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Defying the trend, togs made in USA
American Apparel proves that doing it yourself, fair labor are good business as others go overseas
The Baltimore Sun
Meredith Cohn
January 29, 2006

The most striking thing inside American Apparel T-shirt shops might not be the clothes. It might be the labels that say "Made in USA."

Manufacturing jobs in general, and apparel-making jobs in particular, have been moving to cheaper plants overseas for decades. But Los Angeles-based American Apparel has thrived by defying that trend.

The company appeals to U.S. customers who want to be hip and don't want their clothes to carry "Made in China" labels - a tag hard to avoid these days.

American Apparel avoids mainstream malls, models and press, and offers good pay and benefits to workers who churn out 210,000 basic T-shirts a day for adults, kids and dogs, and sells its clothing online and in 57 global stores. One of the most recent to open is in Federal Hill.

Customers may think the shirts and other basic clothes are hip and the maker socially responsible, but experts in retail and the economy say the company's success lies in something the dark-suit crowd could like - a smart business model. American has become one of the largest U.S. garment makers because of its in-house production system, direct shipping to its stores and the creation of a distinct image, experts say.

The company said its practices contribute to efficiency. About 4,000 of its 5,000 workers report to the main office, where most jobs - from design to sewing to advertising - are done. Good pay and benefits help ensure a content and productive work force.

"People put that 'sweat shop-free' label on us, but we prefer to be known as a vertically integrated company," said Cynthia Semon, a company spokeswoman. "It's just good business to treat your workers well and keep your operations under one roof. We make money. Sales were twice as much last year, about $250 million, as the year before."

Experts say that while the formula might be somewhat unusual for a garment maker, it isn't the first company to build a loyal and productive work force with good pay and perks. And it benefits from a fair-labor image, which it cultivates by printing "Sweatshop-Free T-shirt" on the labels.

But the business model may not work for other clothes makers because much of the allure comes from the company's controversial founder, Dov Charney. His sometimes-racy marketing and interviews have drawn praise and criticism, but most of all, they have attracted attention. (They have also led to three sexual harassment lawsuits by workers. Two have been dismissed.)

Still, shoppers can be fickle, leading iconic companies such as Levi Strauss & Co. to fall on hard times and move factories overseas.

"The retail business is extremely challenging," said Mark Millman, president of Millman Search Group, a retail consultant and executive search firm in Owings Mills. "Fashion turns on a dime, and you always have to be at the forefront and have tremendous vision to predict what people want and what they'll pay for it. One bad season can wipe you out."

He said American Apparel has generated good profit margins by opening its own stores, in which it could charge more than when the company was exclusively a wholesale business about two years ago.

It uses the money to buy organic cotton and to pay workers up to $15 an hour - nearly three times the nation's minimum wage. Benefits include health and dental coverage, English lessons for immigrant workers and on-the-job massages.

Charles Craver, a labor law professor at George Washington University Law School, said a core group of shoppers cares about labor, though most people don't pay attention to where products are made. They care more about price. The nation's largest retailer, he notes, is Wal-Mart.

American Apparel prices range from $14 for dog T-shirts to $26 for bikini bottoms to $32 for tube dresses, all in multiple colors. No logos or flowers or other additions. The store also carries throwback favorites such as tube socks and sweatbands.

Some people will pay more for quality and to support a company they believe is ethical, Craver said. These are the people who protested against Gap Inc., Nike Inc. and Kathy Lee Gifford's clothing line for what they perceived to be unfair treatment of workers overseas.

Most clothing and other low-tech products are now made in countries such as China, where wages are a fraction of those in the United States. Each year, the number of U.S. jobs in the garment industry declines, said Peter Morici, an economist and professor at the University of Maryland's Robert H. Smith School of Business.

At least 250,000 people are employed in the U.S. apparel industry, he said. A decade earlier, the number was three times that. Morici said he couldn't name another industry with such steep declines.

"It's been devastated by Chinese competition," he said. "The fact that at least 250,000 people are employed in the industry says it's possible to make something here. But the numbers go down every year, and we don't know where it will end."

For its part, American Apparel expects to keep growing at a pace of three to six stores a month.

The Baltimore store opened in July, and employees say it has been attracting customers from the neighborhood and from Baltimore County.

"American Apparel likes to go to up-and-coming places, and oftentimes it spurs others to open up shops," said worker Laura Webster. "Sometimes people know American Apparel. ... Sometimes they're just into the clothes."

Jim Lucio, a 40-year-old shopper who lives in Baltimore, said he's both. He recently stopped in to look at dog T-shirts and men's underwear. He said the prices were reasonable and workers were probably treated well.

"But I just like the clothes," he said. "I like the classic stuff, without frills or patches or logos. I love the underwear because it's the cool kind of brief style but comes in colors, like classic tighty-whiteys one-upped."
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