Three Reasons Behind American Fashion Clothes Brands' Withdrawal From China

(Chinese Version)

It s only been a month since we sighed over Marks&Spencer s withdrawal from the Chinese market, leaving only the Tmall and JD Official Online Shop behind. However, it now seems that American fashion brand American Apparel is also going to quit the Chinese market.

American Apparel has been sorting out its inventory in the only two stores left in Beijing, the Fangcaodi and Sanlitun Store. TMTpost approached the shop assistants and learned that all the remaining commodities were on sale with 50 to 75 per cent discount, which is quite uncommon for the brand, and that these two stores will be officially closed on December, 18th.

TMTpost found that shop assistants were already sorting out the inventory at the Sanlitun Store of American Apparel

The second floor of the Sanlitun Store has already been cleaned up

“In the future, American Apparel stores will only be seen in the US, since the Official Online Shop will also be closed soon,” the shop assistant told TMTpost. That is to say, American Apparel s over eighty stores in Australia, Germany, England will also be closed by the end of next January.

Founded by Canadian Dov Charney in 1989 and targeting mainly American youngsters, American Apparel had its golden days with its branding such as “Made in US” and “sexy marketing”. When 96 per cent of clothes were made outside of US, it was indeed surprising for American Apparel to set up a factory in Los Angeles, which entailed high labor cost. Although American Apparel had to double the price, it was known by consumers as the symbol of high quality and comfort.

Another reason why young people were willing to buy American Apparel s jeans at a much higher price has to do with its “sexy marketing”. American Apparel s posters often feature young boys and girls posing flirty gestures, which help it soon win over lots of American young consumers. In 2005, its sales grew by 440 per cent to $210 million, and American Apparel became one of the fastest growing brand that year.

A typical American Apparel s poster

However, things began to went wrong in both its “Made in US” and “sexy marketing” approach: After the Los Angeles Immigration Bureau dismissed over a thousand illegal Mexico workers in in 2009, American Apparel suffered a great deal in its supply chain. Later on, Los Angeles Times asked American Apparel to take up the social responsibility and rebrand in a more positive, inclusive manner, while its advertisements were forbidden in the UK for four months.

American Apparel s posters often feature young boys and girls posing flirty gestures, which help it soon win over lots of American young consumers.

American Apparel began to refrain itself in 2015 and suggestive elements began to disappear in its recent posters.

Worse still, American Apparel was plagued by management problems, and the unions launched several strikes against the management board. Besides, its founder Dov Charney was accused of sexual abuse and embezzlement by employees… In short, American Apparel not only didn t make any money from 2010 to date, but instead owed more than 200 million US dollars. That s why it had to file for bankruptcy protection twice (in October 2015 and November 2016, respectively).

While Marks & Spencer took everyone by surprise when it announced in the earnings report that it would withdraw from the Chinese mainland market, American Apparel's withdrawal is not surprising at all. However, if we put the two companies together, we may find that there are many similarities behind their withdrawal from such a promising Chinese market:

1. Management turmoil

At the beginning of this year, Marks&Spencer announced that Marc Bolland, who s been M&S s CEO for six years, had retired, and Steve Row, former executive director of General Merchandize, would take over. However, Marc Bollant expressed his willingness to continue in office in 2015, so many analysts guessed that he was actually “fired” due to a long period of poor sales performance.

In comparison, American Apparel s founder Dov Charney retired in a more dramatic way. Accused of embezzlement and sex abuse, he was fired by the company and replaced by a female senior executive Paula Schneider. Still, it s hard for American Apparel to overcome its founder s scandal and win over the public s trust again.

Dov Charney, founder and former CEO of American Apparel, was "fired" after being accused of sex abuse and embezzlement.

Although Paula Schneider attempted to bring the company back on trail through various ways, including streamlining the business, closing stores with poor sales performance and rebuilding its brand, they all turned out in vain. At last, as its debt continued to grow, Paula also decided to step down this October.

2. Inappropriate strategies

While Marks&Spencer only opened ten stores in China within a decade it entered China, American Apparel is far more aggressive in its expansion strategy.

Within six years after 2003, American Apparel opened over 450 stores around the world. However, most of its stores were in the red. Take for example American Apparel s stores in New York: there are more AA s stores than GAP s, and simply in West Manhattan, there are as many as four AA s stores, all in red.

Gradually, it became hard for AA to make ends meet and it was even on the verge of bankruptcy in 2010.
On November 14th, 2016, AA filed for bankrupt protection for the second time. Canadian sports brand GIL later revealed that it had acquired American Apparel s global intellectual property right with $60 million.

3. The lack of innovation

Although many AA s loyal fans still think the brand s clothes are of high quality, simplistic and “easy to match”, they have to admit that AA is falling behind other brands in innovation.

"Starting from college, I would buy AA s tennis skirt, canvas bag, tight T-shirt, all classic ones. Indeed, I have the impression that there aren t many new design and clothes sold in AA s shops are, to a large degree, fixed," Yu Anqi, a loyal fan of American Apparel, told TMTpost. Similar to Marks & Spencer, which continue to sell its classic old European clothes, American Apparatus also fails to keep up with the taste of the young consumers.

Tylor Swift in AA s typical striped skirt. AA started its glory exactly with these basic types of clothes, but it can no longer satisfy the need of young consumers, who need more diversified design and choices.

There s nothing wrong it promoting classic design that s easy to match, but consumers still suffer aesthetic fatigue without any change of innovation. UNIQLO also is known for classic design, but it excels in bringing out innovation oftentimes for its classic base shirt and striped shirt. To satisfy the need of different groups of consumers, UNIQLO teamed up with both Hermes s Design Director Christophe Lemaire and Disney, Marvel to carry out popular designs.

Although American Apparel and Marks&Spencer have decided to withdraw from the mainland Chinese market, there s still huge potential is this rapidly-growing market for foreign brands. It is likely that they might come back in the future. Who knows?

Quite interestingly, while American Apparatus is sorting out its inventory at Sanlitun Store, another American fashion clothes brand Abercrombie & Fitch, targeting mainly young consumers and known also for “sexy marketing”, just opens its first store in Beijing, located less than a hundred meters away. Nobody can tell if it would laugh the last.

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[The article is published and edited with authorization from the author @Su Jianxun, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.