Sustainability and digital technology are among the key trends that Levi Strauss chief executive Chip Bergh says are shaping retail today.
Rising costs and the shift in supply chains to be more local to the market in which companies trade are also among the four trends that Bergh identified, speaking in an interview today at World Retail Congress (WRC).
Sustainability, says Bergh, is now a key issue for the clothing brand – and for its customers.
“Sustainability has been a strategic issue for us,” he says. “We weave it into everything we do. We drive our innovation programme around sustainability.” That means using more sustainable fibres, such as hemp, finding ways to reduce water usage and overall reducing its environmental footprint.
“Sustainability used to be pretty niche from a consumer standpoint and very Europe-centric. Now it’s truly global and cuts across generations. The young consumer in particular is really focused on this. If you ask a teenager today they will very likely say climate change is top of mind in terms of their concerns.”
Digital, adds Bergh, is much more than ecommerce – and being a technology company is quickly becoming a priority for all brands.
“With the pandemic everybody’s stores shut down and everybody did the hard pivot to ecommerce,” he says. “But when I say the rapid move to digitisation it’s more than ecommerce and building out those digital capabilities for the consumer. There’s so much of our business that can be digitised everything from how we design product to how we manage getting product to store.” He adds: “If you are not a tech company today, you are going to be dead in 10 years time. We are an apparel company but we are quickly becoming a tech company.”
Rising cost pressures are coming partly as a result of the pandemic, partly because of supply chain bottlenecks and partly because of shortages of labour in some parts of the world.
Bergh believes that “globalisation is dead” when it comes to the supply chain, since companies will increasing want to make goods closer to where they are sold. That’s both better for the environment and makes financial sense. “Our industry has traditionally chased the lowest-cost manufacturing base around the world,” says Bergh, “but this is coming to an end. The name of the game today is supply chain resilience and agility. When you are losing sales because a ship is stuck outside a port and can’t unload and you are leaving money on the table because consumers can’t buy your products that is a big issue.
“We’re going to see more manufacturing shifting closer to market because of the importance of that agility and responsiveness and having confidence that the product is going to be on the shelf in store when you need it to be.”
Bergh says he also felt that Levi’s had been later to adopt the diverse and inclusive culture that it now has. “When I joined the company 10 years ago, the house was on fire,” he said, “the company had nearly gone bankrupt a couple of years earlier. The brand was stagnating, we weren’t growing, profits were pretty terrible. It was a business turnaround and when we were developing the strategy the idea of focusing on diversity and inclusion came up but I deprioritised it.
“Looking back, it was one of the biggest mistakes I made in my 10 years here as, in my heart and soul, I believe that a diverse organisation will outperform a homogenous one every time.”
A quarter of Levi Strauss sales now online
Bergh’s World Retail Congress appearance came as Levi Strauss this week reported first quarter figures, showing that a quarter of its sales took place online in the opening months of its financial year.
Net revenues came in at $1.6bn (£1.2bn) in the three months to February 27 2022. That’s 22% ahead of the same time last year. Global direct-to-consumer sales were 35% up on the same time in the first quarter of 2021, as sales rose both in its own stores (+48%) as shoppers returned in-store to buy and through its own website (+10%). At the same time wholesale grew by 15% year-on-year. Revenues through all digital channels grew by 16% to represent about 25% of first quarter net revenues.
Sales grew across its markets, including the Americas (26%), Europe (+13%) and Asia (_11%).
Net income came in at $196m (£150m) – 37% higher than a year earlier.
Commenting on the figures, Bergh says: “Our teams’ disciplined execution of our strategic priorities enabled us to deliver strong top and bottom-line growth as we capitalise on structural tailwinds and successfully manage a dynamic operating environment. The strength of our brands and strategy position us to deliver sustainable growth well into the future.”
Levi Strauss sells to 110 countries around the world, online, through third-party retailers and department stores and through 3,100 own-brand stores and shop-in-shops. Its core denim brand, Levi’s, is ranked Top250 in RXUK Top500 research.