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American Apparel 

American Apparel, Inc.
Type Public (AMEX: APP)
Founded Los Angeles, California
Headquarters Los Angeles, California
Key people Dov Charney, President and CEO
Marty Bailey, President of Manufacturing
William T. Gochnauer, Interim CFO
Nicolle Gabbay, Head of Retail Operations
Patricia Honda, Customer Service Manager[1]
Industry Garments manufacturer
Products Clothing
Revenue US$387 million (net sales, 2007)[2]
Employees 10,000 (2008)[3]
Website www.americanapparel.net
This article or section has been nominated to be checked for its neutrality.
Discussion of this nomination can be found on the talk page. (September 2008)

American Apparel (AMEX: APP) is the largest clothing manufacturer in the United States.[4] It is a vertically-integrated clothing manufacturer, wholesaler, and retailer that also performs its own design, advertising, and marketing. It is best-known for making basic cotton knitwear such as t-shirts and underwear, but in recent years has expanded to include tank tops, vintage clothing, dresses, pants, denim and accessories for men, women, children, babies and dogs. The company is known for a number of progressive policies including promoting immigrant rights and labor policies the company dubs "sweatshop free."[5]

Contents

Company formation and growth

Shopper at a Los Angeles store
Shopper at a Los Angeles store

In 1997, company founder and CEO Dov Charney, who had run several related clothing enterprises, moved his manufacturing to Los Angeles and began to sub-contract sewing with Sam Lim who, at the time, had a shop with 50 workers under the Interstate 10 freeway in Los Angeles. Months later the two became partners.[6] In 2000 American Apparel moved into its current factory in downtown Los Angeles. The company also operates a dye house and knitting facility located in Los Angeles.[7]

After its success as a wholesale brand, the company moved into the retail market. The company was ranked 308th in Inc. Magazine's 2005 list of the 500 fastest growing companies in the United States, with a 440% three-year growth and revenues in 2005 of over US$ 211 million.[8]

In late 2006 American Apparel announced a reverse merger, in which Endeavor Acquisition Corp., a special purpose acquisition company founded in July 2005, bought the company for $360 million.[9][10] The merger closed in December 2007, at which point American Apparel became a publicly traded company.[11] As a result, Charney became the President and Chief Executive Officer of the publicly traded company known as American Apparel, Inc. He remained the majority shareholder, and all employees of American Apparel were given 500 shares of stock in the new company.[12][13]

It is also one of the few companies exporting 'Made in the USA' goods and in 2007 sold about $125 million dollars of domestically manufactured clothing outside of America.[14]

Production

American Apparel's headquarters and factory in Los Angeles
American Apparel's headquarters and factory in Los Angeles

Whereas most other companies selling clothing in the United States base production elsewhere, American Apparel bases its manufacturing in an 800,000 square foot factory in downtown Los Angeles, California. The company also owns and operates its own fabric dye house, garment dye house, and knitting facility, all based in Los Angeles.[15][16] American Apparel has decided not to outsource its labor, paying factory workers over an average of $12 dollars an hour.[5] Garment workers for similar American companies in China, earn approximately 40 cents per hour.[17] It claims to have the 'highest earning apparel workers in the world'.[18]

The company uses "team manufacturing" which pools the strongest workers towards priority orders.[19] Each team functions autonomously and determines its own daily production schedule, giving them control over their own hourly wages.[20]After its implementation, garment production tripled and required a less than 20% staff increases.[19] The factory claims to have the capacity to produce 1 million shirts per week[21] and manufacture 275,000 pieces a day[14].[22] According to the New York Times it is the largest single garment factory in the United States and employs over 4,000 people across two buildings.[23][24]

A banner on top of the downtown factory states "American Apparel is an Industrial Revolution."[25]

Vertical integration

American Apparel is a vertically-integrated company.[26] The integration extends to 185 retail storefronts, all of which are owned by the company.[27] By integrating all aspects of production and avoiding outsourcing, the company achieves a fast turn-around time from design concept to finished product.[7] On Charlie Rose, founder Dov Charney discussed the process of developing new merchandise in their unique retail system, saying that it took just a "couple of weeks" for a bathing suit to go from idea to the retail floor. He claimed that a garment could be designed on Monday and be sold in London the following week.[28][29]

Retail

Retail storefront
Retail storefront

The company's expansion into retail was the fastest retail roll out in American history.[30] In 2003 American Apparel opened company stores in Los Angeles, Montreal, and New York to nearly $80 million dollars in sales[31] As of 2008 the company has more than 200 stores worldwide and continues rapid retail growth, with new stores in the United States, Israel, Japan, Korea, Netherlands, Switzerland, China, Germany, Canada, France, Sweden, Mexico, United Kingdom, Brazil and Australia. Stores are planned or under development for Belgium, Italy, Iceland, Spain, [23], China[32], and Hawaii.[33]

