Why Levi’s is opening 100 new stores as Covid online sales boom grows

A Levi’s brand on the window of a Levi Strauss & Co. retailer in London.

Chris Ratcliffe | Bloomberg | Getty Photographs

Buyers are doing increasingly more buying on-line amid the pandemic, and that has each firms and traders attempting to finest combine e-commerce and the normal retail retailer enterprise shifting ahead.

In 2008, e-commerce gross sales made up simply 3.6% of complete retail gross sales within the U.S., in accordance with knowledge from eMarketer.

Amazon noticed its enterprise develop tenfold within the 2010s, Walmart additional established its on-line platform, new entrants like Wayfair emerged and nearly each retail model ensured it had a digital presence, as e-commerce boomed. By 2020, on-line gross sales made up 14% of complete retail gross sales.

The Covid-19 pandemic sped that development up much more, with e-commerce gross sales now anticipated to make up 15.3% of complete retail gross sales by the top of this yr, in accordance with eMarketer. That’s not anticipated to decelerate — that determine is predicted to extend to 23.5% of complete gross sales by 2025.

“The buyer needs a seamless expertise. She or he needs to have the ability to work together with us in our shops in addition to on our web site and so constructing an omnichannel expertise has been important through the pandemic,” Harmit Singh, CFO of Levi Strauss & Co., stated on the current CNBC @Work Summit.

Mixing in-store and on-line purchasing experiences

Levi Strauss & Co., which operates roughly 3,000 shops and shop-in-shops along with promoting its merchandise on-line and in different department shops and retailers, has targeted on scaling up its investments in its digital expertise whereas additionally conserving a precedence on what a buyer experiences purchasing in individual.

In Levi’s 2020 fiscal yr, almost a fourth of its gross sales got here through on-line purchasing, whether or not immediately by way of Levi’s platform or by way of the digital presence of its wholesalers. In 2015, on-line gross sales made up lower than 10% of its enterprise.

Final yr, Levi’s launched a brand new experiential retailer in Palo Alto, California, as a part of its push in direction of extra direct-to-consumer gross sales and fewer wholesale. There are a number of digitally-focused options of the “NextGen” retailer, together with integration with the corporate’s app, curbside pick-ups and contactless returns, and a list assortment that’s pushed by native buyer knowledge.

Singh stated that the corporate opened 100 new shops final yr and has plans to open greater than 100 this yr. A few of these shops would be the new experiential ones, the corporate beforehand introduced.

“We scaled up our investments in driving extra of a digital expertise,” Singh stated. “We had been capable of check issues and scale issues at speeds we’d haven’t stated was potential pre the pandemic, and I feel it is actually helped firms like ours as a result of I feel we have been capable of get much more agile and been capable of ship the promise that we have got down to our shoppers.”

The stability between the in-store and on-line expertise through the pandemic additionally has led to modifications in the way in which Levi Strauss thinks about its distribution infrastructure, which has grown in significance amid provide chain challenges.

Singh stated that the omnichannel technique on the consumer-facing facet of the enterprise led the corporate to check out legacy distribution facilities — some that had been solely fulfilling merchandise for wholesale clients, whereas different distribution facilities had been servicing the wants of e-commerce shoppers. It recreated the omnichannel strategy for its West Coast distribution after it started the ship-from-store technique, and he stated it results in stock efficiencies and a low value of service.

“I feel issues like that can make a giant distinction. Now we’re scaling our ship-from-store all over the world and we’re establishing extra omnichannel distribution facilities in Europe and different components,” Singh stated.

Estee Lauder has additionally pushed to make the web and in-store expertise extra seamless, including issues like digital try-on and having its magnificence advisors obtainable on-line, Tracey Travis, CFO of The Estee Lauder Corporations, stated on the CNBC occasion.

“Our in-store experiences is so robust; it is basically the place the corporate has been targeted for a lot of, a few years,” she stated. “Ensuring that we’re investing in on-line and having as a lot of a excessive contact expertise on-line as we do offline was critically vital to make that shopper expertise extra seamless between on-line and offline.”

Deepening the web gross sales focus

“One of many issues that actually has occurred throughout this pandemic is we have seen an acceleration, in all probability [a] three- to five-year acceleration, by way of our on-line enterprise throughout all kinds,” Travis stated.

“Brick and mortar remains to be a really, crucial half” of Estee Lauder, however she famous how the pandemic shifted a few of the firm’s technique.

“Over the last 12 months, the precedence has been very a lot on-line and including functionality to our on-line channel, and on the identical time, attempting to evaluate how brick and mortar would recuperate, the place brick and mortar would recuperate, and the place we must be investing and the place we must be disinvesting,” she stated.

Estee Lauder, which owns manufacturers like Clinique, Mac, Origins, and its eponymous magnificence line, stated that 28% of its $16.22 billion in web international gross sales in its fiscal 2021 yr got here from on-line channels, in accordance with its earnings report. In North America particularly, on-line gross sales made up 40% of Estee Lauder’s complete enterprise, in accordance with firm filings.

Whereas on-line gross sales for Estee Lauder have greater than doubled in comparison with 2019, bodily retail remains to be a key part of the corporate’s enterprise. Twenty-one p.c of its international gross sales in its most up-to-date fiscal yr happened in department shops, whereas gross sales in journey retail environments, comparable to duty-free outlets in airports, made up 28% of its complete gross sales.

The longer term for e-commerce and retail

How the stability between e-commerce and conventional brick-and-mortar gross sales continues to evolve will likely be an vital query that retail firms ask themselves as extra purchasing shifts on-line.

Earlier this yr, the proprietor of Saks Fifth Avenue break up aside the posh retailer’s web site right into a separate enterprise other than its 40 shops. Within the transfer, it stated the brand new digital firm could be valued at $2 billion, or roughly double its annual gross sales.

Final week, activist investor Jana Companions took a stake in Macy’s and despatched a letter to the corporate’s board calling for the same transfer. Jana had beforehand stated that Macy’s on-line enterprise may very well be value about $14 billion, nearly double the corporate’s present market cap.

Macy’s e-commerce gross sales have almost doubled within the final 4 years, and the corporate forecasted 2021 gross sales to be between $8.35 billion and $8.45 billion.

Missed this yr’s CNBC’s At Work summit? Entry the complete periods on demand at https://www.cnbcevents.com/worksummit/

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