Earlier this week, clothing giant American Apparel filed for bankruptcy protection after a steady stream of declining sales, and the massive accumulation of debt. After a tumultuous relationship with former CEO and founder Dov Charney, the firm has decided to restructure their current assets in hopes to continue operating its 260 stores worldwide.
In the early-mid 2000s, American Apparel saw one of the quickest rises in retail history. The brand rested on the premise of providing basic-wear without the need for outsourcing & sweatshop labour, which struck a chord with customers looking for an alternative to traditional fast-fashion outlets.
However, the company’s altruism was difficult to maintain as a unique concept, with other retailers jumping on the bandwagon. H&M has continuously re-invested in their ‘Conscious Collections’, and have recently doubled-down on their efforts with the ‘Close the Loop’ campaign. Urban
Outfitters, which has been AA’s long-standing rival for accessory-seeking millennials, also provides clothing recycling programs and promotes ‘One-of-a-Kind Vintage’ programs. American Apparel saw strong business performance early on due to its use of vertical integration through its supply chain. By owning all of the steps in the process like manufacturing, American Apparel was able to avoid the profit margin applied by intermediate partners and pass on savings to the consumer. However in 2015, clothing with a sustainable edge sold through the web is able to outperform AA in, which has physical stores to maintain. Micro-brands like Killion have been able to provide sustainable basic-wear and siphon the web-savvy youth from American Apparel’s customer base.
Even with the crippling debt and increased competition, the nail in the coffin for the brand came from its own founder. AA’s former CEO, Dov Charney, stood at the center of numerous scandals ranging from sexual harassment of employees to the failing of provocative ads. All in all, Dov’s failings mirrored those of his company. The number one rule in fashion is that there are no rules, but the business world isn’t as accepting.
By: Amit Kalra #TPGAmit