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American Apparel Takes on the T-Shirt
Bobbin Magazine
Julie McElwain
May 2001

With high-quality, fashion-forward tees, American Apparel aspires to be the 'Starbucks' of the T-shirt world.

When most people think of the basic, blank T-shirt, they tend to think of big companies such as Hanes, Fruit of the Loom, Russell and Anvil. Nonetheless, stepping up as a T-shirt-wielding David among apparel industry Goliaths, Los Angeles, CA-based American Apparel is ready to challenge that perception.

In fact, the company actually wants to occupy the same market space as the dominant T-shirt players that sell their product into the imprintable market, explains Dov Charney, president and chief executive officer.

"Those companies are huge. They carry enormous inventory, and in the imprintable T-shirt industry it's about having stock, being able to ship orders out. But there's been a shifting in this industry."

Specifically, Charney says, the larger companies have sent most of their production down to Mexico or offshore. Such changes have opened up a window of opportunity for American Apparel, which manufactures 95 percent of its products domestically. "Our angle is that while all the other [companies] have shifted their production offshore, we're committed to being domestic, with a small percent slightly south of the border," explains Charney.

Touting American Apparel's domestic production is more than marketing, however. State-side production allows Charney to keep close tabs on the quality of the line, which is divided into private label and its own brands. The latter offers such labels as Classic Girl (a contemporary T-shirt line aimed at teenage girls and young women, and a newly launched panty collection), Standard American (men's T-shirts) and Classic Baby (tiny tees for infants and toddlers).

Wholesale prices for the average American Apparel T-shirt range from $3 to $6, which Charney acknowledges are slightly higher than the prices of other blank T-shirt companies.

"We're focused on quality. We want to be the Starbucks — the gourmet T-shirt maker — for the screenprinter," says Charney. "Not everybody needs Starbucks. Not everybody has the appetite to pay three bucks for their coffee. Some people just want the 60-cents cup. But some people want the best coffee, and will pay $3, $4 and even $5 for it. We're looking for those people who want a better T-shirt."

Charney has been looking for those people for more than a decade, since the time when he first became enamored with the basic apparel item as a teenager in Montreal, Canada. T-shirts from the United States, he believed, were superior in quality and offered a creamier hand, so he began trucking boxes of blank tees from his boarding school in Connecticut back home to Canada. He and his friend — who had a business selling T-shirts at concerts — would sell them on the streets.

By the time Charney went to college the business had evolved beyond his circle of friends. "I was selling to other screenprinters. The more T-shirts I bought, the more T-shirts I sold," he recalls. He soon was looking to buy T-shirts in the Carolinas, and from there it was a logical leap to manufacturing his own T-shirts under the American Apparel banner. "At the time, Hanes was $30 for a dozen, and you could make T-shirts for $22 to $23 a dozen. I thought, 'Hey, that sounds like a good idea.' That's how I jumped into manufacturing."

In the early '90s, Charney set up shop first in Columbia, SC, then later in Charleston, SC. For seven years, the Montreal native commissioned knitters and dyers, contracted cutters and sewers and tinkered with fit and styling to make the perfect tee. While the experience was educational, the timing was off from a business standpoint.

"The industry was sort of collapsing there. All the knitters and larger companies were either going out of business or moving their production offshore," says Charney. With its contracting base drying up, American Apparel floundered. However, while on a sales visit to Los Angeles, Charney suddenly realized that southern California had its own cottage industry of T-shirt manufacturers. The system on the West Coast was similar to that of the Carolinas, except the workers had less experience, approximately five to 10 years versus 20, 30 and 40 years' experience on the east coast side. Charney made his move.

The transition from the Carolinas to California was made easier when Charney joined forces with Sam Lim, owner of a cutting and sewing facility with another partner (who has since left the company). Charney and Lim merged their core operation in March 1998, although Lim owns a cutting and sewing factory in Mexico (where American Apparel ships 5 percent of its production) and Charney owns a distribution facility in Montreal, which spearheads the company's exports into Canada.

Initially, American Apparel skewed heavily toward private label manufacturing, with its branded labels taking a back seat. Later, Charney recognized that "private label isn't profitable long term because your client is always looking to make it cheaper. There's no loyalty. They just want it cheaper, cheaper, cheaper. And there is so much supply, from all corners of the world, that it doesn't make it feasible to focus in that one area. So we de-emphasized private label packages and we're focusing on our brands for the imprintable T-shirt industry that services the specialty [screenprint] industry," he says.

Charney is also determined to make a deeper niche within that niche category, by focusing on more fashionable, more fitted basic T-shirts done in 100 percent combed cotton, 30 single yarn baby ribs and superfine jerseys.

Classic Girl, which accounts for 70 percent of production, offers roughly 40 different styles and colors, ranging from tees with I length, raglan sleeves to V-necks, from soft, body-hugging T-shirt dresses to sensual spaghetti straps and feminine cardigans. The line, with its overtly sexy styling, is targeted toward teenagers and young women, with sizes ranging from two to eight.

