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WEARING THE FLAG

American Apparel insists on selling U.S.-manufactured goods only

By Donna Mitchell

It would be hard to think of a more aptly named retailer than American Apparel. That’s because all its garments, which target the crowded young-adult market, are manufactured in the United States. Most of American Apparel’s peers hire overseas subcontractors to make their clothes at lower cost, but the Los Angeles-based chain will have none of that.

Young hipster shoppers are very astute about global and environmental issues, says Angie Lafontaine, owner and team leader of Victoria, British Columbia-based Lafontaine Retail Consulting. They expect companies to behave as responsible socially as they say they will, and not just to present an attractive marketing package.

“The younger customer is more knowledgeable and will make decisions to support a company that meets all of their needs,” she said.

American Apparel serves up wardrobe staples in plain styles and comfortable fabrics, no matter how wild the fashion winds blow each season. Its T-shirts, shorts, skirts, pants and other items come in a range of colors.

And the company prefers to open stores in city neighborhoods, not malls. “Young contemporary adults that appreciate our products often don’t want to go to malls,” said CEO Dov Charney. “The malls in many cases are geared to boomers.”

American Apparel has sounded the right note with its customers. Its designs are simple and free of corporate logos, said shoppers sifting through the racks recently at one of the company’s two stores in Manhattan.

“You would be surprised at how hard it is in Manhattan to find a basic, yellow, medium-sized T-shirt or a non-tiered skirt,” said Cassidy Mosher, 22, a recent fashion design graduate of the Fashion Institute of Technology (FIT), in New York City. (The tiered skirt she referred to and did not want was one of the summer’s more ubiquitous styles.)

The company also tries to be environmentally responsible in making clothes. Its Sustainable Edition, a line of popular styles made from cotton cultivated without pesticides, features distinctive green stitching. In September the company struck an agreement with Whole Foods Market to sell the Sustainable Edition line through a new Whole Foods concept called Whole Foods Market Lifestyle, which offers environmentally friendly clothes, housewares and other goods.

Charney would not discuss the private company’s profits, but he says customers typically spend between $80 and $100 at a time. Sales revenue grew to $140 million last year, from $10 million in 2000. At the current rate of business, American Apparel is on track to generate $250 million in sales this year, Charney says.

The company’s real estate strategy is as straightforward as its clothes. American Apparel owns its stores, each of which measures between 2,000 and 3,000 square feet in size. The company prefers emerging urban neighborhoods that are filled with hipsters but that have not yet been targeted by large chains.

American Apparel often sets up shop near book or music stores, and some of the units are near subways. Although the chain is more concerned with its core customers than its co-tenants, it surely has potential for happy coexistence with large national chains: Regulars like 21-year-old Jodi Tilton, an FIT student, say they also shop at Urban Outfitters and H&M.

The store layouts are simple. “We like to have a straight box if possible,” said Charney. Each store makes the most of its selling space by stocking more than 5,000 items, he says. The selling floor is typically packed to within feet of the door with racks of brightly colored apparel, and more clothes are arranged on higher racks along the walls. The space uses track lighting, and the walls are painted white.

American Apparel operates some 45 stores in the U.S., which Charney says could eventually be increased 10-fold. The company also has about 25 stores in nine other countries, including Canada, Germany and Sweden, says Charney.

The chain prefers to advertise in publications that reach the culture mongers, mainly the “alternative” weekly papers found on newsstands in major cities, such as the local LA Weekly or New York City’s Village Voice.

The company’s current ad campaign relies heavily on unconventional and provocative photography, often using photos of customers wearing the skimpier pieces while lounging at home. The Web site also features photos of customers modeling the clothes while haunting bookshops or just walking around their neighborhoods; some stores display poster-size versions of the Internet pictures. The ads are “supposed to connect to leisure culture that is the hallmark of young adult life,” said Charney. “Knits are about leisure.”

Leisure might drive the ad campaign, but the company’s expansion in recent years has been anything but laid back. American Apparel started out in 1989 manufacturing T-shirts it would sell to wholesalers for imprinting. In 1993 the company began making other kinds of apparel. In November 2003, the company rolled out three stores: one on Broadway in Manhattan, another in the Echo Park section of Los Angeles and the third on St. Laurent Boulevard in Montréal.

American Apparel directly handles almost every phase of the manufacturing process from its 800,000-square-foot facility in downtown Los Angeles, says Charney, who insists that it is good business and less expensive than outsourcing in the long run.

“There are no mistakes,” he said. “The garments are precise, and if we want to change anything, we can optimize the fit and style more rapidly.” Further, the company can control the quality of what it makes and ship products faster than it could using middlemen and outsourcing, he says.

Making the clothes in America also allows American Apparel to live by its convictions and avoid any chance, it says, that a subcontractor might exploit cheap labor overseas.

“You can find workers in the world that will work for a dollar a week, $2 a week, $5 a week, or $10 a day,” Charney said in a documentary on its manufacturing process. “It’s not about that. It is about [streamlining] the process in such a way that we can lower our costs while still feeding our people — our workers —with a living wage. That is really important to us.”

Manufacturing in the U.S. does not necessarily translate to bigger price tags for consumers. A hooded sweatshirt at American Apparel costs $38, for instance, versus a similar, imported item going for $64 at Urban Outfitters, according to the companies’ Web sites. Anyway, switching to overseas manufacturing would prove costly to American Apparel — it would have to change its name.