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The Branding of Blank Tees
California Apparel News
Alison A. Nieder
August 18, 2000

The 31-year-old president of the company is on the roof, several employees are conducting an impromptu conference—in French—in the hall. And there's a Chihuahua in the stairway that really needs to be taken for a walk.

This is not your typical T-shirt manufacturer.

And that's exactly how Dov Charney, co-owner of Los Angeles-based American Apparel wants it.

American Apparel manufacturers T-shirts for the imprinted T-shirt market—screen printers, embroiderers and distributors—typically a price-driven commodity business.

Into this scenario walks Charney selling a T-shirt for somewhere between $3 and $4 in a market that typically pays less than half that price.

"People look at me like, $3 a piece for a white T-shirt!" They're used to paying $1.40, $1.30, $1.20," Charley says.

The hyper-kinetic president justifies his higher prices by drawing a comparison between his company and the ubiquitous coffee retailer *Starbucks*--a comparison he is fond of making.

"The bottom line is, just as people will pay $3 or $4 for a Starbucks coffee, they'll pay $3 or $4 for the right T-shirt," he says. "Not every coffee has to be 50 cents."

American Apparel is in the process of building its brand in the business-to-business sector, focusing on the imprinted T-shirt market. That's a narrow focus in a broad market. Indeed, Charney estimates that there are 100,000 screen printers and corporate T-shirt buyers in the U.S. and Canada. That adds up to a market with annual sales in the $7-to-$10 billion range.

"We're not a branded company like *Guess?* or *Mossimo* or *Fresh Jive,*" he says. We're a commodity-branded company."

Charney's goal is to put American Apparel's T-shirt in the same category of product that have made the leap from commodity to brand names, like *Hanes* underwear and socks and *Levi's* 501 jeans.

*Road Show*

With Charney as its point man, the company will continue its business-to-business brand building at *MAGIC International* in Las Vegas this month and the *Action Sports Retailer Trade Expo* in San Diego in September. And those shows aren't even the main push. The *Imprinted Sportswear Shows* (ISS), which are held six times a year in different regions across the country, are sure to rake in big sales for the company. It is at ISS that American Apparel can reach its main market: distributors, embroiderers, screen printers and promotional T-shirt makers.

Charney doesn't rule out ever selling directly to retailers, but he is adamant that his current focus is the imprinted T-shirt market.

"We're selling to people that need 1,000 to 5,000 T-shirts at a time for an event, for a promotion, for a record label, for a corporate job," he says.

*Ready for Change*

Conventional wisdom in the T-shirt business suggests that price drives the market and only large manufactures with enough economies of scale—or enough offshore production to offset domestic costs—will survive. But Charney points to industry-wide indications that the T-shirt apparel industry is ready for change.

"*Fruit of the Loom* is in bankruptcy and nothing creative has com out of Hanes for a few years," he says. "We're producing T-shirts that are progressively designed for the imprinted T-shirt industry. "

The company produces men's and women's T-shirts made from lightweight combed cotton in fine-gauge jersey and baby rib, which Charney describes as softer and more luxurious than the standard T-shirt fabric.

The women's styles—called Classic Girl—are fitted with fashion-forward styling details, such as deep-V, keyhole and halter necklines, cap and three-quarter sleeves and hoodies and side vents.

"There's a huge opportunity in the young women's segment of the market," says Charney. "There's a Hanes Beefy-T for men, but there's no equivalent for girls. We're planning to provide that equivalent."

The men's collection—called American Standard—is more fitted than the standard Hanes or Fruit of the loom T-shirt, and is made from lightweight combed cotton jersey and rib.

"We want to provide an alternative to the relaxed-fit era," Charney said, nothing that while his women's T-shirts appeal to most female consumers, his men's line appeals to a more alternative customer.

"We feel that if we want to be progressive and innovative, we need to be different from what's out there," he says.

Part of that big picture involves being prepared for being in demand. Charney keeps an inventory of colors and styles on hand to fill immediate orders.

"Right now we stock 500,000 pieces in [the Los Angeles] showroom," he says. "We ship 10,000 to 50,000 pieces out a day.

*10 Years of T-Shirts*

Charney's approach to the T-shirt business is unconventional, but the Montreal native's roots are deep. He started 10 years ago buying U.S.-made T-shirts to sell on the street in Montreal.

"At the time, in Canada, they didn't have the quality," he says. "I just imported them and was selling T-shirts to my friends."

The business grew beyond a few T-shirts for friends, and Charney began manufacturing on a subcontracting basis in South Carolina in 1991. If Charney had arrived 10 years earlier, he might have had a long successful run. But in the early 1990s, the U.S. domestic knit industry was beginning to buckle under the strain of offshore competition. Small companies merged with larger ones or went out of business. Large companies began looking offshore for joint venture opportunities. Charney saw his East Coast contracting base shrinking as his West Coast sales grew. But he didn't consider moving the company West until one of his contractors on the East Coast closed shop and forced him into action.

"One of my sewers closed up in the middle of an order," he recalls. "So I said, 'Send the fabric to Los Angeles," where there was a large pool of contractors able to handle quick turns.

Charney kept the South Carolina side of the business open until 1998 in order to maintain continuity with his customers.

That year Charney met his current business partner, Sam Lim, while looking for a contractor in Los Angeles (as Charney tells it: "I met my partner under the 10 freeway," where Lim had a sewing shop.) Charney and Lim joined Sam Kim to start a new contracting business under the name "Two Koreans and a Jew" (Kim has since sold his stake in the business to Charney and Lim, and now operates *Freebird, Inc.* in Los Angeles).

*Going Vertical*

American Apparel is on its way to becoming fully vertical. The company took over full ownership of a factory in Ensenada, Mexico, owned by Lim and another partner. Charney also owns separately the Montreal-based distribution side of the business, which he says generates approximately $4 million a year. The latest acquisition for American Apparel is a "small, unknown" knitting mill, which Charney says will set up shop on the fifth floor of the company headquarters later this year.

American Apparel could be the poster child of the North American Free Trade Agreement (NAFTA), with the addition of the Mexico factory, which plants the company firmly in all three NAFTA countries. Charney likes to boast that his company is trilingual. Indeed, English, French and Spanish are likely to be heard spoken throughout the factory.

The Mexico deal is a business concession Charney reluctantly agreed to. He said he plans to produce most of the line—60 to 74 percent—domestically at his factory in the Produce District of downtown Los Angeles. He said he primarily sees the Mexico operation as a means of creating a trade surplus in Mexico, selling his T-shirts to distributors in Mexico.