American Apparel Factory Outlet

The Low Cost of High Wages

United states Apparel would like to follow Wal-Mart to China—for most of the right reasons

Dov Charney, founder and CEO of American Apparel, the Los Angeles-based purveyor of top-notch tees and undergarments, would like to follow in Wal-Mart's footsteps and start a factory in China. There, the similiarities end. In place of moving to Asia so he is able to pay his employees less than a dollar per day, Charney claims he would spend a great wage.

At their factory in downtown Los Angeles, American Apparel employees make $12.50 hourly plus benefits—more than two times the U.S. national minimum-wage and several times the $2 to $3 each hour paid at various other sweatshops only blocks away. Those large wages describe the reason why United states Apparel is unique in a textile business described as a few of the worst working conditions in the world.

Other haberdashers usually outsource their labor to technicians which operate within the Third World—especially China—where workers earn just a couple of bucks on a daily basis and luxuriate in few rights and scant protection from misuse by administration. In September, for instance, Wal-Mart apparel employees in China, Bangladesh, Nicaragua and Swaziland sued the organization, alleging they were obligated to work overtime and denied their right to organize a union.

Like Wal-Mart, American Apparel is a nonunion store. But unlike Wal-Mart, American Apparel has not obstructed its employees' collective bargaining legal rights. It also agreed to hold a union election, but its workers were not interested—they already make twice as much as unionized garment workers.

Meanwhile, the organization has thrived; in 2004, income jumped to $128 million from $80 million the prior 12 months. And China is phoning.

"It's just chat at this point, " Charney says. "But we want to start a factory in Asia when we start selling T-shirts truth be told there." China's 1.3 billion people wear countless tees, so Charney recently delivered over one of is own henchmen to examine consumer styles.

"These are typically enthusiastic about some US products, " he says. "But we don't know if it is suitable for United states Apparel yet. American Apparel could work in Hong-Kong, Korea or Bangkok, in Asia, they are very brand-oriented. They need 'Gucci' spread across their particular chests. Us Apparel is more of a 'less-is-more' variety of brand—quality tees that fit really."

American Apparel currently has retail stores in Japan and Korea, and putting a factory someplace in Asia could be the logical next move. Asia would-be perfect, except with only 80 United states Apparel shops today start, Charney lacks the 300 outlets he claims are essential to warrant a fresh factory.

"You need to have different manufacturing in various regions given that it's more efficient—you do not have to pay money for transportation or taxes, " he describes. "But we have only been in retail for just two many years and also just was able to capture 80 shops. If we're how big is the Gap, we can do so. Right now, our efficiency arises from having one vertically incorporated factory in Los Angeles, but hopefully to go on it to a different degree."

His lasting plan will be locate factories in regional areas in which United states Apparel sells its clothes. Today, the business nonetheless makes all its clothing at its only factory in LA, which started with 60 employees in 1997 now uses 4, 000. Those workers are involved with every standard of production—from cutting and sewing to finishing and quality-control. The organization has 1, 000 more staff members at stores in The united kingdomt, France, Germany, Canada, Mexico therefore the U.S., including a current addition in Huntington Beach. Last month, the business added brand-new shops in Paris plus one each in Providence, Rhode Island, and Atlanta, Georgia.

Money usually uses the expansion: wherever American Apparel goes, its smart employees well above their nation's minimal wage—it even pays them over the U.S. minimum-wage. In Mexico, for example, Charney has actually two shops, one in Mexico City and another in Playa del Carmen, and the ones employees make 70 pesos one hour.

"With statutory holiday breaks, it comes off to a lot more like $7.50 an hour, " Charney states. "The idea will be spend those employees the same as our other staff members, but it is nonetheless a bit less because the stores have only exposed. When we started in the [U.S.], we had the wages arise once we optimized the shops."

And as the employees make more money, so does American Apparel—a pleased scenario Charney attributes to managing all of them well.

"We simply try to get the best individuals, " he states. "Money walks and bullshit speaks. To own a better staff and pay somewhat significantly more than prevailing wages, you will get even more out of it. . . . We do not have to depend on reduced wages."