© American Apparel

Executive Summary

The main objective of this page is to summarize the facts and findings of American Apparel’s marketing plan. The information provided is gathered from researches and analysis performed with today’s most common marketing tools. The marketing plan is opened up with an analysis of American Apparel’s current market situation using the STEP analysis. This analysis is commonly used for identifying the external factors influencing the company’s business and is divided into four parts: Sociocultural, Technological, Economical and Political. The results have shown that American Apparels sociocultural influences arise mainly from trends towards fair trade organics and the significance of fashion in terms of self-expression. Focusing on the technological factors influencing American Apparel’s business, mobile internet starts to become an important factor in modern retailing. Especially today’s youth grows into the role of performing every task from the palm of their hand, thanks to Apple’s iPhone and Co. Besides sociocultural and technological factors, there are also the economic factors touching the company’s business. Unlike the ongoing trend of offshoring the manufacture facilities, American Apparel think one step ahead and keep their manufacture footprint low by keeping their manufacture facilities in their hometown Los Angeles. Political factors such as the US immigration politics are still one of the biggest negative influences for American Apparel, as they mostly employ Mexican immigrants. In the past this resulted in a loss of more than 1500 employees who were suppressed to their home countries. The company’s competitive advantage gathered from the SWOT analysis revealed that American Apparel’s strengths lay in their trend independency and their fair trade philosophy. The weaknesses gathered resulted in low brand awareness and fabrication quality, whereas both factors act also as opportunity. Threats such as the limited target group and the too provocative advertisement campaigns show that American Apparel should put more effort in their market segmentation and marketing mix, otherwise they will loose their customers to their competitors such as Uniqlo, Abercrombie & Fitch or H&M. American Apparel mainly uses demographic and psychographic segmentation methods to address its products. This leads to a limited target group, which can be accessed with their marketing mix consisting of the wide and colorful product line, the provocative advertisement campaigns, the justifiable prices and the vertically integrated business model.

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© American Apparel

Company Profile

American Apparel is a vertically integrated clothing manu-

// American Apparel Business Model

facturer, distributor and retailer founded in 1989 by Canadian Dov Charney. Their wide product range consists of colorful basic apparel like t-shirts, underwear, pants, sweaters etc. Processes such as designing, dyeing, cutting, finishing, marketing and the distribution of their products all take place in the very same facilities in downtown LA, which make this company noteworthy. Nearly half of American Apparel’s employees, predominantly Mexican workers, call the factory their workplace (ca. 5,000). The other half operates in more than 285 retail stores in 20 countries 1 . In the early days, the company was only a supplier of shirts for screen printers (band shirts etc.), uniform companies and fashion brands, before it opened the first retail shop in 2003. Today, American Apparel runs the largest clothing factory in the USA. Over the last years, the company has not only won fame for their provocative advertisements and their political engagement, but also several

© American Apparel

American Apparel operates as a vertical integrated business. Since the company controls both the production and the distribution of its products, it is an example of a balanced vertically integrated corporation2.

prestigious awards in branding and marketing. // Awards • Ernst & Young Entrepreneur of the Year in 2004 • Marketer of the Year at Los Angeles Fashion Awards in 2005 • #2 Trend-Setting Brand in Intelligence Group’s 2008 Cassandra Report • #2 Apparel Retail Brand according to Brand Keys 2008 Ranking of Top Retail Brands • Retailer of the Year 2008 at the Michael Awards

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Source: http://www.americanapparel.ch/contact/profile.html Source: http://en.wikipedia.org/wiki/Vertically_integrated

