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Levi's and Nike: Iconic brands embrace digital evolution

The apparel giants are taking a DTC-led approach that's bringing results.

Levi's and Nike: Iconic brands embrace digital evolution
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Photo by wu yi on Unsplash

Brands that are built into the fabric of American life are now weaving together apps, software systems and digital loyalty campaigns.

It’s a feature of the rise of ecommerce that has put an emphasis not only on technology’s role in shopping, but also the ability to reach to customers through direct channels that don’t require displays in someone else’s store.

Among stories brands making this shift, Levi’s and Nike stand out in making direct-to-consumer central to their present and future growth. On earnings calls over the last week, leaders from both companies broke down the recent progress of their digital businesses, and where they hope to go. Here’s a look at what we learned:

Levi’s: DTC first, new chief digital officer role

Levi Strauss Co. is making “DTC-first” one of its primary strategic priorities. This brought strong results in the 169-year-old, denim-centric apparel brand’s latest quarter. The brand said its total DTC net revenue increased 22%, outpacing its already-strong overall revenue growth of 15% for a total of $1.47 billion.

CEO Chip Bergh said DTC allows the brand to “deepen our connection with consumers, while showcasing the fullest expression of our brands.” In Levi’s case, a hefty portion of direct-to-consumer is through the brick-and-mortar stores it owns. In these retail destinations, the brand saw a return to higher levels of foot traffic. It is also opening new stores as it seeks to grow. In all, it plans to open 1,500 company-operated stores by 2027.

A return to more in-store shopping resulted in “moderation” of traffic to Levi’s ecommerce channels, but Bergh said the overall digital business remains “healthy.” It was down 2% in the quarter, but remains 60% higher than 2019. The company’s app, meanwhile, saw a double-digit increase in monthly active users as it expanded to India. It is now available in 10 countries. Levi’s loyalty program, which is still in early stages, saw 50% year-over-year growth.

Approaching a $500 million business, the company is aiming to triple the size of the ecommerce business over the next five years.

In all, digital channels accounted for 20% of the company’s revenue for the quarter. Underscoring their growing importance, Bergh said that Levi’s is creating the new role of chief digital officer.

“The role will bring together our data, AI, engineering and digital product management efforts under one leader who will spearhead our digital efforts for both ecommerce and our digital go-to-market,” Bergh said.

DTC and digital are key to Levi’s plans for growth. At its recent investor day, the brand said it is working to reach net revenue of $9-10 billion in 2027. With this, it wants to grow DTC to 55% of revenue, with the tripled ecommerce business representing about 15% of the mix.

“We see tremendous potential in ecommerce and with the leadership to drive its success, we will move more quickly to realize it,” Bergh said.

Nike: App-led growth, supply chain scale

As it concluded a fiscal year in which it celebrated its 50th anniversary, Nike leaders touted digital as one of its three key drivers of its growth.

The iconic athletic apparel brand has been bold with its focus on ramping up ecommerce and digital channels, announcing a strategy dubbed Direct Consumer Acceleration in 2020. The tradeoffs of the approach have been on view as the swoosh cut ties with retailers like DSW, Dillard’s and Urban Outfitters.

In fiscal year 2022, the company’s digital business grew 18% year-over-year, and accounted for 24% of the company’s business in the recently-ended fourth quarter. It’s a $10 billion business that has doubled in size when compared to pre-pandemic.

Nike’s leaders owes a big part of this to providing an increasingly personalized shopping experience through its ecosystem of apps. It touted record-high traffic to its commerce app in connection with a 50th anniversary campaign. Nike also has SNKRS for sneaker releases, which had record downloads in Japan, South Korea and Mexico. There’s also Training Club and Run Club for workout planning and wellness. Together, these apps account for half of the company’s digital demand.

“We do not take lightly the choice made by consumers to put us in the most prized real estate that exists today, the home screen of their phone,” said CEO John Donahoe. “No other brand occupies that space globally like NIKE, and it remains one of our biggest competitive advantages.”

The company is planning further expansion, with an app ecosystem across commerce and fitness activity specific to China coming in the next fiscal year that will provide locally relevant features.

“Increased digital engagement is translating into more repeat buyers, a higher buying frequency and increased average order value, ultimately driving higher lifetime value through membership,” said Matt Friend, chief financial officer. “And as retail consolidation continues and consumers converge around fewer digital platforms, a distinct Nike consumer experience is driving more direct connections, positioning us well for long-term growth.”

The digital expansion doesn’t only involve consumer-facing apps. Nike’s next major initiative is the implementation of a new enterprise resource planning (ERP) system, which describes software that brings together business processes. The system will be implemented in China in July, followed by North America in its fiscal year 2024. Levi’s has a new ERP of its own coming to the US in the next quarter, as well.

“As we shift to an increasingly direct-to-consumer future, a new ERP will be foundational for increasing speed and agility across our supply chain,” said Friend. “This will give us real-time visibility to inventory across our network plus dynamic transactional capabilities to optimize consumer demand and inventory productivity.”

Additionally, new capabilities activated through a partnership with Adobe will power better demand creation and member retention, Friend said. It is also testing audience segmentation in North America, in which it uses real-time data to power personalization on the Nike App.

Another initiative is Express Lane, a supply chain approach which draws on consumer insights and aims to shorten lead times for updated goods to reach the market. This drove 25% of Nike’s revenue in fiscal year 2022, and the company is planning to make it part of a bigger portion of the business in fiscal year 2023.

Taken together, the company sees a “consumer-led digital transformation.” It will include both online and offline channels as customers toggle between the two, but in time digital will grow. Owned digital channels could reach up to 40% of its business, Friend said.

“We're seeing growth in our digital business that's exceeding what's happening in the marketplace,” Friend said. “We're watching our own digital traffic and an accelerating level of Nike app downloads that's driving more consumer engagement against our digital platform, and that is driving growth and shift relative to the broader marketplace.”

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