Living The American Dream: Charney’s Business Takes Off

Charney’s dreams of running a clothing company crashed in the mid-1990s, along with much of the industry. Did he waste his father’s $10,000 loan, he wondered. Was his move to South Carolina pointless? Charney wanted to make sure that his venture down south was not in vain.

After filing for bankruptcy, Charney recognized that he could not revitalize his company all on his own. He needed someone who had experience, someone who had been in the industry for some time and knew what it would take to reorganize the company and make it profitable. Charney found that person in Marty Bailey.

“I called up a guy I trust and asked, ‘Who's the best out there at organizing a factory?’” says Charney. “He said Marty. So I called him on a Saturday and said, ‘Dude, my name's Dov and I need help.’ He started Monday; that’s the way I operate.”

With over 20 years experience in the garment industry, Bailey came on board and immediately began to reconfigure Charney’s factory. He dramatically improved its efficiency by organizing the sewing team into groups of eight to ten people, each of whom was assigned a different task to perform to create a single garment. “Team manufacturing,” he called it.

Charney’s first design was the Classic Girl line and despite being dismissed by the likes of Haines and Fruit of the Loom, it proved a success. With that, he decided to move his business to Los Angeles, California, where he began a new business model, something Charney calls a “hyper capitalist-socialist fusion.” Today’s American Apparel was born.

Initially, the company restricted its operations to manufacturing t-shirts for designers, rock bands, corporate customers and the like. Because Charney’s shirts could hold silkscreen designs well, and they fit better than his competitors, they started becoming successful. Added to that was the fact that all of his products were produced right there in his L.A. factory. That meant that not only were they high quality, but he could capture the latest trends and create a fast turnaround. A t-shirt could go from being a concept to being in consumers’ hands in less than one week.

Because of the high quality of Charney’s clothes, he was able to charge more for them than his competitors with their Chinese imports. His t-shirts went for an average of $4 each, more than four times that of his competitors. Slowly, Charney’s customers began to increase their orders and he used the higher revenues to reinvest back into the business.

Today, American Apparel operates 155 stores in 11 different countries. The company continues to sell simple cotton clothing aimed at the market Charney calls “contemporary metropolitan adults.” It has expanded its product line from t-shirts to include skirts, bathing suits, jackets and more. However, wholesale of black and white t-shits continues to dominate, making up nearly half of all sales.

Although it is still only a fraction of the size of the likes of The Gap, American Apparel has proven to be one of the fastest-growing companies in the industry, opening 90 new stores in under two years. Indeed, Charney plans to double the number of stores over the next three years. “It’s sickening money, man,” says Charney. “We're minting money.”

Last year, a venture capital firm by the name of Endeavor Acquisition Corporation bought out American Apparel for $244 million in new capital, and is keeping Charney on as CEO.

Now, as the single largest clothing manufacturer in the U.S. with over 5,000 employees, Charney says his concept is simple: “It’s t-shirts that look good, t-shirts that feel good, and t-shirts that are made in a non-exploitative setting.”



Living The American Dream: Charney’s Business Takes Off

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