American Apparel retail stores are marketed and designed individually rather than homogeneously.[34] Store designs are sparse and typically cost between $100,000 and $400,000 to develop.[34] The company tends to reject midtown, high rent locations and generally avoids in-mall stores.[34] The stores are often hubs for urban renewal since the company looks for low-rent but high traffic locations like Houston, Little Tokyo, New Orleans, college towns and most recently across from the Apollo Theater on 125th in Harlem.[35][34] In some stores, the decor features Penthouse Magazine covers from 1970s and 1980s - a style that has been controversial.[36] When scouting for locations, it considers urban areas that can be revitalized.[37] After opening on Southwest Stark Street in Portland, Oregon American Apparel was joined by a vintage clothing store, sushi restaurant, shoe shop and modern-styled hotel.[37] In some cases, the company sublets parts of retail locations to other businesses of the same demographic, bringing additional retailers to previously unoccupied space.[37] The bulk of American Apparel retail venues are in New York City and California.[38][34]

AmericanApparelStore.com[39] is the company's e-commerce sales hub.[40] It carries an online inventory of roughly 250,000 SKUs and receives 1.5 million visitors per month.[41] Online sales grew from $13.3 million in 2006 to $29.3 million in 2007.[41] The company site runs on the Yahoo Stores platform and is included in the Internet Retailer 500 Index.[41][42]

In late 2007, American Apparel opened a retail location for vintage clothing called California Select in Echo Park, a district of Los Angeles [43] Shortly afterward, the company began selling vintage clothing through an Ebay store of the same name.[7][44] In 2008, the company was named "Retailer of the Year", following Calvin Klein and Oscar de la Renta.[45][46]

Wholesale

American Apparel shirts are used as band merchandise and concert t-shirts for the bands Wilco, Death Cab for Cutie, Metric, and Flogging Molly.[47] All shirts sold on Shirt.Woot are printed on American Apparel tees.[48] People for the Ethical Treatment of Animals, the animal rights advocacy group, prints its merchandise on American Apparel clothes because they are made domestically and animal-free.[49]

Branding and advertising

American Apparel designs, creates and prints its own advertisements.[50][51] The company is known for its provocative and controversial advertising campaigns, which is largely the inspiration of the company CEO Dov Charney. According to Adage, American Apparel's advertising 'telegraphs the brand' from person to person[52] For a time, Charney promoted a branding strategy that spotlighted his treatment of workers as a selling point for the company's merchandise, promoting American Apparel's goods as "sweatshop free."[26] In 2008, the company took out a series of political ads featuring the corporate logo that called current immigration laws an "apartheid system."[53] In regards to the company's image overseas, advisor Harry Parnass stated that the brand is about aspiration and that they are "selling the American dream."[54]He dismissed competitors who do the same but refuse to manufacture in America.[55] The company's advertising is also known for its sexuality. Many of the models are recruited by Charney and his colleagues on the street, or company stores; others are selected after sending their photos directly to the company website.[23]

In 2005 the company was named "Marketer of the Year" at the first-ever LA Fashion Awards.[56] Women's Wear Daily published a survey in April 2007 from Outlaw Consulting, a creative research firm tracking the habits of 21-to 27-year olds, which ranked American Apparel as the 8th most trusted brand, ahead of such clothing brands as H&M and Levi's.[57] In January 2008 the Intelligence Group, a trend and market research firm, listed American Apparel as their number two Top Trendsetting Brand, behind only Nike.[58].

American Apparel also briefly experimented with advertising in Second Life, paying to design a virtual store on the private island named Lerappa but later shuttered the operation ("Apparel" spelled backwards) in Second Life. [59]American Apparel closed its virtual shop in the fourth quarter of 2007.[60]

In March 2008, Woody Allen sued American Apparel for $10 million alleging the company used a still from the movie Annie Hall in an advertisement without his consent.[61] American Apparel claimed that the two billboards, one in New York and one in Los Angeles for a week in May 2007, were meant "strictly as social parody."[61]

Airbrushing

The sexually charged advertising has been criticized, but has also been lauded for honesty and lack of airbrushing.[62][63] American Apparel images often display subjects with their blemishes, imperfections and asymmetrical features highlighted and attached with brief, personal descriptions.[23] According to company policy all ads inside American Apparel stores - excluding art exhibits - are untouched.[64]

Legalize LA

Main article: Legalize LA

In addition to participating variety of immigration protests, the company launched an advertising and advocacy campaign called "Legalize LA"[65] The campaign featured advertisements in national papers like The New York Times as well billboards, t-shirts, bus ads and posters.[53] The company also maintains a Legalize LA portion of their website that features news articles relating to immigration reform, the brand and information on the history of the issue.[66]

Corporate culture and employment

The production system of American Apparel centralizes most of its employees in a single location. By not outsourcing, Charney believes that he knows his workers better and that it ties them directly to the brand.[67] A banner on top of the downtown factory states "American Apparel is an Industrial Revolution." [68]

