American Apparel Opening in China

American Apparel Inc.'s rapid retail rollout is heading to China to coincide with the Summer Olympics in Beijing.

LOS ANGELES — American Apparel Inc.’s rapid retail rollout is heading to China to coincide with the Summer Olympics in Beijing.

This story first appeared in the March 17, 2008 issue of WWD.  Subscribe Today.

The vertically integrated manufacturer of slim-fit Ts and other perennial basics plans to open stores in Shanghai, Beijing and Suzhou next month.

Fleece hoodies, Tyvek jackets and other items soon to be sold to Chinese youth will continue to be manufactured at the company’s downtown Los Angeles headquarters.

The Games, set for Aug. 8 to 24, have intensified foreign retail interest in the rapidly expanding Chinese middle class. American Apparel joins a growing list of foreign companies entering a market flooded with designer labels. With its focus on affordable fashion basics that lack conspicuous logos, American Apparel is a marked contrast to many European brands popular with Chinese consumers.

China has supplanted the U.S. as the top market for retail opportunities, the consulting firm TNS Retail Forward said in a recent report.

Last month, Louis Vuitton unveiled its first TV advertising campaign specifically targeted for fast-growth markets like China, and Fendi is said to have spent $10 million for an October runway show atop the Great Wall of China. Coach, Burberry and Gucci are among the labels that have significant direct retail presence in the world’s most populous country.

“We expect to be an anomaly, and we expect it will take time, because we’re not interested in chasing the market,” American Apparel chief executive officer Dov Charney said. “The [upscale] brands have done well there, because Chinese consumers are a little into the glitz….American Apparel doesn’t provide that. There’s no status associated with it, so we’ll have to appeal to the early adapters who appreciate fit and simplicity.”

The brand has proved viable in other Asian markets. American Apparel operates five doors in Japan, three in Tokyo and one each in Osaka and Fukuoka. There are eight additional locations in South Korea.

“Clearly the upscale brands have an advantage in capturing the attention of shoppers [in China],” said TNS senior economist Frank Badillo. “But well-known, midtier brands still have an opportunity, so long as the brand can identify the niche it wants to target.”

Several foreign midtier brands have already found success in the market, including Swedish retailer Hennes & Mauritz and Spain’s Zara, which opened a Shanghai flagship in 2006. It has six doors in Hong Kong and six other locations in Mainland China.

“If you look back 10 years, there was a lot of Chinese government pressure to have foreign companies enter the market via a partnership with a state-owned enterprise,” said Doug Hart, a partner in BDO Seidman’s retail and consumer products group. “But if the consumer wants certain brands, the government has now realized that it needs to give these foreign companies greater freedom.”

However, it is not known whether American Apparel’s provocative advertising campaigns will pass muster in China. In September, the government’s State Administration of Radio, Film and Television banned TV ads for women’s underwear, breast enhancement surgery and sex toys.

Charney said he may use a campaign strategy in China similar to the U.S., with advertisements in a range of publications, from glossy fashion magazines to lowbrow metro weeklies. “I believe Chinese young people will understand the message of the advertising and will connect with it,” he said, adding it is possible the brand will opt for a soft launch with little advertising.