Levi's at Wal-Mart?

Abstract

In early 2002, Levi Strauss was considering rekindling its Wal-Mart relationship with a new value brand. How should the brand be developed to preserve sales with existing customers in other channels? Was it possible to leverage the iconic Levi's name while remaining competitive and not affecting consumers' propensity to purchase other Levi's product lines at higher price points?

Excerpt

UVA-M-0711

Rev. Oct. 12, 2010

LEVI'S AT WAL-MART?

Introduction

In early 2002, Phil Marineau, CEO of Levi Strauss & Co., was thinking about whether he should direct his company to sell its product in the world's largest retail store, Wal-Mart. Levi Strauss had posted a decrease in sales for the past five years, and Marineau was eager to stem the decline. Since joining the company in 1999, Marineau had embarked on an aggressive plan to turn the company around by implementing new business strategies that included shuttering 16 North American manufacturing plants and moving the production to cheaper offshore sources. In the marketing area, Marineau had worked to revive the brand image by launching a series of new advertisements and product placements to broaden the appeal beyond the 15-to-19-year-old segment.

Marineau and his management team sensed that the Levi's brand was being challenged at all points along the spectrum. The high-end segment was dominated by trendy brands such as Tommy Hilfiger, Calvin Klein, Ralph Lauren Polo, and Diesel. In the middle segment, Levi Strauss competed with vertically integrated retailers such as the Gap, American Eagle Outfitters, and Abercrombie & Fitch. Meanwhile, retailers such as Wal-Mart, Target, JCPenney, and Sears had built their own private-label brands, offering comparable designs at significantly reduced prices. With Levi's selling in several chain and department stores, the company often found itself being used as a loss leader , with Levi's heavily discounted to the end consumer. Now Marineau and his management team had to decide whether to sell Levi's in Wal-Mart and, if so, what approach to use.

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Keywords: brand equity, advertising and promotion