Sundar Ganapathy

I will caveat this post by pointing out that while I respect American Apparel’s brand strategy and I love their billboards, I absolutely despise their clothing and I judge the people who shop there accordingly.  The brands you buy do say a lot about who you are.

American Apparel was founded in 1998 and has rapidly developed into a well known global brand with retail stores in 13 countries. This newcomer has managed to not only compete, but thrive, in the highly saturated market for retail apparel. There has been a lot of buzz recently about the company and a possible bankruptcy, but due to an infusion of private equity capital they appear to be on sure footing.
Lets take a closer look at the numbers:
Their P/E ration is 4 times the industry average while their growth is nearly 8 times the industry average. But then we see a very interesting and almost disturbing fact: their net income per employee is only 2% of the industry average – talk about huge inefficiencies. Of course this can be explained by the fact that American Apparel is vertically integrated and manufacturers all its clothing in the United States.

So how does a brand like American Apparel find success with high operating costs and little surface product differentiation while other brands cut costs, invest heavily in marketing, and develop stylistic differentiation?

Rather than position the brand in the traditional way, American Apparel has recast common perceptions of the apparel market and points of differentiation, while leveraging existing brand equity. American Apparel has found a way to shift discussion towards social consciousness and ethics, without turning off style conscious consumers. Then, it has further raised it profile through a degree of cognitive dissonance: using highly sexualized imagery but project social consciousness by using “real models.” The brand value and brand aesthetics are so complex that consumers aren’t buying into a definitive statement – they buy into their own biases.

Ugly hipster tools who shop at American Apparel - buying a brand that they only think they understand

Despite the complexity of the brand, American Apparel has focused on a single message: social consciousness. This message has resonated powerfully with persuadable consumers and found expression throughout their products and marketing efforts. Socially conscious consumers are more likely to be educated, have more disposable income, and are likely already predisposed to take action for a cause. American Apparel has targeted this segment and exploited their propensity for social causes by linking their brand with a high degree of social consciousness. For example, American Apparel produces all of its clothing in downtown Los Angeles where it pays its workers on average, twelve dollars an hour. Every employee gets paid time off, healthcare, subsidized lunches, bus passes, free parking, and free ESL classes. This is almost unbelievable when nearly every competitor produces their clothing in South East Asian countries where there are absolutely no standards for workers’ rights and no associated costs. According to their website:

The average sewer with experience at American Apparel is making about $25,000/yr (i.e. $12/hr, well over twice the federal minimum). This can be higher in some cases. We also offer parking, subsidized public transport, subsidized lunches, free onsite massages, a bike lending program, a program of paid days off, ESL classes and much more. Most importantly we guarantee job security and full-time employment; this is an anomaly in the garment industry, which has historically been dominated by seasonal work.

We also continue to provide all of our employees and their families with company-subsidized, affordable health insurance ($8/week, $1-3/week for children). And we just made everyone’s lives a little easier by opening an onsite medical clinic. This facility, which is the first of its kind, offers primary care services along with pediatric, urgent and preventative health care.

This message has effectively connected with specific consumers. Over the past ten years, American Apparel has developed a strong “base” group who are brand loyal. These consumers are socially conscious and willing to pay a premium for “ethical” goods, such as fair-trade coffee, organic foods, and American Apparel clothing. While this base has helped sustain American Apparel, it has not driven the brand’s incredible growth. It is the persuadables who have propelled the brand globally. American Apparel’s design aesthetic is quite simple and many consumers care much more about style and cost than ethical issues. Still, the brand has found ways to appeal to style conscious consumers without sacrificing its core ethical brand equity. In fact, they have actually strengthened their message of “social consciousness” while attracting new consumers.

American Apparel is perhaps best known for its highly suggestive, sexually charged billboards. The brand has taken a very shrewd approach with regards to advertising. While the age old axiom “sex sells” still applies, American Apparel’s brand of sex appeal is much different than that broadcast by other companies. American Apparel uses models of a number of ethnicities. In addition, their models are not chosen to be unblemished or perfect, but are rather chosen for looking pretty and “real.” The American Apparel model represents a realistic standard for beauty that one could realistically attain or would see on a daily basis. At the same time, these models are shown posing in sexually suggestive ways. This at once resonates with the base of socially conscious consumers who are aware of the unrealistic standards of beauty and unrealistic demographics often portrayed in retail clothing ads, while attracting the persuadables who are attracted to the realistic and attainable image of beauty and sex, as opposed to the unattainable fantasies they are used to seeing. American Apparel has been masterful at differentiating themselves and diverse consumers through a complex but powerful brand.

I love their ads - why cant the people who shop there in real life look like this

With the use of highly visible socially aware business practices, American Apparel has created a base of socially conscious consumers willing to pay a premium for simple clothing. This is nothing short of impressive, but pales in comparison to the company’s masterful execution of branding and their explosive growth. American Apparel has found a way to attract new consumers who are willing to switch brands by using sexually charged, but realistic, imagery. American Apparel’s blend of ethical consumerism and provocative imagery has created one of the fastest growing global apparel brands.