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© American Apparel

Current Market Situation

// Sociocultural There is a strong tendency of people valuing fair trade and organic products, which resulted in an increased demand for products in this category. At American Apparel these products are already present and this opens the opportunity for American Apparel to emphasize these values. Another sociocultural trend that had a major impact on the demand of clients for specific products is individualism and the call for customizability. Competitors already derive great success from offering customized products in order to spotlight the individuality of its customers. American Apparel should not underestimate this trend and consider it for it’s future marketing strategy. Connected with the trend of individualism there is a movement called Anti-Brand which calls for basic products that do not emphasize the brand by printing or stitching logos or brand names onto the products. This shows another possible target group that can be tailored. Today’s market is saturated with brands and producers who depend on trends. This results in a short product life cycle and unethical consumerism. Sustainability is the key word for future products and could be an opportunity for American Apparel, especially with its consistent collection to pioneer in this segment. Markets in the developed countries are saturated with consumer goods, especially in the clothing industry. Markets like India, Brazil or China are growing explosively and so is their demand for goods. These Markets are underpenetrated and in respect of the local culture this offers a great possibility for American Apparel to grow in the international market. // Technological Since there is Internet, there is online shopping. Over the last few years, online shopping has grown rapidly and gotten more important than ever before. Thanks to webshops, companies can set new geographic segments and therefore reach more potential customers. American Apparel strongly makes use of this by offering „online-only“ and “special sale” products and a wider choice of apparel than in its regular shops. With Apple’s iPhone and Co, today’s urban life can’t be imagined without mobile Internet, and the market for applications has grown at an incredible speed. People nowadays can do their shopping from the palm of their hand. This could be a chance for American Apparel to extend its selling channels by creating a news and shop-application. Digital technology is a very important aspect, but not the only one to be considered. The manufacturing processes of a big company like American Apparel, are expected to be environmentally responsible. To acquire new, environment-friendly chemicals for dyeing etc. is not only better for the nature but also for the factory workers. American Apparel already depends on environmentally friendly practices, like for instance using a solar electric system, which powers 30% of the factory.

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// Economic Unlike most companies which are following the ongoing trend of offshoring their manufacture facilities, American Apparel stay true to their anti-offshore philosophy and refuse any influences from this popular economic method. This philosophy enables American Apparel to keep their manufacturing footprint on a much lower level than other retail clothing companies. This opens the opportunity of strengthening their market position as a fair trade basic clothing retailer.

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Besides taking into consideration the positive influencing factors, American Apparel was also confronted with a rather less positive factor, the Economy Crisis in 2007. For a modern clothing company such as American Apparel with goals and aims in regard of global growth, the crisis has been a heavy setback. As a result of this crisis, the once most powerful currency, the US-Dollar, experiences a high value loss. But this previous negative economic factor now turns into a positive opportunity, because the demand for US products increases more and more due to the low currency exchange rate. With a global base of approximately 285 stores, American Apparel is able to serve a broad market segment but there are still many under-penetrated markets still available for expansion. As a result of that, American Apparel need to move their focus from their largest markets namely New York, Los Angeles, London and Paris to under-penetrated markets such as urban areas in Switzerland, Italy and Denmark. These areas are still underrated in regard of urban fashion and trends.

// Politcal American Apparel has been quite politically active over the last few years. The company especially campaigned for two issues concerning minorities: The majority of employees in the factory in Los Angeles are Mexican immigrants. For that reason, American Apparel has always felt strongly about the subject of immigration. Started in 2003, it is still running an advertisement campaign called Legalize LA to confront citizens and companies with this subject matter. In 2009, American Apparel had to let go 1’500 employees, after the U.S. Immigration and Custom Enforcement (ICE) revealed, that 25% of the factory workers were illegal immigrants. American Apparel responded with questions of the effectiveness of such an action and said1:

“The firings will not help the economy, will not make us safer. No matter



how we choose to define or label them, illegal immigrants are hard-work-



ing, taxpaying workers.” 2

In order to celebrate sexuality, be it homosexual, heterosexual or bisexual, and to support the gay community after the passage of Proposition 8 (Same-sex marriages) in California, American Apparel now runs the ad campaign named Legalize Gay. With the support of homosexuality, the company has not only made friends but also had to cope with a lot of criticism. Since it is notoriously known to court controversy with their advertisements, American Apparel had to get used to criticism. Their products are often shown on half-naked women, lolling on couches and floors, resulting in increased irritation to some potential customers. With the aim of expanding its business to the many corners of the world, American Apparel might has to adapt its advertisements as it would have to face several different regulations.

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Source: http://en.wikipedia.org/wiki/American_Apparel Source: http://en.wikipedia.org/wiki/American_Apparel

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© American Apparel

SWOT Analysis

Strenghts // Not depending on trends // Made in USA - Fair Trade // High value of brand recognition // Basic Apparel

Weaknesses // Low brand awareness // Fabrication Quality // Price

Threats

Opportunities // Grow store base // Expand brand awareness // Extend target group

// Limited target group // Too extreme ad campaigns // Trends don’t last forever // Copy Cats SWOT Graphic by Alice Dal Fuoco

