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Levi's may exit multi-brand outlets for exclusivity

Levi's may exit multi-brand outlets for exclusivity

Author | Source: The Economic Times | Friday, Sep 01,2006 8:49 AM

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Levi's may exit multi-brand outlets for exclusivity

In a bid to scale up its brand image and stem the erosion of its brand equity, the 150-year-old jeans brand Levi's is doing away with its current strategy of marketing through multi-brand outlets (MBOs) and will instead ramp up the number of its exclusive outlets across the country.

The company has stepped up investments for setting up exclusive stores and is in the process of phasing out several of its 460 MBOs. The company is also converting some of the more profitable MBOs into exclusive Levi's franchisees.

“Levi's is positioned as an aspirational brand, and distributing it through multi-brand outlets, has eroded the brand equity. The feed-back from consumers is that an MBO approach does not deliver Levi's feel and experience,” said Shumone Jaya Chatterjee, managing director, Levi Strauss & Co.

The company is increasing the number of its exclusive retail outlets from 110 currently to 250 by the end of '07. By offering a 4% increase in business margins in an exclusive arrangement on the current margins of 26%, the company has succeeded in luring quite a few of the MBOs to convert into sole Levi's franchisees. The company has managed to convert 50 such MBOs and is in the process of converting 50 more by '07.

The retraction from MBOs has helped the company ensure a more personalised customer approach. “Our retail expansion plan is focused on the Tier 2 cities that are anchored by a major city, which will act as trend-setters. While Mumbai acts as the trend-setting city for the West, Gurgaon and Delhi act as the same for the North. In the South, we have the advantage of three trend-setting cities - Bangalore, Hyderabad and Chennai. However, the East is not so simple, as Kolkata seems to be stagnant in consumption and trend-setting,” he said.

Levi Strauss India is a Bangalore-based, wholly owned subsidiary of Levi Strauss & Co, San Francisco. The company markets Levi's, Dockers, Signature, Sykes brands in India although it has been present in India for the last ten years, it is still struggling to be profitable. Till '05, the brand recorded losses and its annual revenue is estimated at Rs 60-80 crore.

The Rs 2,500 jeans market is fiercely competitive and the entry of several new designer brands like Tommy Hilfiger, Guess and Espirit are expected to give existing brands a run for their money. By chartering a clearer roadmap in terms of brand positioning and distribution, Levi's is hoping to claim a share of the growing retail pie in the country.

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