Re: The Levi’s Personal Pair Proposal
This main issue facing Levi’s is whether or not their company should take on the joint venture with Custom Clothing Technology Corporation to produce a pair of jeans with a superior fit compared to off the rack jeans. Analysis:
When you are looking for a pair of jeans, there are a couple of things that are very important to the customers. Price is obviously an important factor but where Levi’s creates value is by providing the customer with a well fitting, comfortable and stylish pair of jeans. Currently, only one in four women were happy with the fit of their jeans. This could create a large opportunity for Levi’s to capture that share of women who are willing to pay a small premium in order to have a better fitting pair of jeans and providing the perfect fit service. This proposal gives Levi's the opportunity to create a niche in the industry and differentiate themselves from the low cost, high volume producers and the higher cost producers that target affluent customers, which was a problem for them in the past. The Perfect Fit jeans scheme also has some cost benefits associated with it. The one negative is the initial start up cost. On the positive side, Levi’s distribution cost will be basically eliminated since the jeans are shipped directly to the customer. Also, since the jeans will be produced on a just in time basis, Levi’s will not have to hold any finished inventory. The denim industry is a rapidly expanding one, growing at 10% last year. Since Levi’s has stuck to producing American made jeans, they are not able to compete with the low cost high volume segment. Levi’s net income actually dropped during this period of expansion because of the competition with the low cost jean providers, such as their old partner Target. With the Perfect Fit Jeans, they will charge a premium, which most will be willing to pay for the perfect fit. This differentiation strategy will allow Levi’s to still produce American...
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