// Strengths (Not depending on trends) American Apparel’s philosophy differentiates itself extremely from today’s fast changing fashion industry. They set their values on permanence and therefore not on trend dependency. (Made in USA - Fair Trade) One of American Apparel’s key values is that they manufacture all their apparel in their Los Angeles based factory. As a result of that, they provide outstanding work conditions which justify the higher price. (High value of brand recognition) The brand defines itself through its provocative campaigns and its individual basic clothes which help newly won customers to recognize the brand. (Basic Apparel) American Apparel’s basic apparel operates in a huge market segment including all different kinds of customers. There is no segmentation in regard of occupation, American Apparel considers a demographic and psychographic segmentation to address its clothes to many different people of the same life-cycle stage. // Weaknesses (Low Brand Awareness) Even though American Apparel is very famous in various scenes, the brand lacks in awareness on the mainstream market. Since the brand doesn’t put the logo on their apparel, it is not being recognized by the average public. (Fabrication Quality) Although the company insists on fair trade and the products being made in the United States and therefore on good quality, the apparel often shows poor fabrication. (Price) Justified on fair trade and US production, the prices set for their apparel are above average and hence more expensive than competitors.

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// Opportunities (Grow Store Base) Increase store base in under-penetrated urban markets in North America and Internationally. (Expand Brand Awareness) Make use of new communication channels to advertise the products in order to raise brand awareness. (Extend Target Group) Revise actual market segmentation to expand the addressed target group, so that it is not limited to the age attribute. // Threats (Limited target group) American Apparel focuses on young, urban, education individuals and limit themselves to a certain age segment and may miss addressing other potential age groups. (Too extreme Ad campaign) American Apparel’s advertisement campaigns regularly contain very provocative content with a strong sexual message. They may push the envelope too far and this could have a negative effect on their reputation. (Trends don’t last forever) Although American Apparel consider themselves as an Anti-Brand they enjoyed great popularity among trend-driven individuals. Trends come and go and this may have an impact on their success, which requires American Apparel to take this issue into account. (Copy cats) The competition isn’t sleeping and there are other companies, such as Uniqlo, entering the market with similar products, American Apparel need to raise awareness of their competition and differentiate themselves on the market.

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© American Apparel

Market Segmentation

// American Apparel as a person

Today’s fast changing retail-clothing market requires its protagonists to adapt to these changes and analyze the segments they want to address. With its wide range of trendy colorful garments that can be worn at any time of the day, American Apparel uses the demographic and psychographic segmentation method for its consumer market. // Demographic The demographic focus of American Apparel is set on males and females between 18 and 35 years (also known as Generation Y) and those who are still young at heart. In regard of occupation we consider students, architects, journalists and people from various art professions, the one’s who choose American Apparel as their first address for clothing. Their income status can be defined as middlehigh, as the clothing prices are rather high and vary from country to country. Especially in Europe, whose strong currencies command the market, are the prices in comparison to Canada or the U.S. extremely high.

© American Apparel

A typical American Apparel follower would be a 22-year-old Female art student named Lisa. Lisa loves to wear dark and natural colors, which can easily be combined with other clothes. Fashion does not play an essential role in her life, she prefers wearing clothes which are comfortable and functional but she still sees

// Psychographic American Apparel’s psychographic focus is set on people who enjoy being with their friends, at partys and those who are interested in fashion and therefore follow the latest trends. Although American Apparel acts as an anti-trend

herself as a trend follower in regard of basic clothing. Besides drawing and painting, in her leisure time she hangs out with her friends or goes to indie concerts and party all night long.Lisa is really into the music of Miles Kane, White Lies, Crystal

brand, nowadays, being anti-trend is totally in fashion

Castles and the XX.

and maybe that’s one of the main reasons why American

A typical style of lisa would be high

Apparel’s brand is so attractive to today’s rebellious and partying youth.

wasted pants with a loose fit t-shirt in natural tones, and a bandana around her head.

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Marketing Mix

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American Apparel

Marketing Mix Graphic by Thomas Petrig

// Product „Back to Basics“ is not only one of American Apparel’s most famous advertisement slogans; it also perfectly describes its wide but simple clothes assortment. The products’ basic design enables American Apparel to offer a wide range of colorful garments, which can be easily combined with other pieces of their assortment. Their anti-offshore philosophy, which means manufacturing, design, marketing, accounting, retail and distribution under the same roof in Los Angeles, allows them to use fair and sustainable manufacturing methods and therefore provide high quality garments to the consumers. Where other companies adapt to all ongoing fashion trends and spread their name all over their garment, American Apparel’s products are not subject to fashion movements, as their design is reduced to the max and therefore functional and always fashionable. American Apparel stay true to their values and achieve brand awareness through the form and functional design of their garments. Although American Apparel’s product line is mainly divided into Men, Women and Kids wear, they carry lots of unisex garments, which prove themselves as quite popular. Especially nowadays, women start to set their priorities on comfortable and loose garments, instead of wearing tight and sexy clothes. The unisex garment has been extremely pushed during the last years, not at least because of American Ap-

