Dov Charney was removed as the head of
An unnamed source told the Los Angeles Times, “He was totally taken by surprise, which is part of the problem. He’s going to fight like hell to get this company back, but he won’t succeed. ”
Citing the “bad” and the “creepy” about Mr. Charney is easy. When his name is mentioned, the mind goes immediately to “walks around the office in his underwear,” and "sexual harassment suits."
American Apparel, as an extension of him, is known for racy ads in unlikely places. The company’s ad “Made in Bangladesh” drew controversy when it came out this March but apparently didn’t draw very much revenue either. American Apparel has struggled to restructure its debt even as its stock wallows as a penny stock.
That's not all of it, of course. Just last week I was reading the print edition of Miami New Times, a weekly newspaper filled with local news and events not usually covered by the city’s major newspaper, the Herald. The paper is owned by the same entity that owns New York’s Village Voice.
The back page of this edgy publication is the home of personal ads, get-rich-quick schemes and other hard-to-classify classified ads. Plopped right in the middle of this mélange of “stuff” was an ad for American Apparel, advertising tee shirts and other tops. I remember shaking my head thinking, “What a weird place to put an ad for a national, publicly-held specialty retailer.” I’m sure it wasn’t very expensive, but I also couldn’t imagine it was very effective.
This is the easy part…the unconventional bad and creepy. But I’ve run into American Apparel executives quite a bit on the Retail conference circuit, and I have to say Mr. Charney has also overseen a lot of unconventional good as well. It remains to be seen whether that “good” will translate into a successful and scalable business, but it’s worth talking about.
American Apparel makes all its products in the United States. Very few if any retailers of its size can make the same claim. Yes, the company has been accused of running sweatshops, but overall, its stated objective is to be “sweatshop free.” After the horrible tragedy in Bangladesh, Mr. Charney wrote something it’s very hard for me to disagree with: “The apparel industry’s relentless and blind pursuit of the lowest possible wages cannot be sustained over time, ethically or fiscally.” Amen, brother.
I sat on a panel with an American Apparel supply chain executive two years ago and learned yet another counter-intuitive policy of the company. It also bucks the industry by distributing all its products from the US, even when shipping to its European stores. In other words, it maintains no distribution centers outside the US (as of a year ago). That choice is a bit harder to say amen to. It’s hard to be responsive to 21st century rapidly shifting demand cycles or supply chain economic realities when shipping from half a world away. Just ask most other retailers who source from China or Vietnam about the challenges of being responsive to demand in the US. And that's with distribution centers strategically located here.
Most interesting of all is the company’s adoption of RFID technology. As I mentioned in an earlier article, RFID readers have come down in price significantly, and American Apparel is the first retailer of size that has completely built out an RFID infrastructure in its stores. This is no small thing, and over time, if the company can solve its top-line problems, should go a long way towards helping the company become more profitable.
With a complete RFID infrastructure, and no liquids or metals to create reader problems, the company should be able to keep its in-stock position clean and accurate. My expectation is it will eventually be able to eliminate the annual expense of physical inventories in stores.
As I’ve said before, physical inventory costs are the dirty little secret of retail expenses. Companies spend on payroll for in-store preparation, outside help to perform the counts, and supervisory personnel to manage and audit the process. Even still, on an item by item basis, the inventory is rarely close to 100% accurate. With RFID, all these costs are eliminated but the counts are far more accurate.
Whatever else happens from this day forward, this technology implementation was done with Mr. Charney’s blessings. When I met the company’s then Vice President of IT, Stacey Schulman at a conference back in 2011, she told me Mr. Charney gave them free reign to do what they thought was right. In this case, what they did was exactly right.
It’s easy to create a caricature of a leader…and in no way am I saying Mr. Charney is anything less than creepy. His behavior has been reprehensible at best. But he’s also overseen some innovations – both intuitive and counterintuitive. I hope, unlike Julius Caesar, the good that he did lives after him, while the bad is interred with his severance package.
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