American Apparel Inc.

Author:Mark Lane

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747 Warehouse Street

Los Angeles, California 90021


Telephone: (213) 488-0226

Fax: (213) 488-0334

Web site:


American Apparel Inc., founded by Dov Charney in 1997, rose to profitability as a T-shirt maker with an unconventional business model. Countering the almost universal garment-industry practice of outsourcing labor to other countries, Charney located his company headquarters and manufacturing facility in the same building in downtown Los Angeles, paying his factory workers high wages and providing comprehensive benefits. Despite the higher costs of its manufacturing process, the company was able to grow by using a "vertically integrated" structure in which all facets of business were intermingled for maximum efficiency and speed of production. After seeing sales double each year after 2000, American Apparel expanded into retail, with a widened offering of basic knitwear, in 2003. Charney himself devised the accompanying print ad campaign.

The American Apparel ads premiered in concert with the retail-store openings in 2003 and expanded geographically as more stores opened, running in lifestyle publications and alternative newsweeklies in relevant urban markets. Charney himself sometimes took the photographs for the ads, which featured sexually provocative images of company employees as well as men and women whom Charney had sought out on the street and elsewhere. The campaign openly courted comparisons with soft-core pornography while at the same time publicizing American Apparel's commitment to social justice, a combination intended to appeal to the progressive values of young, hip urbanites.

While the campaign ran, American Apparel sustained its rapid growth. Sales continued to double each year, and the number of retail stores grew from 2 in 2003 to more than 50 in 2005. The ads generated considerable controversy and resulted in public scrutiny of Charney's overlapping personal and business lives, but his marketing savvy, as demonstrated by the print campaign and the company's distinct brand image, went virtually uncontested.


Dov Charney started selling T-shirts on the streets of his native Montreal during high school, and he dropped out of Tufts University to start the first incarnation of his T-shirt manufacturing business, American Apparel, in South Carolina. When this effort failed, Charney moved to Los Angeles, where he relaunched American Apparel in 1997.

Despite the prevailing conventional wisdom decreeing that profitability in the garment trade required the use of cheap foreign labor in the manufacturing process, American Apparel's business headquarters and factory operations were located in a single building in downtown

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Los Angeles. From the start American Apparel paid well over the minimum wage and offered comprehensive benefits and perks to its factory workers, while also making significant improvements in fabric quality and fit relative to other major American T-shirt brands. These two brand attributes—a politically attractive sweatshop-free business model and a superior product that was competitively priced—helped Charney carve out an ever-growing niche among T-shirt wholesalers. The company found particular success as a supplier of T-shirts to rock bands, who screen-printed their logos onto the shirts and sold them at concerts and online. American Apparel first became profitable in 2000, and the company nearly doubled its sales growth and employee force each year thereafter, eventually adding new products, such as tank tops and women's underwear. In explaining American Apparel's success, Charney pointed to his antiestablishment business model, arguing that it simply made more sense for his company to locate its factory operations in the United States. American Apparel's "vertically integrated" structure, the concentration and strategic intermingling of all company departments under one roof—Charney, for instance, served as head fashion designer and marketer as well as CEO—was a cost-saving, efficiency-enhancing way of doing...

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