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All the Way to the Blank
An $80 million T-shirt wholesaler with a social conscience, American Apparel is diving into retail
Lee Bailey
March 22, 2004

Downtown Manhattan offers shoppers almost everything they could possibly fathom, from bootlegged blockbusters to the latest zillion-dollar European couture. In such a crowded and rich retail landscape, sometimes simplicity makes the boldest statement. Los Angeles-based American Apparel, which enjoyed wholesale revenues of more than $80 million in 2003, is banking on the power of such contrast as it opens retail stores at a vigorous pace — the Broadway flagship made its debut in the fall, in a space formerly occupied by an antique gallery. West Village and Lower East Side locations have followed, and American Apparel operates Montreal and Los Angeles stores as well.

Purveying what founder Dov Charney calls "basic, commodified styles for the post-boomer generation," American Apparel is perhaps the most written-about yet little-known T-shirt brand. Although the company's worker-friendly and environmentally progressive policies have garnered profiles on CNN and PBS and in magazines ranging from Time to The New Yorker, the name American Apparel registers with few shoppers. American Apparel's retail strategy aims to change all of that by introducing the brand to the man on the street — literally.

The inviting new stores emphasize the uniqueness of both the label's product and its politics. Blank cotton goods are arrayed on simple racks, in eye-catching chromatic sequences. Small flat-screen monitors play clips from Charney's many television appearances, including a 60 Minutes feature. Works by "accomplished urban photographers," one of whom happens to be Charney, adorn the spaces between fixtures, and even the bathrooms.

Although the store's videos and various placards explain the company's interests in environmental conservation and positive labor relations, Charney insists the main objective of the retail venture is indeed to move merchandise. "Of course we want to educate the consumer to know what we're about, but our retail stores are fundamentally focused on addressing a hole in the market," he says. "The imprintable T-shirt wholesale business is huge, but it's my sense that consumers also want direct access to high-quality, basic cotton goods, with no adornment." While Charney acknowledges giants of the industry, like Fruit of the Loom and Hanes, he sees their product as significantly different. Color and fit distinguish American Apparel products from those of the majors, he says.

Charney's first attempt to reach consumers — by selling blanks to retailers to be sold to consumers as is — was unsuccessful. "The retail buyers didn't get it — it wasn't exciting enough for them. Being unembellished, and almost sort of an 'anti-brand,' it was hard for us to get stores' attention." Charney also worried that even if he could persuade retailers of the demand for basic cotton goods, they would simply turn to larger manufacturers whose offshore manufacturing enables them to charge significantly lower prices. "We wouldn't have had enough control when selling to retailers," he says. So, in typical fashion, Charney decided to do it himself.

Although American Apparel operate san e-commerce Web site, the company's experience in retailing to consumers is minimal. "The Web site does some business, but a single store can easily outsell the Internet when it comes to clothes," Charney says. He foresees a three-prong consumer sales distribution model, with stores, a catalog and the Web site all serving consumers.

The emphasis in the stores is on conveying the versatility of the garments to shoppers. "I really try to help a guy understand that he can go in many different directions with even the most basic shirt," explains Mark patlan, an assistant sales manager at American Apparel's Broadway store. Patlan says the crewneck jersey T-shirt, available in 16 colors, is the most popular men's item in the store. Other pieces include preshrunk fleece hoodies, which retail for $45, thermal knits, tank tops, muscle shirts, leisure shirts, sweatpants and ringer T-shirts. Underwear, a category that is performing well on the women's side, is in development for men too, Patlan adds.

"Because most of the goods the label produces are wholesaled and then edited or imprinted in some way, shoppers are really responding to the opportunity to make these blank pieces their onw," says New York district retail manager Caitlin Salemi. She also says customer feedback in the store is reported to American Apparel's product development group, and that retail-exclusive pieces sometimes result.

The three New York locations are situated within two miles of each other, which is surprising given that the brand currently operates only six stores worldwide. "We want to speak to New Yorkers properly," Charney says. "Neighborhoods here vary from one block to the next. The West Village shopper is a different person from the Lower East Side shopper." Charney envisions American Apparel as the "Starbucks of T-shirts for the urban shopper."

The proliferation is set to continue in Los Angeles as well, where four more stores will open in the coming months. Montreal will receive another, and the brand will also make retail debuts in Fankfurt, Berlin and Toronto over the next year. With this spasm of growth, Charney hopes to tap into what he senses is an interest in simplicity. "Retailing has always had a high glitter factor, relying on brands that have created a sense of false tribalism, using sex appeal," he says. "I think consumers are ready to make their own decisions, though."

In terms of competition on the retail front, Charney names the Gap and Old Navy as two big — really big — market leaders. "Any vertically integrated manufacturer who also retails its own plain cotton basics is who we're competing with," he says. He maintains that the relative strength of American Apparel, besides the social virtues it promotes, is reliability. "We will be making the exact same commodity a year from now. If you have a favorite American Apparel T-shirt now, you will be able to buy it in our store in the future. Period. Fashion is not a part of this equation."