Value Chain of American Apparel

American Apparel is a peculiar player of the fashion market, whose action oppose to most of industry representatives. Common industry practice is to focus on design and branding issues – to concentrate on the core business, but American Apparel acts differently, they are fully-integrated: from dye house and knitting factories to international fashion retail chain. At the same time company cares a lot about marketing (that may be rather provoking, though cheap and efficient) and logistics processes. By combining these specific factors company has created its image and has taken a strong market position – due to their specific business model that involves harsh control on all levels.

Inbound logistics

Vertical integration of American Apparel core business has resulted into simplification of inbound processes – company simply does not need much from the external environment. Such way of doing things seems a good solution for the company, as it may always be sure that there could be no problems with suppliers, and the business will operate almost in any condition of external environment.

Operations

All of company’s operations except from international fashion retail, takes place in USA and that is core part of company’s strategy – they could have production in China with much lower wages, however being a throughout USA brand is what American Apparel has always been doing. The tag “Made in USA” is really rare, especially in the fashion industry, so this issue is the core value-adding factor. Company focuses greatly on the control of its operations and the quality – that is the consequence of vertical integration, company seeks highest quality at every stage of production.

Outbound logistics

Company, represented by its major shareholder and CEO claims that vertically integrated business model allows to design, cut, distribute and sell an item globally in just 7 days. Moreover, company does not franchise its foreign fashion retail operations, and pursues a peculiar strategy with its stores. It focuses on the principle of spending relatively low amounts on store design and refurbishment. For example, in USA American Apparel tends to choose locations for their stores, with rent is about $200 per square foot – company uses low amount of investments in their distribution premises. At the same time, company operates and works a lot on an e-shop that is also a very important distribution channel nowadays, and share of e-sales in company’s financial statement will definitely be growing in the future.

Marketing & sales

American Apparel has created a powerful brand that has high recognition and trust indicators. Company also states, that their brand has a cult status worldwide, due to their “downtown of LA production”. Share of international revenues has increased greatly due to expansion that American Apparel has set up. In their marketing they often use provocative methods that could be considered pretty much helpful for brand development. At the same time, they have a focus on quality – so the final picture for the client is really very likely: good-looking, fashionable clothing of highest quality (that is approved by “Made in USA” tag). Also, an important issue for company’s marketing activities is their environmental friendliness that is a very important point in the decision-making process in their home market, so it was really worth making such a point. With their approach American Apparel for the client seems to be a company producing premium-branded clothing with highest quality and no “unnecessary” value creation points (like stores design). For American Apparel, marketing function is a cornerstone, that ties together all the peculiarities of the brand and makes it clear for the customers – why you should buy American Apparel goods.

Service

Service for American Apparel mainly stands for the contact with the client – evidently in the selling points, American Apparel stores. Based on advanced HRM practices, company has built the atmosphere of support and has set up fair remuneration, so employees should provide much higher service level – and this creates additional value to what customers buy.

Company infrastructure

Being a massive vertically integrated company, American Apparel has a focus on location of production facilities of their goods – being a strong USA brand, each item being tagged with that, and there are branding implications from that point. One specific thing that depicts company’s approach to infrastructure was installation of a solar battery on the roof of their factory. Acting this way company attracts attention to its premises and location of the premises – you always have to fit with local trends in order to succeed.

Human resource management

American Apparel cares a lot about their employees and offers them a range of extremely convenient options included in employees’ basic salary. This kind of approach shows that company wants to establish a relationship with each and every worker, and the result would be workers extended commitment and higher quality of work done. Basically, people is the foundation for company’s successful development in recent years, so it is evidently also a way of creating additional value (from company’s insight it is much more important, than from customers point of view).

Technology

Technology for American Apparel is probably not the most important shape of the business model, due to business specifics. However, technology is extremely important in production – the system should be working perfectly and the quality of the product should always be on top level. Quality of goods is definitely plays one of major roles in company’s strategy.

Procurement

Due to the fact that company has internalized its operations greatly throughout vertical integration process, procurement as a supportive issue that has significant impact on the process of running business. On the other side, procurement does not have significant effect on value creation – this supportive function does not imply that.