Denim lovers who find a flaw in their 501s may soon find themselves explaining the problem to an agent located 8,000 miles away in India. San Francisco-based Levi Strauss & Co. said it plans to ship a number of jobs, including customer service, to the subcontinent and other far-flung locations.
The iconic American company, which made its first pair of jeans in 1873 after the California gold rush, revealed in a regulatory filing Wednesday that it will hand off a number of key back-office functions to India-based outsourcer Wipro starting next year.
Levi will pay Wipro $143 million over five years to handle information technology, human resource, finance and customer-service functions, according to a filing with the Securities and Exchange Commission.
The plan will see privately held Levi cut about 500 jobs in total. A spokesperson declined to say how many of those layoffs would come from the company’s U.S. ranks.
The deal is part of a strategy, disclosed by Levi in broad strokes in March, “to streamline operations and fuel long-term profitable growth.” The company is looking to cut annual operating costs by $175 million to $200 million.
Despite its legendary status, Levi is having trouble selling its utilitarian jeans in a market that has embraced denim as a fashion statement. The company’s sales grew just 1 percent in the third quarter, while profits fell 11 percent, to $51 million.
Sales to women were particularly weak. In a statement, CEO Chip Bergh also blamed “soft retail traffic.”
Will Levi Strauss’ decision to cut costs by shipping jobs overseas help right the company—or create a firestorm of consumer backlash at a brand that, while procuring much of its product line from Asia, still advertises products like “Made in The USA” 501 Original Fit Jeans?
“It’s always startling when a very American brand like Levi’s, that is so tied to America, ends up becoming less American,” said Allen Adamson, North American chairman for brand consultancy Landor Associates, in an interview.
Adamson said most consumers have by now accepted the fact that the goods and services they purchase are sourced from all over the world. But he noted that Levi’s move carries some risk given the uncertain job market for American workers. “There’s always a group of consumers that buys American and, for them, being made here is the most important thing. The size of that group varies by the state of the economy,” Adamson said.
Levi isn’t the first iconic American brand to ship jobs offshore. Motorcycle maker Harley-Davidson in 2012 moved 125 tech jobs to India through a deal with outsourcer Infosys. It’s also well known that Apple has the bulk of its products, including the iPad and iPhone, manufactured in China by contractor Foxconn.
Levi officials said the outsourcing drive will not impact customers. “Our goal remains to deliver quality customer service, as always, during this important transition to Wipro, who has years of experience providing this service to a variety of leading companies around the world,” a Levi spokesperson said in an email to International Business Times.
Adamson said companies that move jobs offshore fare best when they are transparent about the process. Levi may be falling short on that score. It won’t disclose how many of the 500 jobs being cut are from the U.S., or even reveal the current size of its U.S. workforce. The company employs 16,000 workers worldwide.
A spokesperson also declined to specify where the outsourced work is going. Wipro operates massive call centers and IT shops in India, but also maintains centers in a number of other low-cost locations, including Philippines, China and Brazil.