The last few months have been very tough for many companies, especially those in the consumer retail space. You would think a company that has to compete with supposed "low cost" foreign sweatshops would be tanking in an especially deep way. Not if you're our favorite clothing company, American Apparel. From an article in WWDRetail:
Amidst the current retail meltdown, one specialty retailer that has
managed to keep its sales up like a
pair of spandex-infused leggings is
American Apparel. Last week, as most retailers announced dismal
December same-store sales — including double-digit declines at
competitors such as Abercrombie & Fitch, Gap and Pacific Sunwear —
American Apparel managed to pull out a 3 percent gain. For the full
fourth quarter, the Los Angeles-based maker of colorful fashion basics
posted a 10 percent comps improvement, even as holiday sales
industrywide tanked.
What's not to love? They employ thousands at their sole factory in Los Angeles, located in not exactly business-friendly and definitely not low-cost California, pay them above minimum wage and provide decent benefits, and have a very "interesting" CEO to boot. As I point out each time, companies that feel they must outsource offshore to tap into lower labor costs should be embarrassed.
Their success is due to the vision of that CEO, Dov Charney, who recognizes the power of people's brains and also the power of vertical integration to create speed and agility.
Unlike its peers, American Apparel
is a vertically integrated manufacturer, wholesaler and retailer that
produces all of its garments domestically in Los Angeles — an
impressive feat in an era when even iconic Levi Strauss shuttered its
last North American factories in 2003. The retailer says it is the
largest sweatshop-free apparel manufacturer in North America, pays the
industry’s highest factory wages and provides health care benefits for
all its line workers. The company emphasizes this socially responsible
production process in its marketing, and that halo has hit a nerve with
the brand’s hip, urban consumer base.
Of course there's the other partof the story that we also enjoy:
Looming in the background of this appealing business story, however, is
a salacious group of well-documented lawsuits, both new and old, which
long have been virtual catnip for the tabloids and mainstream business
press. The multiple suits have painted American Apparel 
as a singular
company not for its innovative sourcing strategy or muscular growth
trajectory, but rather for an allegedly sexually charged workplace
where Charney runs amok in his underwear, regularly harassing female
employees.
We've told you all that before. But from this article came something new:
Microtransfers of product between stores is another important
merchandising tactic, added Charney, with styles selling poorly in one
store moved to another where they might sell better. “There’s always
one store where something will be really trendy,” he explained — his
irrepressible inner merchandiser coming alive — “like these amazing
nylon pants that, out of nowhere, started checking out of Washington,
D.C. — like 200 to 300 a week. Every skinny, hip, young man wanted
them. It was like an epidemic. It was a Malcolm Gladwell moment. Stuff
like that happens.”
Two months ago when I told you about my visit to American Apparel, I mentioned how they ship product to the stores worldwide in small quantities. Lower inventory was more important that more frequent, and presumably costly, shipments. Here we have an extension of that strategy: small, frequent shipments between stores to balance inventory based on locale-driven demand. Gone are the huge containerized shipments of most retailers. Batch is transitioning to inter-store one piece flow.
A company that doesn't actually study or strive toward lean, gets lean. That's the beauty of lean manufacturing: it becomes intuitively obvious once you break away from traditional mindsets and paradigms.