While the men's wear line is slightly fitted and jumps the age barrier, Charney admits that Classic Girl is not for the missy customer. "The reason some T-shirts don't work is because they try to make them work for everybody. But a sixteen year old girl wanting to exhibit a lot of sexual energy is not going to want to wear some oversized T-shirt," he points out. "Maybe someday we'll move into the missy market. But right now no other manufacturer is really addressing this [contemporary women's] market, and we want to stay focused on that."

American Apparel's fashion-forward approach is important to Charney, but he understands that the blank T-shirt business revolves less around style and more around stock availability and snappy turnaround time. Indeed, the company has in inventory no less than a million units at any given time, and its distributors carry 100,000-plus units as well. "We always have to be ready for that screenprinter or distributor who calls and needs something for a concert or promotional event tomorrow," he says.

The inventory is housed in American Apparel's 167,000-square-foot facility in downtown Los Angeles, and later shipped to its clients, which are screenprint companies and distributors, primarily in metropolitan areas throughout the United States, Canada and Mexico.

Unlike many southern California manufacturers that outsource much of their cutting and sewing to contractors, American Apparel keeps a tight rein on production, employing 200 to 300 workers (depending on the time of year) who utilize the 35 knitting machines, 25 Vetigraph markers and cutting tables and 200 sewing machines.

Styles are then inventoried, with an estimated 10,000 to 50,000 units shipped daily. Compared with its T-shirt competitors, American Apparel would be considered a small operation, with last year's sales ringing in around $15 million, and this year's sales projected to be only slightly higher, around $18 million or $19 million.

Explains Charney, "Our sales haven't grown overall, because we're changing markets, with our [private label] business diminishing and the business inspired by our own designs' growing quickly."

However, he has big plans for what is a billion-dollar T-shirt industry, predicting that sales will climb to $20 million to $25 million in the next couple of years. He targets the company's long-term sales growth at $100 million. "That's not tomorrow, or next year ... but it will happen," Charney insists.

In order to make that goal a reality rather than wishful thinking, Charney has stepped up an already aggressive marketing and sales agenda. He has a consistent presence at such tradeshows as the Imprinted Sportswear Show (ISS) and ASR, working the booths and encouraging manufacturers that have screenprinted T-shirts in their merchandise mix to look at his sample line.

To reach even more potential customers, he launched a Web site last year that details the products as well as the company. Moreover, he recently took that one step further by incorporating e-commerce into the Web site, which allows him to conduct business-to-business transactions over the Internet.

The export market is another area Charney is determined to explore in more depth. The company currently ships its products to western Europe and Japan, but those contacts were made via domestic tradeshows. In the future, Charney says he wants to become more proactive. "We want to push it further. We're not ready yet, but that's where we're going."

Almost as important as knowing where the company is going, is knowing where the company is today. Charney is adamant that American Apparel be on firm footing before tackling new areas - or the Goliaths of the industry. "We need to dig in deeper, to penetrate the market we're in right now," he says, adding: "We're building our foundation right now. We want to be the best at what we do, and once we are ... once we're strong, then we can take on the world," he concludes.

Julie McElwain, Bobbin's West Coast contributing editor, has covered the West Coast apparel, textile and related industries for Bobbin for more than 10 years.

Taking the Initiative

Dov Charney doesn't just want to make the best T-shirt in the world — he also wants to create the best T-shirt company. "We want to be an ethical company, committed to our employees," he asserts. "We're doing good things now, but I want to be the most ethical T-shirt producer in the world."

For American Apparel, that employee commitment has meant joining forces with an innovative nonprofit group called the Worksite Wellness Project, which, according to its executive director Liz Torres, targets businesses in the Los Angeles area that are unable to provide healthcare to their employees.

The five-year-old organization sends health workers to companies to educate employees about disease prevention regarding such conditions as diabetes, high blood pressure and alcohol abuse, and encourages them to get regular check-ups by handing out referrals to both county and private nonprofit health clinics.

Additionally, Torres says that Worksite Wellness forms partnerships with other health providers to offer direct care to employees. "We work with an organization called Queens Care, which has a mobile van [outfitted] as a clinic," she notes. "We were able to bring the van to the premises of American Apparel, and they gave free physical exams to all of [Charney's] employees that were there."

While small apparel manufacturers and contractors are ideal for the Worksite Wellness Project, Torres admits that employers often balk at the commitment that the organization requires from the company. "It is a challenge [because] small business employers wear so many hats. There isn't a human resources person there, and they have to handle everything, [so] this type of concept is new to them," she admits, adding that the program requires a significant time commitment and access to the company's employees.

Typically, Worksite Wellness schedules presentations every other month during the lunch hour, although Torres says that some employers, such as Charney, request a more regular presence. "We have fee-based programs where we can send out a staff person to the factory for six hours a week," she says, adding that many employers regard the program as a stop-gap measure. The cost is $20 per hour.

"No one wants a sick employee, and this does reduce absenteeism," says Torres. Furthermore, a company that doesn't offer regular health benefits can use this to provide at least some level of benefit to its employees, which is very helpful as well as a boost to moral. "If an employer can spare the time, it's really a win-win situation," concludes Torres.

For more information, contact the Worksite Wellness Project at tel: (213)743-1496.