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Bring It On!
A budding T-shirt king doesn't need protectionist measures to thrive in the U.S.
Daren Fonda
October 29, 2001

Conventional wisdom says it's financial suicide to open a garment factory in the U.S. Why set up here when your competition has long since fled to sweatshops off—shore? Judging by the success of the American Apparel company — which opened a massive T-shirt factory in Los Angeles three years ago - " Made in the U.S.A." still makes good business sense. Says owner Dov Charney, 32: "My competitors located production centers thousands of miles from their design rooms and marketplace. It's like making prefab homes in India and trying to sell them here."

The U.S. garment industry could use more companies like Charney's. Some 33,000 apparel jobs were lost last year as manufacturers, taking advantage of NAFTA, continued to move south of the border. Last fall the government eliminated tariffs for apparel made with U.S. fabric from 24 Caribbean basin nations, spurring more U.S. job losses. The industry's economics are so unforgiving that underwear giant Fruit of the Loom sought bankruptcy protection in 1999 and still hasn't emerged.

In contrast, American Apparel is thriving. With 300 workers, Charney's factory produced 5.5 million imprintable T-shirts, tank tops and panties in the past year, most labeled Classic Girl or Standard American [as of April 2004, the company employs 3,200 workers]. Regional screen printers, distributors and retailers account for 90% of his $20 million in sales. The rest went to private-label companies.

Charney's workers are relatively well paid: a top seamstress can earn $13 an hour compared to 21 for her counterpart in Indonesia. Benefits at American Apparel include English classes and yoga, and on Mondays workers can visit a "health-care Winnebago" where registered nurses provide free services (click here for current worker wages and benefits). Charney's wholesale prices range from $3 to $6 a T — double that of his big rivals. But Charney says his company earned "seven figures" last year.

How does American Apparel do it? For one thing, it's a lean operation. Charney is the firm's chief designer, marketer and photographer. "I can make a product sample in a day," he says, "take a picture of it and have it on my website that night. Two weeks later, it's in my inventory." That nimbleness separates his business from large competitors. Maintaining a 1.3 million piece inventory in Los Angeles, he can quickly ship a rush order for 100,000 Ts. And having a single, centralized operation — with production managers, machine operators and graphic designers in one place — means he can rapidly change his production line.

One of the reasons American Apparel may survive it that it's a niche, value-added player. Its shirts are made with fine-knitted cotton with a higher yarn count than the typical T, making for a softer feel. Even if the company boosts sales fivefold to $100 million, it will still be a minnow in the $10 billion U.S. imprintable T-shirt industry. But Charney is convinced that having a factory in America is critical to his success. "I'm a free-trader," he says. "I have no problem with lifting quotas and tariffs. I know my product will be better."