Harvard Business School
In 1995, women’s jeans was a $2 billion fashion category in the US and growing fast. Levi-Strauss was the market leader, but its traditional dominant position was under heavy attack. Standard Levi’s women’s jeans, sold in 51 size combinations (waist and inseam), had been the industry leading product for decades, but “fashion” was now taking over the category. Market research showed that only 24 percent of women were “fully satisfied” with their purchase of standard jeans at about $50 per pair. “Fashion” in jeans meant more styles, more colors, and better fit.
All of these combined to create a level of product line complexity that was a nightmare for manufacturing-oriented, “push-ba...
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...sed” companies like Strauss. By 1995, Strauss operated 19 Original Levi’s retail stores across the country (2,000 to 3,000 square foot mall stores) to put them in closer touch with the ultimate customers. But this channel was a very small part of their overall $6 Billion sales which were still primarily to distributors and/or independent retailers. Exhibit 1 shows Levi’s financial footprint.
Strauss was as aggressive as most apparel manufacturers and retailers in investing in process improvements and information technology to improve manufacturing and delivery cycle times and “pull-based” responsiveness to actual buying patterns. But the overall supply chain from product design to retail sales was still complex, expensive and slow. In spite of substantial improvements in recent years (including extensive use of “EDI”) there was still an eight month lag, on average, between ordering cotton fabric and selling the final pair of jeans.
The industry average lag was still well over twelve months in 1995. The financial footprint for one pair of women’s jeans sold through the normal wholesale channel compared to one pair sold through an Original Levi’s Store is summarized in Exhibit 2. Although the retail channel was less profitable for Strauss, it was seen as an “investment” in understanding end-use customers better. As an experiment in an alternative value chain concept, Strauss introduced “Personal Pair”™ kiosks in 4 of its Original Levi’s Stores in the Fall of 1994.
The experiment was made This case was written by Professors Lawrence Carr, William Lawler and John Shank of the F. W. Olin Graduate School of Business at Babson College. , as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation . It is based on publicly available information. Copyright © 1997 by Lawrence Carr , William Lawler, and John Shank and licensed for publication to Harvard Business School Publishing.
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