American clothing company Levi Strauss Co., best known for its heritage denim label Levi’s, in June reported an 8 percent increase year-on-year for the second quarter of 2024, with direct-to-consumer (DTC) revenues also rising 8 percent.
With CEO Michelle Gass at the helm, Levi Strauss & Co. has said it is pursuing becoming a USD10 billion company.
Central to this vision is Levi’s commitment to international markets, with a keen eye on the dynamic landscape of the Asia-Pacific region.
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The company’s heightened emphasis on women’s apparel and denim lifestyle has been instrumental in yielding substantial growth and propelling advancements in market share.
A shift to a DTC-first strategy has also led to an array of major store openings for Levi’s in Asia, in key markets including Singapore and Thailand, as the brand dives into expanded, elevated retail experiences.
Most recently, Levi’s opened its largest store in Southeast Asia, in Kuala Lumpur, Malaysia’s Suria KLCC mall. Featuring an upgraded store format, the 4,239-square-foot Suria KLCC store features Levi’s extensive product range, from premium collections such as the Levi’s Vintage Clothing and Made in Japan lines, to the climate-relevant Performance Cool collection, in addition to a tailor shop designed for customisation and alteration services.
Ahead of the opening of Levi’s new Suria KLCC store attended by Retail in Asia, we spoke to Nuholt Huisamen, managing director, East Asia Pacific, Levi’s, to discuss the company’s wider strategy as well as key ambitions in the region.
Retail in Asia: Levi’s has ambitions to become a USD10 billion dollar business. What are the key pillars to realising this vision, and how does the Asia-Pacific region fit into Levi’s strategy?
Nuholt Huisamen: We see our international markets as an integral part of that growth drive towards that USD10 billion dollar ambition, and Asia is part of that.
Asia is poised to grow the fastest within more traditional three regions, so within that cluster that we look after, which are North Asia, Japan, Korea, Southeast Asia, Australia, and New Zealand, we see a lot of growth potential in this part of the world.
We’ve got three core strategies that we laid out for the company.
One is being brand-led, around being at the centre of culture. I want to highlight the second [core strategy], which is our DTC-first strategy. The third is what we call ‘power the portfolio,’ whether it’s categories, markets, channels, really to be a more diverse business as opposed to a very U.S. men’s bottoms business.
DTC-first is probably one of the other key drivers for us here in Asia to drive the growth. Our historical strength has been our U.S. wholesale business. [Now] as a company, globally, we want to pivot from that to more of a DTC-first company. We want to be in charge of the conversation and relationship with the consumer.
But bringing that notion to Asia, and to Southeast Asia, we already are 90 percent DTC business. From an Asia perspective, historically, the wholesale channels, those department store retail, were not as established at the time, the way the American retail system would have been established, and so we had to open doors.
For the last decade or two, we’ve been opening a lot of doors, and we’ve expanded a lot in countries like Malaysia, Singapore, Thailand, and most recently the Philippines.
In the case of Malaysia, we’ve been very selective; we’ve taken some locations back from partners.
And in the Philippines, we’ve got very strong partners in the Philippines. But taking back [the brand] means we run the stores, we “own” the staff, we own the real estate, we own the inventory, so we can control the brand environment, we can control engagement with the consumer, and that’s proven to be very successful for us. DTC first is one of our core strengths here in Asia, and that was sort of the game plan.
The next phase for us, and we’re ready, and you’ll see that one part of the Suria KLCC experience is how do we elevate the footprint that we have? It’s not about quantity of doors anymore, it’s quality of doors, as far as our DTC first strategy goes in Asia.
Retail in Asia: Have you seen this DTC-first strategy start to pay off for the company, whether in terms of sales or store traffic, other KPIs?
Huisamen: Singapore and Thailand used to be partner-managed businesses for us. Since we’ve taken those businesses back, we unlock the revenue opportunity to direct to the consumer.
So we are seeing massive growth in Singapore, in Thailand where, for example, we used to earn per annum around 10 million in royalty revenues. It’s only now going into its second year, we’ve already built that business to more than 50 million dollars.
Our aim is that for to be in excess of 100 million dollars so the potential to unlock the value in the particular market is immense in terms creating commercial opportunity.
Another example might be within Singapore, where we took the business back and tripled the store size. Today it is one of our most profitable stores in Southeast Asia, and we believe that when we do it, we can control the environment, the conversation with the consumer – we take ownership of that relationship and elevate the physical retail.
Retail in Asia: How do you balance this brick-and-mortar strategy with your other channels?
Huisamen: The denim category is a very personal category. Customers want to feel the denim, want to see how it fits, and so we don’t see a complete shift to digital.
We think it’s a truly omni-channel experience. We find that some consumers do search online and then go buy in the store, and some go search in the store and fit things on and then buy later online. The difference between age groups are also there because young kids are a little bit more in tune with that.
