Making American Apparel Great Again?
If you haven’t heard, this might be your last chance to snag one of those iconic latex bodysuits: American Apparel is closing, for good. American Apparel locations at college towns and hip urban districts across the country are offering unprecedented markdowns and clearing out their inventories. Notorious for its racy ads, pricy retro staples, and made-in-America edge, the clothing brand filed for bankruptcy in January 2017 and sold their intellectual property and manufacturing equipment to Canadian company Gildan, who acquired the American hipster favorite.

There’s no way to pin down American Apparel’s demise to a single factor – the company had a complex reputation for malpractice which, at times, preceded its trendiness. A fellow indie millennial darling, the L.A.-based retailer Nasty Gal, recently filed for bankruptcy. The common factor, apart from on-trend crop tops and vintage jumpsuits? A dedication to “American-made.”

It’s no secret that companies like American Apparel and Nasty Gal who manufacture most of their clothes in the United States are scarce in today’s globalized fashion industry. Currently, just 3% of the apparel Americans buy is made in America. 97% of our clothes are imported from overseas, as companies seek cheaper labor in countries like Bangladesh, India, or China. It seems companies like American Apparel may simply lack the demand among their target audience — young people — to stay afloat in a competitive global economy, despite their “Made in U.S.A” labels. A 2013 Gallup poll found that 79% of 18-29 year olds make no effort to buy products made in the U.S., and didn’t consider it “a major factor” in their shopping; it seems that American-made clothing’s high production costs weigh down most of its appeal in civic pride or locally-sourced ethical value. As an NDP Group survey found in January 2017, nearly 80% of shoppers believe a “Made in USA” label carries some degree of value, but only 23% are willing to pay a higher price tag for it.

It’s only natural for millennials to become more averse to shelling out more money for tailored, in-store American goods over foreign-made products at competitively low prices. Young people don’t go to malls or shopping centers as much as they used to, as the digital marketplace is richer than ever before with more online retailers and shoppers. Thanks to the global fashion industry, the one commodity which has fallen in price in recent years is clothing, and college students can’t always afford to choose paying the premium of American apparel. Unfortunately, however, under the Trump administration, they might not have the luxury to avoid such costs.

“We will follow two rules: buy American and hire American,” said President Trump in his inauguration speech in January. The administration, along with House Republicans, wants to encourage ‘American-made’ products through a border-adjustment tax, which would impose a 20% tax on all imported goods and services, while not taxing U.S. exports at all. This, in theory, would benefit American exporters by increasing demand for products with a “Made in USA” label. The Economist estimates, however, that in order to offset the dramatic price hikes in imports, the U.S. dollar would have to appreciate by 25%, which is highly unlikely. In the meantime, things don’t look good for American wallets – retailers which manufacture overseas, like Urban Outfitters or Nike, would increase their prices by perhaps as much as 5-10%, according to estimates from The New York Federal Reserve.

The tax could help some ‘Made-in-U.S.A.’ retailers who maintain popularity with a young consumer base. Many of these long-standing American brands like Maine-based L.L. Bean and New Balance, and Manhattan’s Brooks Brothers retain favor with millennials for their vintage appeal and established quality. Other newer upstarts like People Tree and Revolver, known for their sustainable made-in-the-U.S.A. ethos, could also get a boost from the tax’s imposition, as it could become cheaper for them to manufacture their locally-sourced goods. This would, in theory, level the playing field between the 97% of imported clothing and the 3% that’s made in the U.S.

It all comes back to consumer preferences – how young people respond to these changes in the markets. Interestingly enough, the “Made in the USA” label could even become a liability, rather than an asset. In November 2016, both New Balance and L.L. Bean suffered from controversy, boycotts, and social media rants from their youthful client base, for being associated with Trump’s policy in image. New Balance’s VP of public affairs told the Wall Street Journal, “The Obama admin turned a deaf ear to us, and frankly with President-Elect Trump we feel things are going to move in the right direction.” In response, a fired-up millennial consumer base threatened on Twitter to burn or throw away their New Balances after having helped catapult the brand to its recent resurgence in popularity. L. L. Bean bore similar attacks when Trump tweeted in support of the Maine company, in appreciation for board member and Trump donor, Linda Bean.

Beyond the contentious politicization of the “Made-in-America” label, young people, like all consumers, respond to prices. Even if the border-adjusted tax brings some manufacturing jobs, if it also causes clothing prices to rise, millennials may simply purchase less clothes, which could lead to store closures and job losses. On the other hand, if it incentivizes companies enough to make their clothes in America, it could drive up demand for the “Made-in-America” label, appreciate the value of the dollar, and release companies from the pressure to move offshore.

In order to succeed long-term, however, these companies must innovate. Even if the tax succeeds in bringing manufacturing jobs back to the United States, it would be difficult, if not impossible, to bring back the heyday of American manufacturing – they still must compete on a global scale for consumer dollars. In a digitized marketplace, with rapidly changing trends and a globalized fashion industry which employs one in six people alive, there are no shortcuts to young people’s wallets.

  • Richard

    I agree. A wise businessman in the Caribbean named Sir Kyffin Simpson always said that the key to success is progression and humility, and clearly he’s done very well for himself as a self made man!

  • John Andrews

    The Airgain IPO launches this week, and they’re a one-brand company.

    Some investors don’t think it’s a good stock though:

    http://seekingalpha.com/article/3997291-risky-signals-antenna-maker-airgain-launches-ipo

  • Cincinnati World Cinema

    Well said, Joe, and worth rereading on a regular basis! Another advantage of small-to-midsize city living is pace and competition. Living in NYC, LA and SF entailed a hectic pace, hallmarked by capital S striving, as one realized there were a ton of others doing what I do. Spending so much time in one’s car in SoCal meant much less time for quality pursuits and pleasures. A smaller pond with relaxed pace allows one to savor life and special moments.


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