Hot take: I think over 95% of businesses selling on large Amazon would fail miserably if they opened a DTC channel. Anyone can build a storefront on Shopify, list their product, pay $100 a month membership, and start selling. But how many entrepreneurs can sell profitably in significant volume via a DTC channel? People complain about Amazon’s fees without realizing that for many brands, CACs would kill them if they had their own channels.
On the other hand, some brands are seeing massive success with DTC. One of these brands is Levi’s, which claimed to have doubled their DTC revenues in the last decade and now making this channel a major part of their strategy. According to Michelle Gass, Levi Strauss & Co. president: “With the strong momentum and consumer permission, now is the time to accelerate our transition to D2C, where we will evolve our culture and operating model, and our consumer centricity will drive every aspect of how we operate.”
This brings me to think, what makes Levi’s a good candidate for a successful DTC channel, and when should a business stay away from it?
What Makes Me Think Levi’s DTC Adventure Will be a Success?
I think one of the main factors making a brand a good candidate for a DTC website is a strong brand identity. And no one can deny that Levi’s is a heavyweight in that category. I don’t think I can name a single person who has not heard of it. The brand has been around for over 150 years. According to YouGov, it is the 18th most popular brand in the US as of July 2024. Because Levi’s is so well-known around the world, they are getting a ton of direct searches, and many customers will pick them over any other brand.
And one of the reasons people love them is their product. Beyond just branding, strong and unique products can be a great way to attract customers to a DTC website. Levi’s jeans are frequently considered great value in the jean industry. Sure, they aren’t the very best someone can get, but they are frequently considered a top choice at their price point. While Shein and other new brands are disrupting the fashion industry, it seems like Levi’s products are far from becoming irrelevant. I’ve personally never been disappointed with the brand.
It is worth noting that Levi seems to have healthy margins. Too many people see the cost of doing business on marketplaces because it is easily predictable. Marketplaces are upfront about fees and taxes. On the other hand, payment processing fees on DTC websites are much lower than Amazon’s referral fees, but customer acquisition costs (CAC) can be high. Technology and maintenance can also be significant expenses.
The brand has a strong social media presence, with almost 10M followers on Instagram and 1.3M on TikTok. This allows Levi’s to reach a global audience, build a community, and improve brand visibility and recognition across different markets. They can interact directly with customers and gather valuable feedback which can help them improve their offer. Even though social commerce and marketplaces are huge, having such a strong online presence is a massive competitive advantage when crafting a DTC strategy and can potentially bring them tons of traffic. According to an article from PYMNTS, “One of the highlights of Levi’s D2C strategy is the expansion and evolution of its loyalty program. In the third quarter alone, the program added nearly 2 million members, bringing the total number of members to 28 million worldwide.” It seems like the brand has a strong customer lifetime value, making a DTC strategy more profitable in the long run.
Finally, Levi’s supply chain is a strong asset to their DTC plans because it ensures products are always available, orders are fulfilled quickly and accurately, and costs are kept low. They have the ability to scale it and handle risks or potential disruptions. Efficient supply chain management also helps Levi’s adapt to market trends or launch new products effectively.
The main risk I see in their strategy here is channel conflicts. Levi has a large network of retail partners who are part of the brand’s success by stocking Levi’s products. These retailers might feel threatened or bypassed, which could damage the business relationship and potentially cause loss of shelf space in stores. This could reduce Levi’s overall market presence. Additionally, price discrepancies between DTC and other channels could confuse or frustrate consumers. A coherent omnichannel strategy will be important if Levi decides to diversify their channels and run promotions or sales. We’ll also have to see if the brand has the resources to pursue a DTC strategy without disrupting existing channels.
Conclusion
I believe that Levi’s is a great candidate for a successful DTC strategy because of its strong brand identity, its popular and valued products, healthy profit margins, robust online presence, and efficient supply chain. This positions Levi’s well to engage with customers while keeping costs reasonable. A coherent omnichannel strategy will be important for the brand to minimize potential channel conflicts and ensure customer satisfaction, but I think Levi’s has everything they need to make their DTC adventure a success.
https://today.yougov.com/topics/consumer/explore/brand/Levis