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parel’s provocative advertisements showing how sexy women in oversize shirts can look like. American Apparel really created an absolute new stereotype of women, wearing loose fitting clothes and look more attractive than ever before. // Promotion If you look through the dictionary you may not find any other adjective that would describe American Apparel’s advertisement strategy better than “provocative”. Notoriously known for its billboards with half-dressed models in more or less lascivious pose, American Apparel enjoys the status as an advertisement genius among today’s youth. In comparison to their competitors,

© American Apparel

which sign famous and beautiful personalities for their glamorous campaigns, American Apparel falls back on its own employees and uses them as the company’s embodiment. Especially this anti-trend towards today’s super model industry enhances the image of American Apparel and motivates the consumers of being a part of all that. Over their website they even sign their own customers as models, no matter if the customers body’s do not correspond to today’s model average measures of 90-60-90. American Apparel operates with a few promotion types to persuade consumers of buying their apparel. The most essential of them are their huge billboards, which stick out the walls of urban areas. Besides their beloved billboards, they use email newsletters to keep their customers up to date and offer them special discounts on online shop garments. American Apparel’s third and most popular promotion type is PR. As already mentioned earlier in the chapter of the “Current Market Situation” there are two politically oriented campaigns: Legalize LA and Legalize Gay. Both convey American Apparel’s free mind and effort they put into the equality of human rights. The connection of basic apparel and political engagement is maybe one of the most effective ways of attracting consumers and turn them into loyal customers

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© American Apparel

// Price According to our survey, customers tend to see the prices of American Apparel’s products in the lower and middle „class“. But comparing the basic garments with the ones from H&M or Uniqlo, American Apparel sets the price rather high. But these differences to the competitors can be justified with several factors. First of all, like mentioned before, every single garment is environment-consciously produced in Los Angeles, California. Therefore, American Apparel is one of the only big US clothing manufacturers, who do not support offshore, third-world labor. In contrast to other companies, American Apparel’s factory workers can earn up to $21 per hour, which makes them the highest paid garment workers in the world. Because of US-based manufacturing, the company is able to keep an eye on every process of production and can consequently guarantee quality products, made out of high quality fabrics. // Place American Apparel distributes its products via three different channels. The most important - the one that generates the most sales - is clearly the retail-channel. The garment manufacturer sells its apparel and accessories in more than 285 own retail stores worldwide, approximately two thirds alone located in North America. The second channel, which is highly prolific in the United States, is wholesaling. American Apparel provides its shirts and sweaters to smaller fashion brands, screen printers and uniform companies and enjoys the reputation as a reliable wholesaler. Even though American Apparel is expanding in almost every continent, it is still not possible for everyone to buy his or her apparel at a retail store. The company can reach these customers through its online shop, where they offer an impressive range of products and a large amount of information. Due to the vertically integrated business model, American Apparel has the possibility to keep the supply chain rather short and therefore more controllable. Since the manufacturing, the warehousing and the distribution are carried out in the same place, American Apparel is able to design, cut and distribute in the span of one week.

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Conclusion

© American Apparel

The research work allowed us to discover new surprising, maybe even unexpected insights about the clothing manufacturer American Apparel. This includes their environmental consciousness and fair trade in terms of production as welll as political engagement. American Apparel has established a reputation of being innovative in the manufacturing business, by entirely relying on themselves and building up a vertically integrated business model. The first times we came across American Apparel was, when we bought shirts of our favorite band some years ago. We appreciated the high quality and the perfect cut of the garment made in LA, unaware of the fact that it is to become the largest clothing manufacturer of the United States. The Los Angeles based company rapidly grew over the past ten years with the help of provocative advertising, their commitment to political issues and of course their ability to create a lifestyle with basic, simple but high-quality apparel. This lifestyle has been adopted and spread especially by 18 to 35 years old, urban citizens all over the world. American Apparel truly shaped a whole generation in terms of individualistic, metropolitan fashion.

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© American Apparel

References

We would like to thank American Apparel® for providing the photographs and information used for this marketing plan. All the information used for performing the company profile and the analysis has exclusively been taken from http://www.americanapparel.net/contact during the time frame from March 16, 2011 until April 5, 2011. The photographs used for the entire report are exclusively taken from American Apparel’s advertising archive on http://www.americanapparel.net/presscenter/ads/index.aspx and have been marked as property of American Apparel by adding the

© American Apparel

tag.

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