Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, October 14, 1994 TAG: 9410140056
SECTION: BUSINESS PAGE: A-13 EDITION: METRO
SOURCE: Associated Press
DATELINE: MACOMB, ILL. LENGTH: Long
About 40 years ago, Nelson's clothing and tailor shop on the town square introduced an exclusive line of jeans - Levi's.
The loyalty of small shops, such as Nelson's, across America helped San Francisco-based Levi Strauss & Co. grow from a provider of working men's dungarees into a $6 billion fashion industry colossus.
Now Levi's is cutting off the small retailers.
The company last month told Nelson's and hundreds of shops nationwide that they will lose their Levi's franchises unless orders for 1994 reach $10,000 by Nov. 27. Levi's officials say it's just not profitable to service such small accounts anymore.
"Red" Nelson says Levi's is just greedy.
``Back in the good old days, there was loyalty and honor in business,'' said Nelson, who took over his father's tailoring shop after World War II and has turned its daily operation over to his son, John. ``Now they just want to sell to the big stores and to hell with the little guys like us.'' Nelson's won't reach the threshold, so some day there won't be any more Levi's jeans hanging from the wooden wagon wheel rack in the basement of Nelson's haberdashery.At least one regular customer says he'll switch brands rather than go to a bigger store.
``There are those of us who prefer the personalized service Nelson's provides. And now they're out of luck,'' said Dick Spencer, a college teacher.
Tom Fanoe, Levi's vice president for customer relations, said purging small accounts will allow Levi's to better serve its larger outlets, which handle more sizes, colors and styles. (The company does not release any information about individual retailers and, therefore, could not say Thursday whether any of those small merchants are in Western Virginia, said spokeswoman Karen Bachmann.)
``This was a very difficult thing for us to do,'' Fanoe said. ``We are trying to be as fair as possible. But we have to be concerned about the long-term viability of the company.''
He noted that other companies, such as Nike, Timberland and Levi's competitor Lee Apparel, which makes Lee and Wrangler jeans, have minimum-purchase agreements. But store owners say Levi's is different, because of its long association with the small shops.
They say Levi's has forgotten its roots and is betraying the shops that nurtured what the company describes as a transformation of its riveted denim ``waist overalls'' from gold miner's work clothes into the ``uniform of a generation.''
``Levi's wants volume,'' said Mike Tatz, whose grandfather started selling Levi's 80 years ago at Zoot's in Chicago. Zoot's specializes in big and tall sizes for blue-collar workers, who were once Levi's customer base.
``From a moral standpoint, yes they owe our store. From a business standpoint, I guess not,'' Tatz said.
Fanoe said the affected stores represent fewer than 3 percent of the independent clothiers selling Levi's and less than one-fourth of 1 percent of all Levi's outlets. That doesn't help customers in South Carolina's Dorchester County. They would face a 100-mile round trip into Charleston to buy Levi's if they lose their county's only outlet, Warshaw's in Walterboro.
And owners like Tatz question where Levi's will achieve any savings.
About five years ago, Levi's eliminated the expense of providing sales representatives for the small stores. Instead, small customers order by phone toll-free from catalogs, an arrangement Fanoe said will remain, and may be expanded. He would not offer specific areas where savings will occur.
``Levi's is discarding a lot of business,'' Tatz said.
``It's an injustice,'' said John O'Rourke, executive director of Clothiers Corp., a New York-based association of 550 men's specialty stores. ``Levi's is so big. If they do this first, who knows what companies will be next?''
Small clothing stores can expect to see more minimum-purchase policies, said apparel industry analyst Jay Meltzer of Goldman Sachs in New York.
``No question it's a long-term trend,'' Meltzer said. ``Companies are getting bigger, and retailers are consolidating and getting bigger.
``Definitely, the tide is going out for the little guy in the apparel industry and in the retail industry.''
But Levi Strauss also has had problems recently with the nation's largest retailer, Wal-Mart Stores Inc., an account worth an estimated $10 million a year.
When Levi Strauss cut off the supply of one of its lines of denim clothing to Wal-Mart's new stores in Canada, the retail chain retaliated by refusing to do business with Levi Strauss at all.
The confrontation began when Wal-Mart, based in Bentonville, Ark., moved into Canada earlier this year by purchasing 120 Woolco discount stores from Woolworth Corp.
Levi Strauss had been providing its orange-tab line of Levi's to Woolco. Wal-Mart's purchase of the stores, though, prompted Levi Strauss Canada to follow Levi Strauss' U.S. policy against selling the Levi's brand to discounters, said Levi spokeswoman Bachmann.
Wal-Mart responded by canceling its business with Britannia, a low-end Levi Strauss brand.
Before the feud, sources said, Wal-Mart was buying 1 million to 1.2 million pieces per year of Britannia clothing for the United States and other markets. That works out to $10 million or less in revenue at wholesale for Levi Strauss and a little more than $20 million in retail sales for Wal-Mart.
The companies are so huge that giving up these sales will have a negligible impact on their finances, observers said.
``The accountants would not call that `material,''' said chief financial officer Jerry Johnson of Levi rival VF Corp. in Wyomissing, Pa., which makes Lee and Wrangler jeans.
The San Francisco Examiner contributed to this story.
by CNB