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The Eccentric Cloth Seller
Kyunghyang.com
Yoo Byung Sun
June 6, 2007

The public went ecstatic when Henry Ford's announced that he would sell automobiles at an affordable price. Ford was in need of money and went to a bank. Bankers turned down Ford's request and laughed at Ford, asking "why would you need an iron horse (carro) if there were so many horses out there." The bank was wrong indeed. Ford became the king of the automobile industry by not only paying his employees twice as much as his competitors, but also reducing the price of an automobile by half.

Howard Schultz was also regarded as eccentric when he opened his first Starbucks coffee shop in 1982. Schultz focused on providing good coffee and a cozy place where people could enjoy them in a relaxed atmosphere. People were very doubtful and mocked his ideas. However Schultz was right. Starbucks, a company that insists upon providing the very best coffee beans and employee welfare, has opened up more than 7500 stores in 25 years. Schultz argued that "Looking at the world seating on your desk is the most dangerous thing," became the owner of the largest coffee shop in the world.

Dov Charney, who established the American Apparel, the largest clothing company in the United States, is definitely not a typical and ordinary business person. He does not step into the same direction as his competitors do. He built the manufacturing plant right in the heart of Los Angeles when others were busy relocating factories to China and South America in pursuit of low hourly wages. He insisted upon branding no trademark on his products whereas others put great emphasis on establishing their brand image. Mr. Charney pays his employees double the amount of what other workers normally make and his clothes are priced half as much as his competitors'. When others were focusing on outsourcing, he structured his company into a vertically-integrated one. American Apparel's revenue exceeds 300 million USD, an astonishing figure considering the company's line up that consists of t-shirts, underwear, and jeans only. The company that was established by a then 29 year old eccentric in 1998, became a star player in the fashion industry employing more than 5000 people with 143 stores in 11 countries world wide.

The AA is headquartered in the slums of downtown LA. This is where one million t-shirts are produced weekly. Instead of bearing a trademark on the products, each product has a tag on which 'made in downtown LA' is printed clearly. It shows they take great pride in the fact that their clothes are made in the heart of LA. The minimum wage in California is $6.75 per hour. However the American Apparel employees make $12 per hour on average. That is more than forty times the amount of what the sewing factory employees in China and the Dominican Republic make.

The story doesn't stop here. Mr. Charney only uses organic cotton. In 2004, he launched a t-shirt made from organic cotton on which no insecticide nor GMO (genetically modified organism) was used. AA is in the forefront of the 'ethical fashion' by not relying upon low-wage labor and using the environment-friendly raw materials. 80% of their total products will be made from organic cotton by the end of the year. Nevertheless, their gross income is almost 80% of their total revenue. The average for the whole American industry is about 60%. That figure is indeed a riddle people can't solve.

Mr. Charney comments on his employees, "People here are happier, more motivated and work harder. In short, they don't quit their jobs." He says there are more than 1000 people listed on the waiting list and they are all eager to work for AA. His people are the ones who make products that are much more superior to the ones produced in low-wage sweatshops. He says, "we can correspond to the change in trend and match urgent orders quicker in an efficient way." The boom in ethical way of consumption by the consumer also contributed to AA's success. The customers do not have to think about the low-wage earning foreign workers when wearing AA and at the same time they can also get some sort of consolation by thinking that they are in some way contributing to the preservation of the environment.

Mr. Charney says, "I wanted to prove that the products produced by the workers who are treated like slaves in illegal workplaces, would eventually become more expensive than the ones produced in the United States in an ethical way." That means that diminishing of the manufacturing industry and reduction in job opportunities are not the destiny of developed countries.

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