LEVI’S CUTOFF BUGS SMALL STORES
Byline: Janet Ozzard
NEW YORK — The news that they were going to lose their Levi’s had many small retailers steamed last week — but the San Francisco-based manufacturer said it won’t change its policy.
As reported, Levi Straus & Co. sent a letter to its some of its accounts this month informing them that the company will cut off retailers who order less than $10,000 worth of goods a year. The company said this was part of its effort to eliminate processes that are not cost-effective.
“What we’re doing is running a profitable business,” a Levi’s spokeswoman said. “We are saying we will continue the supply for the next nine months, which gives them ample time to find other suppliers. It’s nothing we look forward to doing, but we didn’t just cut them off.”
She added that Levi’s will try to help retailers in a variety of ways, including keeping stores on the books if they make the minimum by the end of November, the conclusion of Levi’s fiscal year.
Several retailers who were dropped have complained to the company, and some are taking it further.
Mike Tatz, owner of Zoot’s, a denim and workwear store in Chicago, said he was filing a complaint with the Federal Trade Commission against Levi’s, and called the cutoff “restraint of trade.”
He said he was told by the FTC that if enough people file complaints, the bureau will look into it.
A spokeswoman for the FTC said the agency would first have to determine whether Levi’s action warrants an investigation.
Tatz said he hasn’t decided yet how he will fill the inventory hole that Levi’s will leave, but indicated he might seek to increase his business with Lee.
“All anybody would have to do to fulfill this minimum is sell to a diverter,” he said. “Is that what Levi’s wants? It’s not the way I do business, but we all know that it could be done.”
“We want to say very, very aggressively that Levi’s will continue to expect its retailers to honor their commitment,” responded the spokeswoman to a question about diverters. “We do not do business with people we find are diverting, and we will enforce that.”
Meanwhile, other denim manufacturers said that while they find the Levi’s move perplexing, it is an opportunity for them to find some new business.
Gary Dawson, vice president and brand manager for Lee Brand, based in Merriam, Kan., said the company had planned to be more aggressive about cultivating smaller accounts even before Levi’s latest policy was announced.
“We recently underwent a major restructuring, and we decided that one of our target areas is the small account,” Dawson said. “We’ll do it through sales associates assigned to particular areas, and through telemarketing.”
One denim executive who requested anonymity said Levi’s move was a mystery.
“I can’t believe that small accounts are really more expensive to service than big accounts,” said the executive. “In general, these small accounts place their orders, drop their paper, pay their bills and are very little headache. The big accounts are usually more expensive to deal with. They require much more maintenance.”
Dave Seaman, vice president of sales for Cherokee Apparel, based in Sunland, Calif., agreed that the move seemed perplexing.
“Levi Strauss has always been a market leader in its use of telemarketing, where you have a catalog and you can phone in an order,” said Seaman from his New York office. “My question is: If you’re encouraging your smaller accounts to use that, why can’t a $10,000 account use it, too? Why cut them off?”
As for Cherokee’s business with smaller accounts, Seaman said the company doesn’t have “the sheer manpower” that Levi’s and Lee have to create a road force to call on smaller accounts. He did say that the company is developing its own telemarketing and Quick Response targeted specifically to smaller accounts.
“We send people to the regional shows, and we’ll do business with anybody we see there,” Seaman said.
Meanwhile, Levi’s is entering into a major promotional month with Macy’s. Macy’s had only begun to carry the brand again last year after a 10-year parting of the ways.
The August promotion will mark the completion of the brand’s rollout to all 59 Macy’s units, said Benny Lin, fashion director for Macy’s East.
Next Wednesday, the windows of the Herald Square flagship along 34th Street and on Seventh Avenue will feature Levi’s for women, men and children.
“August is a big back-to-school month, so it’s an important denim season,” said Lin.
The promotion will include advertising in magazines and local newspapers and on bus shelters as well as direct mail, Lin said. One in-store promotion, scheduled for Aug. 18, will be co-sponsored by Rolling Stone magazine. It will include an in-store fashion show and dance contest.