The Inevitable Demise of American Appareal Tuesday August 3, 2010

An interesting article came across my Twitter feed this morning from Julien Smith about why American Apparel is pooched. It’s been rumored for months that the flagship store for the hipster/naughts generation was in deep fiscal turmoil, but this article (which by the way is really well written, minus the foul language) pretty much declares this once thriving business dead.

And while, one look at my closet pretty much shows 50-60% of my clothing either from American Apparel or small independent online t-shirt companies who are dependent on AA products, there is actually a really important business lesson to be learnt from the AA failure.

When one removes all the positively bonehead personal mistakes taken by principal owner and head creep, Dov Charney, you’ll find that the American Apparel failure really boils down to one all too common mistake. One where a business’ success propels them to over extending their business model and over reaching into markets which detract from their bottom line. We’ve seen it a hundred or so times, both locally (a great example is Nellies’ Breakfast) and internationally (think Microsoft’s Zune as an example).

It’s a difficult balance to hold, but if one really examines the American Apparel fiasco, it’s quite easy to see the mistakes that were made. Instead of keeping the brand dependent on a niche market of scenesters and it’s incredible wholesale operations, the company over expanded. Just look at the Calgary market, in a three year span it went from one flagship store on the busy 17th Avenue to three watered down locations scattered in high rental locations. And one only needs to look at this as a microcosm of the overall corporate failure to imagine hundreds of other over-saturated markets.

It’s a real shame that American Apparel is about to end-up in the deadpool. It’s core business model was quite unique and ultimately really successful. It showed that people, like myself, are more than willing to pay decent money for simple, nice fitting t-shirts with a bit of an added social benefit. But alas AA has gone the way of the last generational clothing outlet – The Gap – and looks set to close it’s doors.

For shame.

Wait a second. What do you mean The Gap is still open? And they run Banana Republic and Old Navy? Really? People still shop at the Gap? OMG I had no idea!

Categories: The-Soapbox, The-World,

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