Everybody loves wearing a good pair of the original—Levi’s jeans, that is. This trusty old denim, which has been around since the California Gold Rush of the early 1850s and a staple during the American Wild West, has become an enduring fashion statement in casual wear.
Its makers, Levi Strauss & Co., is the world’s largest in brand-name clothing. Founded in the United States in 1853 by a Bavarian immigrant, Levi Strauss, the company today sells the Levi’s, Dockers, and Levi Strauss Signature brands in more than 110 countries. It has 55,000 retail locations and more than 1,100 franchised stores globally.
In the Philippines, the clothing giant is represented by Levi Strauss (Philippines) Inc. (LSPI), which was established in March 1972 primarily to manufacture jeans for export. In September of that year, however, LSPI started making shipments to the domestic market, but it was to sell a maximum of only 30 percent of its manufacturing output to the domestic market from then on until the mid-1980s.
Recalls Ramon Martelino, country manager of Levi Strauss Philippines: “Because we are a foreign company, we were then limited to the 70-30 rule, which required us to export 70 percent of our output. But at that time, the local demand for our product was increasing. Fortunately, during President Cory Aquino’s administration, foreign companies, by making an additional investment in the country, were allowed to sell in the domestic market beyond the 70-30 rule. So, in 1992, LSPI made the move that allowed us to grow our domestic business.”
BRANCHING INTO SPECIALIZED SERVICES
At first, Levi’s sold its products through retailers, department stores, jeans shops, and boutiques, most of which also carried several other denim brands. But the company changed this marketing approach in the mid-1980s. “We saw a new retailing trend that pointed to a need to give specialized service, present the brand in a distinct manner, and create a unique shopping experience for the customers,” says Martelino.
Thus, the Levi’s-Only Store (LOS) concept was born. Although the bulk of the company’s business in the Philippines was to remain in multibrand stores, the LOS provided Levi’s the opportunity to sell the brand and the product the way the company believed it should be sold. Levi’s caters primarily to the 15- to 24-year-old consumer, but many of its customers over the years have remained loyal to the brand. “We wanted the major elements of the Levi’s brand— youthfulness, inspiration, innovation, a little bit of rebelliousness—to be felt inside these stores,” says Martelino.
With this in mind, LSPI began a campaign to convince its retailers to open franchised Levi’s boutiques. From 1989 to 1991, the first Levi’s-Only Stores in the Philippines were put up in Bacolod, in Ayala Center’s Greenbelt Mall and Quad in Makati City, in Harrison Plaza in Manila, and in Iloilo, Cagayan de Oro, and Cebu. Today, the Levi’s brand is sold in 184 retail doors, 31 of which are franchised Levi’s-Only Stores. Dockers has 55 doors, 10 of which are franchised stand-alone shops.
Levi Strauss & Co. has 138 company-operated stores in 18 countries (it plans to open 300 more stand-alone stores worldwide this year), but in the Philippines, LSPI does not directly operate any retail store so as not to compete with its retailers and franchisees. And Martelino emphasizes that LSPI went into franchising not to make money out of the franchise but simply to pursue the company’s vision that branded stand-alone shops are key to the successful retailing of the Levi’s brand.
“We make money from the products we sell, not from franchise fees,” he explains. “In fact, most of the time, we talk of the franchise fee last. When we started franchising in the late 1980s, we even waived or lessened the fees. This is because we went into franchising simply to create a shopping experience where we can feature, sell, and market the Levi’s brand in the way we want in a controlled environment.”
Applicants for either a Levi’s dealership or franchise agreement are evaluated by LSPI according to what they can bring to the negotiating table, their character, and their business background. Says Martelino: “We are looking for long-term business partnerships, so other than the financial requirements, name, and size of the location, we also take into account the ethics, values, reputation, and community or corporate citizenship of the applicant.”
Martelino says that LSPI works hard to make a franchised store a profitable venture because if it succeeds, so would the Levi’s brand. The result, he says, would be a win-win situation for both LSPI and its franchisees.
“For us, franchising is not only about money,” he says. “It’s about relationships. It’s about the brand. If you know and understand the brand, and you believe in and love the brand, you’d become a good franchisee. That's why most of our franchisees have been with us for so long, even as long as 35 years since they first became LSPI retailers.”