Jean giant jacks in online selling as ecommerce realities bite

Veteran denim manufacturer Levi Strauss is to pull out of selling direct over the Internet, a move that could lead others to reassess their ecommerce strategy.

It was just one year ago that the company ploughed headlong into ecommerce with a relaunched, interactive site allowing consumers to see 360-degree views of clothing and order made to measure jeans, all with a view to reaching the nirvana of one to one marketing.

Through its sites, www.levi.com and www.dockers.com, Levi's was striving to learn more about its customers by gathering and analysing their purchases online using software from Andronmedia and e-merchandising applications from Blue Martini software.

A step too far

But despite hefty investment in this technology, the company has now decided that ecommerce is not its bag. Levi's said it would instead concentrate its efforts on its high street retail strategy, leaving its online sales to partners.

"We are a wholesaling company and have been for over a 100 years, we are not a retailer," Paola Brandi, spokeswoman for Levi Strauss in Europe, told vnunet.com.

"We are focusing on getting the consumer retail experience right. The Internet is a step too far. If ecommerce is the way, then we'll go back to it," she added.

Brandi couldn't comment on how much money had been invested in the ecommerce venture, but reports suggest the company spent $1 million on ecommerce software from Blue Martini and up to $7 million promoting its two sites.

Levi's said it would instead use the sites to promote its clothes and use retail partners Macy's and JC Penney to sell online in the US. Brandi added that the company would follow a similar route in Europe using selected authorised dealers for its online sales.

Internet retail under review

Melissa Bane, director of Internet market strategies at analyst firm The Yankee Group, believes this could start a trend as other traditional manufacturers review their ecommerce strategy.

"We can probably expect to see some other manufacturers pulling back from the Web and choosing to allow their online sales to be handled by their major retail partners. The Web is one more pain on a list of ailments many major manufacturers are struggling with in their overall businesses today."

Levi Strauss has seen a decline in total sales over the last three years as it struggled to move as fast as fashion dictated. Selling direct over the Web seemed a smart move to get the most out of its existing customers, but it appears to have failed to generate enough sales to offset the huge investment.

While the company insists its Web sales were satisfactory, Brandi admits: "We weren't making billions, but we weren't making a loss either. We're re-prioritising, because the apparel/retail market is suffering as consumers' tastes change and we have to adapt. We've been through hard times recently."

Considering the online challenge

Bane thinks this should be a lesson for other manufacturers to plan carefully if they too are thinking, or feel they are being forced into, selling direct over the Web.

"Many manufacturers who have yet to experience direct retail may face a variety of challenges in selling online. In addition to lacking the direct retail experience, manufacturers run the risk of alienating their most valuable existing channel partners," she said.

"Since Levi's is undoubtedly still seeing most of its sales generated by offline channel partners, the company is probably wise to focus on its core business and sales channels. It should be noted that the traditional retail market is not without challenges; the web is yet another headache for many apparel manufacturers still struggling with their traditional businesses," she added.