On October 5, American Apparel filed for bankruptcy with US courts. After dealing with loads of debt and lawsuits, the company famous for its “made in America” approach has come to terms with the future, that it simply cannot continue to support itself. The company grew too big too fast, and took on too much debt. American Apparel has featured orthodox Jewish models, a 62-year-old model and models of every race. This cultural diversity has helped it appeal to countries outside the US, and has allowed it to open 260 stores across 19 countries.
The company itself has valuable assets, a good brand name, but no corporate governance. Founder of the company Dov Charney was fired back in 2014 due to sexual harassment lawsuits and misuse of corporate funds. When American Apparel was first founded in 1989, they boasted about paying workers twice the minimum wage, while protesting against and outlawing the use of clothing made in sweatshops. Not only was this good publicity, but their products were very appealing to customers, recognized worldwide and as a result, the company grew rapidly. The one thing that American Apparel failed to do was change while their company grew. They relied on their signature garments and failed to diversify their product range. In a short period of time their customer base found similar and cheaper alternatives. After a number of non politically correct marketing strategies and a police raid on a factory, in which authorities found 1/3 of staff had entered the country illegally, customers eventually were confused by the overall corporate message American Apparel was trying to send.
The corporate marketing and advertising direction had lost its vision and values. American Apparel once stood for something that mattered so much to so many people, but now has let itself and its workers down. I agree with the CEO’s decision to file for bankruptcy, as I feel that the image of the company has been tarnished, and would be a lost cause to try and improve upon it. That combined with the mountains of debt burdened on the company would make the situation simply impossible to overcome. I feel that the founder of the company has ruined an irreplaceable relationship and link with the consumers. They had a really strong and powerful value proposition as lots of people agreed with American Apparel’s sweatshop free manufacturing approach. All things considered, American Apparel was and could have continued to be a really dominant competitor in the retail industry. But due to lack of change and commitment to the company and its vision, American Apparel failed to deliver and overall made the right decision to file for bankruptcy.
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