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American Apparel Sets Out to Build a Better T-Shirt Company
Apparel News
Darryl James
July 12, 2002

Dov Charney is out to change the face of fashion and he plans to start with his own imprintable T-shirt company, American Apparel.

The Canadian-born Charney has been moving to his own groove since he was a teen selling bootlegged T-shirts from the United States on the streets of Montreal.

Charney parlayed the Canadian T-shirt venture into a manufacturing business in South Carolina by 1991, which he subsequently extended to Los Angeles, eventually shuttering the South Carolina shop in 1998.

Today, he employs 800-plus workers manufacturing fabric and imprintable T-shirts in a factory in the heart of Los Angeles' produce district. [The company has 1,500 employees as of April 2004.]

Charney is on a mission to change the perception of the garment business as a sweatshop industry. He plans to accomplish that goal by such practices as providing his employees with good lighting and updated machinery in a safety-conscious environment, offering comprehensive health coverage and paying wages as high as $12 per hour. [actual wage as of Jan. 2004: $12.50/hour]

"The most important thing to me is our commitment to treating our workers with dignity by offering them a living wage," said Charney. "We can do that by discontinuing subcontracting and by exploiting opportunities in the areas of information technology, marketing, styling and design art. By exploiting non-human avenues in new manufacturing systems and technology, we're able to propel our business without having to resort to exploiting our workers' rights."

Charney declined to go into many specific details about some of his cost-saving measures for fear of tipping his hand to the competition. However, he did say he was able to lower costs by improving the ratio of direct manufacturing such as needlework to indirect manufacturing costs such as moving bundles of cut garments and overhead costs such as factory maintenance.

"Normally, apparel companies have access to cheap labor and it is always a continuing project to look for the cheap labor treasure," he said. "But we've found a way to reduce the minutes involved in the production of the garment, by the way we assemble the machines and how we integrate that process with design."

Charney said he can also justify paying higher wages by "making a better shirt and marketing a better shirt," which makes his company able to sell more, and as a result, pay more to the employees.

And additional costs have been cut and revenue streamlined by changing the method of delivery, he added.

"We stock the garments and we have a manufacturing system that allows us to manufacture garments in days," he said. "It's about a response system."

American Apparel's vertical operation — with knitting and sewing in-house — and focused product offering also help reduce costs.

Ilse Metchek, executive director of the California Fashion Association, emphasizes that vertical companies such as American Apparel are able to pay higher wages by undertaking "commodity merchandising done in a stylish way."

"Charney's business is different from the usual apparel manufacturer in California because he uses one or two fabrics with basic styling that does not change," said Metchek. "He's not using denim, chiffon or the other varieties of fabrics that many other manufacturers do on different machinery, so the product or the merchandise is different from anyone who has a line that changes from season to season."

Metchek also said that American Apparel's ownership and internalization of fabric manufacturing and ability to bypass contractors further enhances the company's efficiency.

"The reason why most manufacturers contract out is so that they can take advantage of the diverse nature of the contractors," said Metchek. "If every manufacturer could make a single product line 12 months a year, and never vary, they would have the same kind of efficiency."

Charney explained that while sewing in-house is more expensive than contracting work out, it pays off in other ways.

"The fact that we've internalized [production and shipping] gives us savings in terms of quality, because we're able to offer a better shirt, a more reliable turnaround time to our clients, which in turn strengthens our relationships," he said.

And although not all American Apparel employees earn a living wage, Charney said he has created a program to convert his entire payroll to a higher wage by next year.

"We may always have entry-level employees, but our average wage over the last six months has gone up almost a dollar an hour since the beginning of this year," he said. "I imagine in a year, 90 percent should be converted, but we'll continue to work toward our goal and keep re-examining the situation."

Charney said he also hopes to change the face of the garment industry by diversifying the ethnic makeup of American Apparel.

"I'm not going to hire people based on their culture," he said. "I'm trying to reach out to those communities to find their talent. It's not about your credentials — it's about your passion."

New Standard for T-shirts

Charney's passion is seeking to edge out in front of other T-shirt manufacturers by giving consumers what he believes they really want. Charney did that with his American Girl line of imprintable women's T-shirts in fitted, contemporary silhouettes. Now he wants to do the same with Standard American, his men's line, which is thinner and more form-fitting than a traditional men's T-shirt.

"Who wants thicker?" said Charney. "Hanes and Fruit of the Loom and all these people gave this propaganda that thicker was better, but kids are wearing the Hanes underwear instead of the imprintable shirts, because thinner is better. The youth of America wants more hipper and form-fitting shirts."

Plus, Charney says the thin imprintable T-shirt is better for warmer climates. As a result, the Standard American has become his top selling men's tee.

"We started making them about a year and a half ago, and the ratio of sales is 10 to one," he said. "The next best-selling would be the tank tops or my sleeveless tee, because guys like sleeveless, but it's the same fabric. We're using the thin stuff."

Going Global

The next step for American Apparel is global expansion. The company already made the leap to cyberspace when it opened an e-commerce portal on its Web site [www.americanapparel.net] in late 2001. The business-to-business feature allows American Apparel customers to place wholesale transactions with no minimum order requirements.

Now, Charney says he's thinking about expanding offshore, eventually opening a factory in China.

This marks a change in stance for Charney, who last year divested from a facility in Mexico he owned separately from American Apparel, opting to centralize his production in Los Angeles.

And true to his character, Charney says he wants to go to China on his own terms.

"We're pro free trade and pro-globalization, but the real reason many people want to do business in China is to have a cheap deal on the wage. We're going to open a factory in China, but we're going to pay a U.S.-dollar minimum wage."