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American Apparel Stretches Out

New Yorkers and Angelenos are familiar with American Apparel's cool stores, and now the rest of the country is now getting to know them.

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MIAMI — There’s a new store chain spreading across North America, and it’s got a hipster quotient that some retailers only dream about.

While New Yorkers and Angelenos are already familiar with American Apparel’s brightly lit, stark stores, the rest of the country is now getting a taste of its revved-up basics — sort of Old Navy for the Strokes set — for women, men and children.

The Los Angeles-based manufacturer of cut-and-sewn textiles, founded in 1997, has busied itself with the retail sector lately. Launching its first store in Montreal in 2003, the brand has rapidly opened or scheduled doors from Miami to Boston, Baltimore to Portland, Ore., and Chicago to Phoenix. Founder Dov Charney reports there are approximately 30 U.S. locations and plans to add 20 more in the next two years. Seattle, Denver and Evanston, Ill., are among the sites slated for this month alone. Charney already owns 18 additional stores throughout Canada and Europe and plans to expand in Asia and Mexico.

“They’re riding a nice wave of customer acceptance,” said Arnold Aronson, managing director of retail strategies for Kurt Salmon Associates, a management consulting firm in New York. “They’re doing a lot of right things — right fashion, right price, right social agenda.”

To understand the aggressive retail venture, what sets its product apart from household T-shirt names, and why it maintains underground credibility with readers of magazines such as Vice — one of the few outlets for its barely there print advertising — knowing Charney is key. His maverick corporate style and his strong workers’ rights beliefs, including above-minimum wages and what the company dubs “sweatshop-free” conditions, have piqued the interest of the media and business schools.

“We’ve isolated ourselves a bit. We really don’t follow trends or anything traditional,” Charney said.

From his student days at Choate, T-shirts were in Charney’s destiny. He sold silk-screened Hanes shirts until he started making his own in 1990, learning the craft on the East Coast. Today all production takes place in Los Angeles. According to Charney, business boomed with the introduction of women’s baby T-shirts, a rave-inspired trend that revolutionized the industry in the mid-Nineties.

“He’s a fanatic about fit and is constantly adjusting a sleeve’s cut or where the T-shirt stops on the stomach,” said Kara Messina, a spokeswoman for American Apparel. 

Despite having 4,000 employees, Charney personifies the hands-on approach. Interviewing him is like conducting a conversation with a boxer during a match. He jokes that his unofficial title is “senior person,” not only because, at 36, he’s, well, most experienced in a company “where the average age is 22,” but because he does everything from designing stores to photographing advertisements to serving as creative director.

The store decor is simple — even spartan — with no-frill materials. “There are concrete floors, lights and a cash desk,” quipped Charney of the 2,000- to 4,000-square-foot spaces he prefers to plant on urban arteries with lots of young adult traffic, like Miami Beach’s Lincoln Road and Ocean Drive. Those stores opened toward the end of 2004. Retail basically follows his wholesale formula: Here’s the product, plain and simple, without megamarketing hype.

The bare-bones setting doesn’t seem to turn off women. “It’s all about the clothes that way,” said Messina, noting that women appear to respond when they see a shirt available in 20 colors. She estimates women generate 60 percent of sales.

According to Messina, the target customer is an urban hipster who shops mostly at boutiques and edgier specialty store chains like Diesel. The company also claims a large following of older customers with a younger sensibility, fashion editors and celebrities such as Sarah Jessica Parker, Parker Posey and Jake Gyllenhaal.

It’s not such a stretch for average consumers, either, considering every item retails under $60. New items are red, fuchsia or black bodysuits with contrast piping and deep scoopbacks that retail for $38, eggplant, Kelly green or mint leggings in a cotton and spandex jersey blend for $26 and metallic swimwear separates for $28. “The look is very early-Eighties right now,” said Messina.

Rather than presenting collections or even seasonal groups, designers simply come up with new styles at any time and throw them into stores to see how they perform. “We can have a read on an item in a day,” said Charney.

KSA’s Aronson reports the merchandising is item-driven rather than lifestyle-driven, which has its advantages to a point. He said if the company wants to grow into a 400- to 500-store chain, it will have to widen the assortments, but if it wants to stay the course, he can see it growing into a 100-store chain, judging by the “reasonable, well-orchestrated success” of current stores.

Brand-building staples like a ribbed tank for $17 exist across the three divisions — Classic Girl for women, Standard American for men and Classic Baby for little ones — but most of the time, the team just moves on after an item sells through. Charney said 60 million garments will be produced this year.

The list of fabrics runs from heavy jersey and loop terry to fleece and mesh. Yet fitted T-shirts in fine-combed cotton have racked up the most action. For an average retail price of $20 and wholesale price of $4, the pieces have become one of the preferred choices for promotional, imprintable and private label use.

No item is sold under the American Apparel label outside the firm’s own freestanding stores.

The company’s retail expansion hasn’t ruffled its 40,000 wholesale accounts in the least, according to Charney. “They love that we’re creating a recognized brand with value that’s known to everyone from soccer teams to concertgoers,” he said, citing combined wholesale and retail volume of $150 million in 2004 and production of a million T-shirts a week to prove his point.

Retail may be what ultimately shelters the brand in the increasingly competitive imprintable category, which Charney describes as a $10 billion industry that wholesales shirts for an average of $2. He said he believes his hip yet nonexclusive niche allows for more widespread growth than some pricier makers. “We’re not dying from competition yet,” he said, “as long as we can make something that people want to take out of the laundry basket and wear one more time.”

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