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DOING THE RAG TRADE RIGHT
A maverick's sweatshop-free approach works
Maclean's
Katherine Macklem
April 14, 2003

Charney has targeted the most prolific purchasers of all — the children of boomers. "I am sitting down," says Dov Charney nonchalantly. He is doing what he's almost always doing: talking on his cell. And he's responding to Dave, a salesman with Charney's apparel company, who's calling in from Miami with bad news. Charney has just wrapped four days in Las Vegas at Magic Marketplace — the largest fashion trade show in the world. What Charney doesn't tell Dave is he's sitting in the driver's seat of his 2002 silver Cadillac DeVille — and he is speeding across the desert to his home base in Los Angeles. Within a minute, his relaxed state, mellowed by hot sun and Led Zeppelin, is gone. Charney leans forward, gripping the steering wheel as if it were the lapels of a man's suit, and yells his instructions to Dave into his headset. "IDIOT!" he roars. "I want the word IDIOT to be part of the f--ing message!"

It seems a major distributor has stiffed Charney's company, American Apparel LLC, in favour of the competition. Worse, the competition is a start-up launched by former employees. Charney calls it The Rat. In five years, Charney, a self-described neurotic Jew from Montreal — "when I'm not worried, I worry" — has built American Apparel into a US$40-million business. The company, which expects to double its sales this year, is still relatively small, with about 1,000 employees. But it's growing fast and Charney, a maverick and an innovator in an old-fashioned business, is challenging established players 50 times his size and a century older. He calls them The Monsters.

The trade-show models are attractive and healthy — "we don't have anorexic women," he says. In an era when corporate responsibility is top of mind and in an industry notorious for its treatment of workers, Charney, 34, stands out. He makes clothing in a "sweatshop-free" environment — and, with unerring market savvy, labels each piece that way. While most manufacturers have spent millions securing subcontractors or even factories in Third World countries, Charney's operation is in downtown L.A. His factory workers — who can receive health-care and immigration support, English and computer classes, even on-the-job massages — earn an average of US$10 an hour, with the potential of making much more. In a sector where margins are slimmer than a catwalk model — pennies on packages of a dozen — American Apparel makes money, which Charney uses to fund the company's rapid expansion. But dare call him a do-gooder, and he'll likely flip. "I'm a capitalist pig!" he exclaims.

That may be true — but it's said as much for effect as anything. Profane and provocative, Charney is jumpy and volatile and sometimes appears scattered, but he moves, both in conversations and physically, in a flash. His mind is quick, he thinks on his feet and he keeps on top of details as well as the big picture. And for Charney, the big picture is big. "Communism failed. Capitalism works," he says. "Now we have to refine it." What he's doing is "next-generation capitalism." Simply put, he wants everyone touched by the business — shareholders, management, workers, customers — to be well treated. It's less about money, more about process. And the product.

Bucking the industry norm, American Apparel offers better pay and a clean workplace American Apparel manufactures T-shirts, all-cotton sweats, tank tops, polo shirts and panties, sold primarily in the so-called imprintables market — that is, clothing with nothing printed on it. The blank shirts are sold to distributors, who team up with printers to sell them to organizations — from church basements to strip clubs — as promotional material for customers, staff, or both. Three companies dominate the business: U.S.-based Hanes Corp., owned by Sara Lee Corp.; Fruit of the Loom Ltd., which was rescued from bankruptcy about a year ago by Warren Buffett's Berkshire Hathaway Inc.; and Montreal-based Gildan Activewear Inc. Typically, the T-shirts for this market are big, boxy, one-size-fits-all — the ones that tend to stay at the bottom of the drawer. Not Charney's. His shirts fit tight, and appeal to young people. By creating a fashionable look for a standard commodity item, and aiming it at the next big market — the children of boomers — Charney is producing clothes that kids want to wear, that shops want to stock, and that have begun to change the imprintables business.

STOPPING FOR LUNCH between Vegas and L.A. at the Mad Greek in Baker, Calif., Charney plans his strategy. If the distributor carries The Rat's shirts, which are strikingly similar to Charney's, Charney won't sell the distributor anything. He's bigger, has greater variety, can deliver faster — and he's ready to play chicken. He's calmed down.

