Levi’s: Digitising their way to post-Covid-19 recovery
On Thursday, Levi’s Strauss & Co. reported net revenues of $1.31 billion for the December to February quarter period, marking a decrease of 13% compared to the same period last year. The company is expecting sales growth thanks to an increase in vaccinations and stimulus funds boosting economic recovery, forecasting a net revenue increase of 24-25% for the first half of 2021 compared to the $2 billion net revenue it booked same period in 2020.
Singh said this is “largely driven by a faster recovery and a more optimistic view that we have.”
After budget cutbacks and store closures due to the global pandemic, to help get the company back on its feet, Levi Strauss & Co.’s finance chief is now increasing capital spending. According to Chief Financial Officer Harmit Singh, Levi’s is now allocating an estimated $210 million, up from the $130 million the capital spending budget was previously trimmed down to, with two-thirds planned for digitisation initiatives.
“We are reallocating our costs in a way that we drive synergies and savings and invest in areas of growth,” said Singh.
Although the company was forced to temporarily shut down many of its approximate 1540 locations due to local lockdown restrictions, Levi’s still plans to open 81 new stores in 2021. However, the company is also working on expanding its online presence and increasing its focus on eCommerce with virtual styling and shopping services.
The digital strategy includes spending on Levi’s smartphone app, customer loyalty programs and expanding its “buy online, pick up in-store” service offering through Europe and Asia. The company is also looking to improve distribution, which is largely reliant on third-party providers, and increase efficiencies by gaining better visibility on inventory.
On leveraging data analytics and AI to better forecast consumer demand and establish insights-driven pricing, Singh said, “As we decide about pricing and promotions, it tells us how deep you can go.” Levi’s will also use part of its budget to launch its new enterprise-resource-management system, unifying data across inventory management, supply chain, finance and human resource management. “We started in Mexico and are now rolling it out to Canada and the US,” said Singh.
Just as people are now accustomed to home offices and hoping the trend is here to stay, the move to more relaxed dress codes brought on by the pandemic is expected to hold. In a note to clients, Lorraine Hutchinson, a research analyst at Bank of America Corp., said, “We think underlying brand strength, new distribution opportunities and an accelerated shift to more comfortable apparel will allow [Levi’s] to exit the pandemic better positioned than peers.”
How Covid-19 Shook Up the Who's Who of American Retail
According to the new Digital Commerce 360 Top 500 analysis report, the massive shift in ecommerce habits due to COVID-19 resulted in a windfall for the US’s largest retailers, including Amazon, Walmart and Target.
The study found that the top 500 companies generated a combined total of $849.5 billion in online sales in 2020, representing a 45.3 per cent increase YoY, the largest jump since Digital Commerce 360 began tracking the statistic in 2006 and more than double the median growth of 18.0% seen over the last decade.
Although retailers of all sizes saw an uptick from online sales, in large part, throughout the pandemic, customers looked to familiar big name brands to fulfil much of their essential needs. Demand for items began to spike as manufacturing in Asia was forced to shut down, causing supply chain shortages. As large retailers tend to hold more inventory, this became a crucial differentiator for customers, says Digital Commerce 360.
Combined, Walmart Inc., Amazon.com Inc. and Target Corp. added $265 billion in US revenue to the $791.70 billion U.S. ecommerce market in 2020, accounting for a third of the market.
Considering the need for people to stay busy during lockdowns as well as the requirements of homeschooling, it’s not surprising Joann, a crafting company, showed the fastest online growth of Digital Commerce 360’s top 500.
- In 2019, the bottom 100 of the top 500 registered the fastest growth while the top 100 showing the slowest growth rate. In 2020, however, the analysis showed the opposite, the top 100 largest companies grew at a rate greater than that of the whole, and the top 10 on the list enjoyed a growth rate even faster than the top 100.
- In 2020, collectively the top 10 grew web sales 52.5%, almost five percentage points faster than the top 100 and accounted for 62.8% of Top 500 sales, up from 59.9% in 2019.
- Who made the top 10 was shaken up some. For example, Walmart made it into the second spot, both Kroger Co. and Costco Wholesale Corp. crept into the top 10 for the first time, landing at No. 8 and No. 10 respectively
Segments of retail that enjoyed fueled courtesy of COVID included toys and hobbies, jumping an average of 24 spots in the rankings and food and beverage merchants moved up an average 23 ranks. In contrast, apparel retailers dropped an average 15 positions in the Top 500, whereas jewellery retailers fell an average of 10 spots.
Although Digital Commerce 360 attributes some of the growth to stock positions and the ability of large retailers to manage supply chain issues, even the largest internet retailer experienced disruption. In March of 2020, during the first save of the US pandemic, even the Amazonian giant found themselves running into meeting customer commitments and delivering orders on time. Order cancellations and extended lead times became commonplace. For a time, Amazon stopped fulfilling orders for items considered “non-essential”.
Despite the issues, Amazon maintained its spot as the top online retailer in North America by a large margin, representing 35.7% of all Top 500 sales. Although it should be noted that the share is down from the 36.7% it saw in 2019.
At the outset of the pandemic Etsy, a solely ecommerce company focused on handmade, vintage items and craft supplies, was expected to perform poorly. However, as supply chain shortages for face masks caused a sudden need for cloth masks, many began to turn to Etsy, tripling its stock value by June.