We also did some consumer research recently and found that for younger consumers, they go into the store, they put the product on, they take a picture for their friend, that whole process leads to the conversion of the sale, either there or online.
And so, bricks-and-mortar is key; you will find that we are opening not just better-quality stores, but larger stores, because that’s maybe the best example of our commitment to bricks-and-mortar.
We also need to be able to show consumers be more than just men’s bottoms business – we have denim for women, we have tops, different capsules, and different price segments.
When Levi’s was a very strong men’s bottoms business, you could get away with a certain amount of space. But if you want to be a true denim lifestyle brand, you need more space to really showcase that to the consumer and change the consumers’ perception of Levi’s in terms of physical expansion.
Retail in Asia: How do you envision the next phase of this strategy in Asia?
Huisamen: There will still be expansion opportunities when new malls open up, but I think the next phase of our DTC first strategy is on securing better locations in malls where we are today, and getting bigger stores where we have still small stores. You will see a handful of our bigger doors [Ion Orchard, Suria KLCC], but the majority of our footprint still is on the smaller end of the spectrum.
We need to upgrade those, and we also upgrade from a shopping experience point of view.
The format [at Suria KLCC] is what we call our Indigo format, but many of our stores are still in our previous format which we call our Pioneer format.
Now from a consumer lens, when you walk into those stores it will be slightly dated, whereas the Indigo format is the more elevated experience. Together with finding better locations, bigger stores, we will keep upgrading the older part of the fleet so that we give all consumers in all locations that elevated experience.
On top of that we’ve elevated our digital platform to be in line with our offline experience, so that customers receive a consistent experience offline and online.
Retail in Asia: Can you elaborate on the differences between the older, ‘pioneer’ store format compared to the Indigo format at Levi’s stores?
Huisamen: The pioneer format was very much designed to showcase a men’s bottoms business or bottoms business, at least. The Indigo format is far more conducive to what we call a ‘denim lifestyle’.
We have brought in a lot of capsule [collections] around some of our north star markets like Japan, where we have two specific capsules, our LVC (Levi’s Vintage Clothing), and our Made in Japan capsule that is also inspired by Japanese fabric and Japanese craftsmanship.
These kinds of collections come more to life in the new stores. We also now have the tailor shop where we provide various services: customisation, alteration.
In traditional retailers, we had windows with mannequins and some kind of display. The trend as we see now in retail is to have a wider storefront so people can be more inviting and walk into the store.
Retail in Asia: A pillar of the core strategy that you mention is powering your product portfolio. Can you describe the consumer appetite for some of these items?
Huisamen: One macro trend that we’re seeing is a shift from the more slim, tapered fits to the more baggy, looser fits. I think that presents a big opportunity for us some of our core strengths are embedded in those fits. Now that the trend is moving, it provides us with an opportunity to sell those products to either the same consumer or a new consumer.
In terms of specific market nuances, we offer what we call our tier one product, which mainly is a represented by what we call LVC, Levi’s Vintage Clothing, and our MIJ, Made in Japan product.
Those two collections combined in Southeast Asian countries roughly range between about a 6 percent to 10 percent business contribution. In Japan, it represents 40 percent of sales in our stores. You can immediately see the consumer in Japan is far more elevated [in appetite] because the general knowledge of denim, and heritage denim specifically, where Levi’s play is very high, and so they’re going to look for those products.
But that, in return, creates a halo effect in all markets for us. So, we’re going to look for those products. It’s one of our fastest-growing segments in our Southeast Asian markets.
Next year, we have an extended version of that, where we’re pulling some of these collections and we’re expanding on the assortment. It’s very much focused on Japan, but, of course, again, it will have that halo effect on the rest of Asia.
In this part of the world, it’s quite humid and warm, and so we have a capsule that we call Performance Cool Product. These are products that have technology embedded in the fabric so that we can position that to consumers in Southeast Asia and offer that denim is not that heavy or warm.
The evolution of that for us into next season would be taking the shift from sort of the performance aspect of it to more of a style execution in lighter fabrics. brands.
Retail in Asia: What are your thoughts on competition in Asia?
Huisamen: I want to categorically say we are not fast fashion. And if you’re not fast fashion, you can’t really compete on price and on speed to market.
Our point of differentiation is on our quality, our heritage and our authenticity. We can’t tomorrow tell consumers, ‘Come and buy our product quick.’ We don’t want to be that. One of our prior sustainability phrases we coined was around ‘Buy better, wear longer.’
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We are not asking you to buy a pair of jeans every week, we are asking you to buy a Levi’s [pair] and wear it longer. Levi’s have been doing it for 170 years, and it will be here after we’re all gone – that’s just the power of the brand.