Charney has stated that American Apparel hires its creatives by their sense of culture and fashion, not their resume.[69] Conversely, the company has also been accused of focusing on personal style and outward appearance in its hiring practices for retail positions.[70] American Apparel has been subject to five sexual harassment lawsuits, three were dismissed or settled.[71] The fourth was appealed and remanded to arbitration.[72] A fifth was recently filed, premiering on the front page of TMZ.com.[73]

According to Charney, the unconventional corporate culture at American Apparel is responsible for the company's creativity and rapid growth.[74] He's stated that the company's is open about sexuality and its culture because "young people like honesty."[75]

Labor

Legalize LA banner displayed at company headquarters
Legalize LA banner displayed at company headquarters

As of 2008 the company employs over 10,000 people and operates over 200 retail locations in 18 countries.[14]>[76] The company pays its manufacturing employees an average of US$12 per hour[5]. According to the San Francisco Chronicle the average factory worker at the company makes $80-120 per day, or roughly $500 per week compared to the $30-40 made daily at most other Los Angeles-based garment factories.[77] Employees also receive benefits such as paid time off, healthcare, company-subsidized lunches, bus passes, free English as an additional language classes, on-site masseurs, free bicycles and on-site bike mechanics, free parking in addition to the proper lighting and ventilation.[78]. Every floor of the factory includes free telephones where workers can take and receive long distance phone calls.[79] The company's employees in foreign countries do not receive the same hourly wages as their Los Angeles counterparts.[32] However, employees in China will earn US Federal minimum wage.[32] After going public, the company offered employees as much as $40 million in stock shares.[33] The plan grants employees roughly 1 share of stock for every workday they'd spent at the company.[80] Approximately 4,000 of the company's employees are eligible for the program.[80] The waiting list for employment at American Apparel has over 2,000 names on it.[81]

The company's employees are not unionized. In 2003, the UNITE launched a union drive at the factory.[82][83] American Apparel countered that the union was "trying to politically force American Apparel into embracing it, regardless of worker interest."[84] In a letter to The Nation, Charney claimed that workers organized a grassroots protest of the union demonstration itself and used it as evidence of the union's unpopularity.[84] The organization reported American Apparel to the National Labor Relations Board for interference with the drive.[85] However, American Apparel was not charged as a result of the claims.[86] Additionally, the nonprofit Garment Worker Center, which usually supports UNITE, did not sanction or back their efforts against American Apparel.[87]As part of the settlement, the company posted document stating that it would not interfere would worker's rights to unionize.[88]

New York Times reporter Rob Walker wrote about the controversy in his book Buying In and revealed that since the unionization drive, the company Sweat X which was held up as the example for what American Apparel should be, had since gone out of business. He quotes Charney saying more explicitly that "[Sweat X]... fucking failed."[89]

Support for immigration reform

As early as 2001, American Apparel has been a vocal advocate for reform of U.S. immigration laws. [90] On May 1, 2002 American Apparel shut down its factory to allow the company's workers, many of whom are immigrants, to participate in a pro-immigration rally in downtown Los Angeles. Dov Charney, a Canadian immigrant, also marched alongside the workers.[91] American Apparel participates annually in the May 1st Immigration March and Rally in downtown Los Angeles. In 2008, they added a route from their factory that eventually connected with other supporters near the city hall.[92] The company's politics were eventually spun off into the Legalize LA advertising campaign.

Environmental policies

Solar panels on the roof of American Apparel's downtown factory
Solar panels on the roof of American Apparel's downtown factory

The company promotes environmentally friendly practices.[93] American Apparel maintains a bicycle lending program for its employees[94] and according to People for the Ethical Treatment of Animals it is a vegan-friendly clothing company.[95]

As of 2007 the company planned to increase its use of organic cotton within the next four years from over 20% to 80%. American Apparel also sells a line of shirts under the "Sustainable" label that are 100% USDA organic cotton.[96][97] In 2008, American Apparel received publicity for purchasing over 30,000 pounds of organic cotton known as B.A.S.I.C cotton.[98]

It installed a 146 kilowatt solar electric system on its factory roof, designed to reduce power costs by at least 20%.[99] These panels power as much as 30% of the factory.[100]The company also recycles its fabric scraps.[101] Much of the company's underwear line is made from these recycled fabric scraps that would have otherwise been wasted.[100] According to estimates, it saves about 30,000 pounds of cotton per week.[100][102]

However, the company has been criticized for leaving its store doors open with the air conditioner running.[103]

Philanthropy

In 2005, the company hosted a bikini car wash benefit with the American Red Cross to raise money for the victims of Hurricane Katrina.[104][105] Two employees of the company packaged and delivered 80,000 shirts to the relief effort.[106] As an underwriter of Farm Aid, American Apparel donates the blank shirts that the organization prints and sells as merchandise.[107][108]

References

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