If you have been following the news on American Apparel over the past year, the filing for bankruptcy may be less shocking than the company’s banned advertisements on the back page of Vice magazine. The retailer once infamous for sexualised marketing campaigns and its transgressive attitude continue to be at the centre of scandal, but for all the wrong reasons. In addition to mounting debt, now totalling US$300 million, the business is surrounded in drama best placed on a reality TV show, from the firing of founder Dov Charney, to lawsuits and protests that feature the new CEO’s face plastered on a piñata. The filing for chapter 11 bankruptcy will buy the management team some time, allowing them to continue in their efforts to revitalise the business, but is it too little too late?
Too cool for change?
In its heyday, American Apparel capitalised on the concept of modern commercial hipsterism, but it has since failed to capture the attention of its core 18-25-year-old target audience. Previously renowned for its edgy product offering that complemented marketing campaigns promoting a controversial amalgamation of sex, sly nonchalance and real political activism, the retailer has failed to evolve with the youth culture of today.
Although well positioned to capitalise on trends such as ‘norm-core’ and athleisure, sales have been dwindling since 2010. The invasion of fast fashion brands into the US is often attributed to the poor performance of teen retailers such as Abercrombie and Fitch, with brands such as H&M
However, American Apparel’s vertical integration of the supply chain should have provided the retailer with a unique advantage, utilising its short lead times and advocacy of US manufacturing. Instead, the crowded competitive environment, stagnant product offering and out-of-touch marketing resulted in the retailer losing its ability to convince consumers to pay more for what are essentially very basic clothing items.
Controversy backlash and recapturing the zeitgeist
So far, the turnaround plan has involved store closures, layoffs, heavy discounting and toned-down marketing campaigns in an attempt to cater to a wider consumer group beyond the rebellious youth the company was founded on. Although overt sexism, female objectification and soft porn cues are not going to bode well during a time when feminism is going mainstream, without them the company is going through an identity crisis.
Turning this business around is a huge undertaking; however, as the largest apparel manufacturer in the US, it encompasses a core advantage in a market that is fixated on providing products to consumers at a rapid pace. Millennial consumers are concerned with how and where their products are created and are keen to support local artisans. American Apparel’s in-house sourcing strategy enables the company to provide its consumers with US-made products that promote authenticity, one of the last relevant buzz words associated with the generation historically targeted by the retailer.
Although production in the US restricts the business from competing on price, it remains its last saving grace, and even this is in jeopardy due to the continued accusation of mistreatment of workers.
American Apparel’s brand image is now intrinsically linked to the troubling revelations of founder Dov Charney; what was once considered risqué and empowering is now sinister and creepy. Management’s ability to resolve these deep seated issues will ultimately determine whether a comeback is on the horizon or whether the retailer will fall with its maker. As it stands, the latter is far more likely.