American Apparel knows fashion – the retail giant’s cutting-edge clothing has become synonymous with “trendsetting brands” – but the company has most distinguished itself over the years for bucking one troubling trend.
As all other major retailers have outsourced their manufacturing to the third world, enticed by cheap labor, American Apparel has remained planted in the United States, sweatshop free.
American Apparel clothing is made at the company’s 800,000 square-foot location in downtown Los Angeles, the nation’s largest garment factory. C.E.O. Dov Charney pays his workers almost twice the California minimum wage and offers health insurance for $8 a week, both rarities on the bottom rung of the U.S. labor market. Additionally, American Apparel offers workers free English lessons and provides well-lighted and well-ventilated working areas, conditions that have won Charney praise among anti-sweatshop activists.
While the clothes cost more to make at American Apparel than at, say, Gap, which outsources its labor to India, the total costs are not substantial when indirect costs are factored in, according to Charney.
Other companies, for example, pay up to $400,000 in annual salaries to their employees to “keep flying back and forth to China,” Charney recently told Apparel magazine.
“That adds up too,” he told the magazine.
By manufacturing from one location in Los Angeles, Charney can quickly react to consumer demands – that speed and flexibility helps American Apparel regain money lost to more expensive labor.
“Free trade provides us with an opportunity,” Charney told Apparel. “There are various inequalities in the market, but the main thing is to focus on your brand, your quality, your product and on distribution channels.”
Proof of the strategy’s success lies in American Apparel’s bottom line.
"The company posted a $40 million profit in 2002 and doubled sales annually through 2005." Additionally, in 2005 and 2006 American Apparel was named one of the fastest growing private companies in the United States by Inc. magazine. Charney took American Apparel public through an unconventional 'reverse-merger' with investment firm Endeavor Acquisition Group in December 2006 for an initial value of $382.5 million. Charney remains the company's chief executive officer and maintains his creative freedom.
Today, American Apparel’s 160 stores employ 7,000 people in 14 countries.
And, again, American Apparel has helped set a trend of sorts, as a growing number of companies across the globe find that following socially responsible strategies can result in sustainability.
Consumers are increasingly shopping for socially responsible brands, numerous studies show. And consumer groups, aided by the internet, file daily reports on the varying degrees of sweatshop violations.
Multinationals are catching on, it seems.
This January at the World Economic Forum in Davos, Switzerland, Daniel Vasella, CEO of the pharmaceutical behemoth Novartis, told attendees that companies "have a duty to adhere to fundamental values and to support and promote them."