time, industry watchers noted, Levi was eager to pocket potential profit from the retail prices it posted online in the name of not undercutting traditional, off-line Levi sellers.
Levi.com was not a victim of poor technology. The company was among the first manufacturers on the Web, in 1994, and became one of the more sophisticated apparel sites when it relaunched to sell online last November.
The site, which allows customers detailed views of clothing, won technology awards, advertising accolades and the admiration of its savviest customers.
But with the price of a respectable online presence growing ever higher, technology experts note that only the most talented retailers or manufacturers with the deepest pockets will be able to survive online. Besides promotional costs--online bookseller Amazon.com reported spending $146.7 million on advertising and marketing for the first half of 1999--e-retailers must arrange to take and ship thousands of individual orders, a task for which many manufacturers are ill-equipped.
“Most manufacturers ought to think twice before selling on the Web even before seeing the Levi’s carcass on the side of the road,” said James McQuivey, the senior consumer e-commerce analyst at Forrester Research. “There are just too many skills they need that they don’t have.”
Levi’s announcement is all the more surprising given the company’s original territorial position regarding the Web.
Unlike many other manufacturers that also rushed to try the new direct-to-consumer sales channel, Levi didn’t tread lightly on a selling turf many think ought to be retailers’ exclusive domain.
Instead, Levi decided it could sell its products online better than anybody else, and forbade loyal retailers such as JCPenney from carrying Levi items on their own Web sites.
Penney’s said its own Arizona jeans have done very well online in Levi’s absence, but added that it was enthusiastic to bring Penney’s online store on a par with the brick-and-mortar versions by offering a fuller array of products.
Already on Friday, Penney’s had put Levi’s hard-to-fit sizes on the “Just 4 Me” section of its Web site.
“The latest event doesn’t surprise us very much,” said Richard Last, the executive vice president for Penney’s e-commerce venture. “Some customers do pinpoint shopping where they are looking for a specific product from a specific manufacturer, but for the most part, customers in apparel especially are looking for a broad assortment.”
Manufacturers have long competed with retailersby opening stores and, in some cases, offering catalogs. But those attempts are often met with resistance by retailers, customers and Wall Street.
When the vehicle is online direct selling, those in the industry say, the road is even tougher because even the best retail sellers are learning their way as they go.
Coffeehouse wunderkind Starbucks Corp. in July announced a multibillion-dollar online venture even as it projected a 10% earnings shortfall from existing cyber-expenditures. The company quickly pulled back, however, when the market reacted by sending its stock down 28%, shaving more than $1.9 billion from its market capitalization.