Charney, who usually wears his own shirts, vintage Levi's and a pair of oversized glasses, grew up in Westmount, the wealthy Anglo enclave of Montreal. His ancestors, he says, have been merchants for centuries. Only his parents' generation doesn't fit the mould. His father, Morris Charney, is a well-known Montreal architect. His mother, Sylvia Safdie, is a world-class artist. His uncle, Moshe Safdie, is the internationally acclaimed architect who designed Habitat for Montreal's Expo 67. By his own account, Dov Charney has always been a hyperactive overachiever. At 11, he launched a newspaper, selling ads to local shops and corralling friends into writing stories. As a youngster, he would haul stuff from his home on Grosvenor Avenue down to busier Sherbrooke Street and, much to the disdain of a shopkeeper on the corner, set up his own sidewalk sale. Once, he sold his mother's clothes when she wasn't home. He says that when the spring-water craze began, he even sold runoff water collected at the side of the road in glass bottles. In his last year of high school, Charney was a boarder at Choate Rosemary Hall in Connecticut where he discovered heavy cotton T-shirts — ones coveted by his friends back home. Soon, he was selling silkscreened tees in Cabot Square across from the Montreal Forum — and his passion for the T-shirt was born.

By the early '90s, Charney was in South Carolina, working to establish a T-shirt manufacturing business. It flopped, as did much of the garment industry in the Carolinas, and he moved to Los Angeles. In 1998, he hooked up with Sam Lin, a partner who stays in the background. Quality is key, Charney says. There are three rules. Is it right — meaning, does the garment fit well and feel good? Do they know — meaning, does the customer know about the product? Third, can they get it? Price is irrelevant. "If it's $11.95 or $14.95, does your daughter care — if she wants it?" His goal is to make the perfect T. What's important is the cotton — and he uses 30-single, combed ring-spun yarn. The higher the count, the finer the thread, explains American Apparel's VP of operations, Marty Bailey. A typical heavy cotton T-shirt is made with 18-single, and rather than ring-spun, its yarn is the less expensive open-end cotton, which provides a coarser "hand," or feel, Bailey says. American Apparel products are softer, and lighter, than the standard T.

And sexier. Part of the story about Charney and T-shirts is the story of Charney and chicks. "Look at that girl," he says, at the Magic Marketplace show in Las Vegas at four in the afternoon, eating a late sandwich lunch. His eyes keep darting to a model at a nearby booth who is wearing a jean skirt that, with an improbable swoop of fabric, is a short mini on the left and a mid-calf midi on the right. She's wearing one of his tops, with a scoop-neck and little sleeves in white sheer jersey, a fabric with a 40-single yarn. The top is tight and she is, as the boys used to say, stacked. Plus she's pretty, with dimples in her cheeks. "Can I help it," Charney asks, "if I want to go over and touch her?" He does go over and tries to pick her up — for his business. When she's not modelling for the jeans manufacturer, he tells her, he'd like her to model his tops. At this show in Vegas, American Apparel has 28 models — some short, some leggy, some endowed, some not, but all beautiful — most hand-picked by Charney. They come from across the U.S. and Canada, and stand, or prance, in front of the two American Apparel booths, handing out free samples and attracting attention. The company's Web site and catalogues are full of shots of the girls — the whole industry calls them "girls" — some photographed by Charney himself on the roof of his factory. Not everyone approves. One woman sent an e-mail applauding Charney for being a "sweatshop-free decent employer," but attacking him for the exploitative use of women. "I know you are in L.A., but rise above the stupid enslavement of the human female form," she wrote. Charney shrugs it off. "That's so relaxed fit," he says, a jibe intended specifically for boomers.

"Women want to be the confident, sexy girl," Charney says. He's aiming to capture the image of the girl at school who sets the trends, who all the others aspire to be: the Cool One. "Women want to be desired and in control — and that's what they see when they see these photos." He says the average model in his ads is five-foot-five and 125 pounds. "We don't have anorexic women. We don't have the nylon girl, we have the cotton girl." BY dinnertime the day following Charney's drive from Vegas to L.A., the distributor has backed down. He's cancelled his deal with The Rat, and signed on with Charney. Later, Charney discovers the distributor is quietly still carrying The Rat's clothing — and Charney pulls all his product. Charney downplays the story. "It's not a big deal."

