American Apparel Takes on the 1 SHIRT MARKET - includes other brief articles

Bobbin, May, 2001 by Julie McElwain

With high-quality, fashion-forward tees, American Apparel aspires to be the "Starbucks" of the T-shirt world.

When most people think of the basic, blank T-shirt, they tend to think of big companies such as Hanes, Fruit of the Loom, Russell and Anvil. Nonetheless, stepping up as a T-shirt-wielding David among apparel industry Goliaths, Los Angeles, CA-based American Apparel is ready to challenge that perception.

In fact, the company actually wants to occupy the same market space as the dominant T-shirt players that sell their product into the imprintable market, explains Dov Charney, president and chief executive officer.

X"Those companies are huge. They carry enormous inventory and in the imprintable T-shirt industry it's about having stock, being able to ship orders out. But there's been a shifting in this industry."

Specifically, Charney says, the larger companies have sent most of their production down to Mexico or offshore. Such changes have opened up a window of opportunity for American Apparel, which manufactures 95 percent of its products domestically.

"Our angle is that while all the other [companies] have shifted their production offshore, we're committed to being domestic, with a small percent slightly south of the border," explains Charney.

Touting American Apparel's domestic production is more than marketing, however. State-side production allows Charney to keep close tabs on the quality of the line, which is divided into private label and its own brands. The latter offers such labels as Classic Girl (a contemporary T-shirt line aimed at teenage girls and young women, and a newly launched panty collection), Standard American (men's T-shirts) and Classic Baby (tiny tees for infants and toddlers).

Wholesale prices for the average American Apparel T-shirt range from $3 to $6, which Charney acknowledges are slightly higher than the prices of other blank T-shirt companies.

"We're focused on quality. We want to be the Starbucks -- the gourmet T-shirt maker -- for the screenprinter," says Charney. "Not everybody needs Starbucks. Not everybody has the appetite to pay three bucks for their coffee. Some people just want the 60-cents cup. But some people want the best coffee, and will pay $3, $4 and even $5 for it. We're looking for those people who want a better T-shirt."

Charney has been looking for those people for more than a decade, since the time when he first became enamored with the basic apparel item as a teenager in Montreal, Canada. T-shirts from the United States, he believed, were superior in quality and offered a creamier band, so he began trucking boxes of blank tees from his boarding school in Connecticut back home to Canada. He and his friend -- who had a business selling T-shirts at concerts -- would sell them on the streets.

By the time Charney went to college the business had evolved beyond his circle of friends. "I was selling to other screenprinters. The more T-shirts I bought, the more T-shirts I sold," he recalls. He soon was looking to buy T-shirts in the Carolinas, and from there it was a logical leap to manufacturing his own T-shirts under the American Apparel banner. "At the time, Hanes was $30 for a dozen, and you could make T-shirts for $22 to $23 a dozen. I thought, 'Hey, that sounds like a good idea.' That's how I jumped into manufacturing."

In the early '90s, Charney set up shop first in Columbia, SC, then later in Charleston, SC. For seven years, the Montreal native commissioned knitters and dyers, contracted cutters and sewers and tinkered with fit and styling to make the perfect tee. While the experience was educational, the timing was off from a business standpoint.

"The industry was sort of collapsing there. All the knitters and larger companies were either going out of business or moving their production offshore," says Charney.

With its contracting base drying up, American Apparel floundered. However, while on a sales visit to Los Angeles, Charney suddenly realized that southern California had its own cottage industry of T-shirt manufacturers. The system on the west coast was similar to that of the Carolinas, except the workers had less experience, approximately five to 10 years versus 20, 30 and 40 years experience on the east coast side. Charney made his move.

The transition from the Carolinas to California was made easier when Charney joined forces with Sam Lim, owner of a cutting and sewing facility with another partner (who has since left the company). Charney and Lim merged their core operation in March 1998, although Lim owns a cutting and sewing factory in Mexico (where American Apparel ships 5 percent of its production) and Charney owns a distribution facility in Montreal, which spearheads the company's exports into Canada.

Initially, American Apparel skewed heavily toward private label manufacturing, with its branded labels taking a back seat. Later, Charney recognized that "private label isn't profitable long term because your client is always looking to make it cheaper. There's no loyalty. They just want it cheaper, cheaper, cheaper. And there is so much supply, from all corners of the world, that it doesn't make it feasible to focus in that one area. So we de-emphasized private label packages and we're focusing on our brands for the imprintable T-shirt industry that services the specialty [screenprint] industry," he says.