Profile of American Apparel: US Manufacturing and Strong Brand Recognition Bring Success

American Apparel is a vertically integrated manufacturer, distributor and retailer of non-branded basic fashion apparel based in Los Angeles, California, USA. It was founded as a wholesale business in 1998, and in 2003 it opened its first retail store and sales began to grow significantly. By the end of 2009 it was operating 281 retail stores in 20 countries. The company continues to run its wholesale business, and also operates an online retail e-commerce website.

In contrast to most other US clothing manufacturers and retailers-which tend to outsource production to countries with low labour costs-all of American Apparel's manufacturing operations are in the Los Angeles metropolitan area. The company promotes the fact that its merchandise is "made in the USA" and "sweatshop free". Wages are therefore much higher than the global average and, indeed, the company claims to employ the highest paid apparel workers in the world. Instead of competing on the basis of low wages, American Apparel uses its US manufacturing base, coupled with a strategy of vertical integration, to offer quick response times and higher quality while maintaining tighter inventory control. This avoids the problem of being left with unsold stock and having to sell it off at a discount. In addition, the company is able to replenish stocks of popular styles at short notice, and this helps it to maximise sales.

American Apparel has proved successful in a market dominated by competitors who have substantially greater financial, marketing and other resources-such as Gap, Urban Outfitters, H&M, Uniqlo and Forever 21. It differentiates itself on the basis of the fit and quality of its garments, the broad variety of colours and styles on offer, its imaginative marketing campaigns, and its ability to fulfil orders, large or small, at short notice. Using its core strengths, it has increased its sales rapidly. In 2008 alone its retail sales grew by 62%. But in 2009, hit by the US recession and the global economic downturn, growth in its net sales was minimal, and its net income declined. Nonetheless, the company remains optimistic about the future, and is hoping to return to significant growth in 2010.