ECommerce - Levi Strauss: key reasons for the failure of its B2C site, consider and explain how the company might have utilised its existing B2B e-commerce to expand successfully to B2C

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1.0 Introduction

The Internet has been compared to the California Gold Rush of 1849 in which Levi Strauss built a Fortune 500 company by supplying miners with clothing (White Paper, Building an E-commerce Network). Levi's managed to reap from the opportunities of the California Gold Rush. However, in an attempt to achieve the same success with the Internet and ecommerce, Levi's failed to succeed. This paper investigates key reasons for such failure and identifies generic critical success factors as a guide for other business who wishes to follow in the path of ecommerce. ü

2.0 Levi's

In the 1990s Levi's Strauss was well regarded as a clothing brand by fashion minded young consumers. However since then, market share has dropped 16.9% and sales have decreased $1.1 billion from 1996 to 1998. The reason for such poor performance was blamed on missed opportunities on changes in fashion and not meeting new tastes. The 'cool' image of the brand was also slipping. The company was criticised for focusing too much on re-engineering the company, which took focus off the product. In order to reconnect to young people, the company set up a community orientated web site that would enable feedback from consumers that would lead to marketing decisions (Oz, 2002 p141). Levi's expected that the site would help set them apart from competitors (Olsen and Wolverton, 1999). ü

In 1998, the web site offered the consumers the ability to purchase products exclusively on the Levi's web site. This upset key retailers who were prohibited from selling Levi's and Dockers from their own web sites (Caylor, 1999).

Just under a year later, Levi's announced that they were closing the web site after poor sales and cost of running. The online sales were taken over by retailers Macy's and J.C. Penney's.

3.0 Key Reasons For Failure

Levi's looked to ecommerce as an opportunity to remove the middleman and sell directly to consumers. Selling on the Internet seemed like a sound strategy for Levi's. Their target audience of generation X and Y customers were more connected to technology and the Internet than any other age group at that time (Standley, 1999). However, this opportunity proved more difficult and expensive than expected. Most manufacturers are more used to distributing large orders to retailers than dealing with single orders of a pair of jeans and dealing directly with the consumer (Olsen and Wolverton, 1999).

Their Canadian web site was developed within only 60 days (Oz, 2002 p141). The time taken into developing and planning the web site was too short for such a big company with so many products. In addition, Levi's lied to their retailers about the web site and told them that it was an excellent opportunity for both parties to gain information on customers. The retailers would not have appreciated being kept in the dark about the web site and would have wanted to be more involved. Only one month after the Canadian site opened, Levi's started work on the US site. One month is not enough to analyse the response of the Canadian customers towards the web site, Levi's should have waited a bit longer before starting up the US web site. They were too ambitious and failed to analyse and respond to customer reactions.

Levi's alienated retailers by not allowing them to sell Levi's products on their own web sites. This caused channel conflicts by upsetting the traditional channels due to real or perceived damage from competition (Turban et al., 2004). It also divided existing customers into those who shopped online and those who shopped offline.

The web site itself was full of images, sound and innovative tools such as "fit calculator" and a "changing room". Filtering technology was used to recommend products based on a person's tastes for music, fashion and lifestyle. This sort of technology was seen the first time in the online fashion industry (Oz, 2002 p142). All this technology would have an affect on download time. Around that...
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