But it is, of course. Charney intends to make American Apparel a household name. "This'll be one of the brands that become part of the American landscape. It will outlive me," he says. His role models include Levi's, and the way it transfixed the boomer generation, and Hanes. He's talking as he's walking, but stops abruptly and kicks off a Puma and points to his sock. Hanes is stitched across the sole. A hand darts down the front of his pants to yank up his underwear. Hanes, again. "I've been wearing them since Grade 9," he says. Perhaps it's time to try something new? "No way. I like being cased in a certain way, you know what I mean?"

In the factory, Charney greets workers like long-lost cousins: loudly and effusively. They smile and wave as he goes by. Last June, Charney put in place a new system designed with Bailey, of operations. Instead of rows of workers on an assembly line, sewing machine operators now complete garments in teams. One will attach a sleeve, another the neckline binding. Their machines are placed almost in a circle so the item is passed — flung, really — from one to the next. When the change was first made, workers staged a mini factory-floor revolt, stopping production for a couple of hours. But after the system was better explained — including how they could make up to US$20 an hour — workers returned to their machines. Now, because operators are paid on volume, needles fly at top speed. While the traditional garment manufacturer, especially the imprintable T-shirt maker, chases the cheapest process — which typically means offshore work — American Apparel does everything except dyeing in-house. "Because we are vertically integrated, we are extremely efficient and flexible," Charney says. "Merchandisers work with photographers and graphic designers, finance people work with production people, technology people work with sales people, et cetera." Last December, a New York City distributor called at 2 p.m., Pacific time, wanting 1,000 black T-shirts for the New York Police Department — the next day, Bailey recalls. There were no shirts in stock, but there was cloth. To be shipped on time, the shirts had to be cut and sewn by 5:30 p.m., an impossible task for an offshore manufacturer. But because of Charney's team process and in-house production, the shipment made its deadline. "There's no one else in the country that can do that," Bailey says. In addition to selling T-shirts through distributors, Charney has begun selling to retailers, and direct to consumers via the Web. He's struck a deal with Bang-On Ltd., a three-year-old Vancouver retailer that's beginning to open shops across the country. Shoppers pick out a design — hundreds of choices line the walls — that's ironed directly onto a T-shirt. Bang-On has agreed to use only Charney's imprintables, and to promote the American Apparel brand. Charney, says Tom Anselmi, an owner of Bang-On, is establishing a middle ground in the T-shirt business — neither the high-end designer top nor a boxy Hanes: "These are very fashion-forward, fashion-conscious T-shirts." Charney has also helped Anselmi along the way with ready advice and easy credit. "You can say Dov is very generous, which he is, but he's also very smart," Anselmi says. "What he's proving is it's possible to be an ethical apparel manufacturer — and still he's grown more than any other T-shirt company."

Charney has no intention of slowing down the growth — and he's pushing at new boundaries. He's looking for cotton grown without synthetic pesticides for a new line called Sustainable Edition. He's talking with R&D people about developing a computerized sewing process. He says he wants to open a factory in China, for the Chinese market, where he'd pay the U.S. minimum wage. He works non-stop, sending e-mails and leaving voice messages late at night. He occasionally stops to watch a film, says his assistant, but afterward, he's back on his BlackBerry or the phone. He can be exasperating to work for, say some staffers, but they nonetheless put in long days at his side, inspired by his vision and passion.

Charney's unconventional approach seems to be working. He receives calls now from venture capitalists eager to get in on the action. He turns them down, saying he doesn't want outside interference. Workers, too, are pleased. In his office is a poster plastered with signatures from his factory workers thanking Charney for supporting them in a march to protest the treatment of undocumented workers. On the public front, he is tapping into a growing anti-sweatshop movement. Just this past winter, L.A.'s board of education decided to buy only sweatshop-free products for its schools. Ever the forward-looking pragmatist, Charney knows this trend won't last. "We can't expect people to buy on guilt forever," he says. True, especially when you're out to beat The Rat and The Monsters.