LEVI’S MINIMUM BURNS SMALL STORES
Byline: RACHEL SPEVACK and JEAN PALMIERI
NEW YORK — Small apparel retailers are fuming after receiving notification from Levi Strauss & Co. setting yearly minimum orders. Levi’s has put a minimum price tag of $10,000 on the amount of business it does annually with small retailers.
The San Francisco-based sportswear manufacturer has sent letters to an undisclosed number of small stores informing them that beginning March 31, 1995, it will no longer do business with them because their annual bookings do not exceed $10,000.
The move is not unprecedented in the industry. Nike and Timberland have set minimum purchases for a combination of apparel and footwear.
Tom Fanoe, vice president of customer relations for the U.S. at Levi Strauss, said the decision was part of Levi’s stated aim to reevaluate all business practices.
Fanoe said a disproportionate amount of company resources had been allocated to these smaller retailers: “We decided that we could take those resources and make them much more effective by redeploying them elsewhere. We have many small independent retail accounts who do a significant amount of business and are very important to us. This is just a very small percent of our company’s volume that we’re talking about here.”
The letter from Gary Magnus, Levi’s director of retail strategies, stated, “This has been an extremely tough decision for us. We understand the close relationship that you have had with Levi Strauss & Co. in the past, and we wish that we did not have to take this action.”
Hundreds of the retailers who received letters, in fact, had done zero volume with Levi’s lately, noted Fanoe.
This is the second notification most of these stores have received from the Levi’s. A month ago, retailers got a letter informing them that Levi’s was “reevaluating its distribution,” according to one small merchant, who added: “Now the second shoe has dropped.”
John Nelson, of Nelson’s Clothing in Maycomb, Ill., received a letter from Levi’s on Tuesday morning informing him that he was one of the stores to be dropped. Nelson’s has sold Levi’s for more than 30 years and currently carries basic jeans and shorts, 550s, 560s and Silver Tab.
“I’m a specialty store in a small market of 20,000, but we have a university here of 11,000 students,” he said. “What Levi’s is doing is against their best interests.”
Nevertheless, Nelson said, he had foreseen the move: “I could see this coming for years. First they dropped their sales force, and now it’s nearly impossible to get in to see them at market.”
Unlike larger accounts, small merchants are forced to work their orders through Levi’s telemarketing arm.
Nelson, who does $7,000 in Levi’s business annually, believes he could have increased his volume with the manufacturer if he’d more of an opportunity to buy goods.
“The only specialty store Dockers account in our town closed two years ago, and they still wouldn’t sell us,” he said. “They’re tying the hands of stores like ours, and it’s very hard to do the business they require.
“They’ve made it extremely difficult to acquire and sell their goods,” he said. “That’s been my biggest peeve for a while.”
Nelson said he called his lawyer to see what recourse he has and to find out if the practice is legal. “We’ve been a customer in good standing, with a good credit history, and we’re being denied the opportunity to represent the product,” he concluded.
Jerry Mayo, owner of Mayo’s, a family apparel store in Clay Center, Kan., about 150 miles west of Kansas City, said he carries Levi’s men’s, women’s and children’s merchandise. He got the letter on Monday.
Mayo said he has been a Levi’s account since 1981, and always paid his bills on time: “We’re a good customer.” At first, the store had a Levi’s road salesman, but then it was put on telemarketing, he explained. “Of course, your volume is going to drop — it’s hard to get excited about seeing something in a catalog. They would send us a catalog seasonally. We had no solicitation from them at all.”
Clay Center’s population is only 5,000, Mayo said, adding that $10,000 worth of merchandise is a lot to buy from one company: “There are very few vendors that we buy $10,000 worth of merchandise a year from.” Mayo said his account with Levi’s was $5,000 to $6,000 a year.
He added that he doesn’t want to buy Lee jeans instead of Levi’s because he feels consumers still associate Lee with discounters, even though it’s been more than a year since Lee stopped shipping its Lee jeans to discounters: “It’s going to take a while for the public to get that [discount association] out of their minds. I’m not certain what we’re going to do.”
Mayo said when Levi’s stops shipping to his store next March, “there will no place in Clay Center where you will be able to buy Levi’s except from the J.C. Penney catalog.” He said his customers will have to drive 40 miles, to Manhattan, Kan., to buy Levi’s, and while there they’ll probably hit Wal-Mart and buy other apparel items.
“They’re trying to squeeze the little guys out,” he said.
One small retailer based in Virginia, who asked that his name be withheld, said he called Levi’s 800 number as soon as he received the letter. “We made some suggestions on how they could deal with small accounts, such as charging us a service charge. They’re supposed to call me back in two or three days.”
This retailer, who has carried Levi’s since 1969 and also sells the men’s Dockers product, is especially upset about how the manufacturer has treated small stores in recent years. “We have to buy through the telemarketing system; we weren’t privileged enough to see the line.”