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Copy of American Apparel - MCS 4370

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kelly ma

on 3 May 2013

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Transcript of Copy of American Apparel - MCS 4370

Why American Apparel needs help... They need to recreate their image and update their design
Current marketing strategy is not working for them anymore
Financial statements running deficit for three years running
Sales declined 16% since 2010
Sex only sells to an extent for a clothing company Company History Background Founded in 1989 by Dov Charney
Currently based out of Los Angeles
Largest garment factory in the US
Produce 250,000 garments each day
273 stores in 20 countries
Vertically integrated
Products are designed, manufactured, marketed, and distributed all from one facility Mission Statement “American Apparel is a vertically integrated manufacturer, distributor and retailer of T-shirts and related products.”
“Our goal is to make garments that people love to wear without having to rely on cheap labor.”
“A design lab where creative ideas, efficient manufacturing techniques, and concepts for designing and selling T-shirts are developed and put to the test.”
“While apparel is a universal necessity that transcends almost all cultural and socioeconomic boundaries, most garments are made in exploitative settings. We hope to break this paradigm.” Vision Statement “A reassertion of values”
Innovator in “cutting-edge, high quality apparel”
Create a healthy environment for employees and for the world The Style Simple, high quality, basic clothes – no logos
T-shirts, sweatshirts, vests, dancewear, underwear and other cotton products in a range of colours
Very unchanging trends along with a specific type of consumer
Demographic: young, metropolitan adults
- Left-wing hipsters
Used to be one of the market leaders in 'hipster' clothing
- Lack of innovation made them fall behind
- Very niche market
Iconic modern and classic styles
“Tenacious simplicity of our garments makes them highly desirable”
“Capitalizes on the unique interchange between the American classic and the totally unpredictable”
“Create timeless trends and high quality fashion necessities”
"Not every brand can pull off the gritty sexiness of an American Apparel ad“
- Report from 2007 (Women’s Wear Daily) Provide industrial workers with fair wages
Provide opportunities for advancement without regard to race, age, ethnic origin, gender, or sexual preference
Engage in humanitarian relief efforts
Shrink AA’s carbon footprint Strengths Vertical integration
- Reduces risk of overstock
- Allows a piece of clothing to go from the design team to shipment in one week
- Better communication between employees
Advocate of social issues
- #2 Trend-setting brand in a 2008 report by the Intelligence Group
Cost-effective marketing strategy
- Advertisements shot in the manufacturing facility
- Print ads are highly relatable, using “normal” people, showing their blemishes

Weaknesses Controversy
- Several sexual harassment lawsuits have been filed against the CEO and the company
- Ads show a new level of “sex sells”
- Best Bottom Contest
Poor accounting practices
- Have been subject to investigations by the U.S. SEC
- Auditors have resigned due to unreliable financial statements
- Investors have filed lawsuits against the company
Growing too quickly
Vision had no formal plan for funding
Political Immigration and diversity
- Hires immigrants, providing fair wages
International company using American standards
- Some clothes are classified as 100% organic
- Being classified as organic in the US is not the same as in Canada
Laws surrounding sex
- Sexual harassment lawsuits
- Accusations of nude underage models
PEST ANALYSIS Technological Radio-frequency identification (RFID)
- Pilot program implemented in 50 stores
- Collects data from tags
- Monitors inventory effectively
- Improved stock levels, reduced theft and reduced employee turnover
Improved anti-theft technology
- Increased implementation of security cameras and anti-theft tagging
Online stores
- Increase in online sales
- 25% at Q1 of 2011
Sociocultural Hipsters like social issues
- Sweatshop-free, sustainable, organic
- Labeled vegan-friendly by PETA
- Supports immigration, diversity and protection of gay rights
- Values of target demographic are in line with the company
Exclusivity factor
- Demographic does something “before it’s cool”
- Increased number of stores = more people wearing the brand
- Not so cool anymore Economic •United States debt
- Country has a total of $50.7 trillion in debt
- Will reduce domestic customers
- Company has $125 million in debt and close to filing for bankruptcy
Fluctuating exchange rates
- Exports to 19 countries, makes it difficult to centralize money
Outsourced labour is cheaper
- Refuses to outsource production; all products are domestically made
Current Marketing Strategy American Apparel focuses on the hipsters and underground and unconventional shoppers
American Apparel leverages art, design and technology to advance the business process, while continuing to pioneer industry standards of social and environmental responsibility in the workplace
Company has racy ads that are focused around sex and sex only sells to an extent in the clothing industry
The link between work and recreational sex at American Apparel has begun to blur Current Marketing Strategy American Apparel uses print, internet, and billboard advertisements to market their products.
In April of 2008, American Apparel placed 483 million internet display ads.
Their current advertisements have been said to resemble 1980's porn
They decreased their current advertising budget 40% from 2009 to 2010 Competitors Forever 21 What they do well:
- Store Locations
Larger selection of clothing
- Mostly female
'Classier' clothing
- AA is more risqué
Attract a more mainstream market H&M What they do well:
Larger selection
- For both genders
Classier' clothing
- AA is more risqué
Price points
Attract 'hipster' market as well as a regular crowd
- Have positioned themselves to both markets How does AA differ? Advertising tactics
- Much more risqué than any other competitor
- Follow the 'sex sells' philosophy
Clothes are manufactured in the USA
Aggressive expansion over the last few years
- 273 stores in 20 different countries Proposed Marketing Strategy Product Update current design while keeping good selling trends
Enhance/Rejuvenate current line up
Hold contest for fashion students/ enthusiasts to design new clothing
- Could lead to internship/ employment opportunity Promotion Price Lower price of existing products that are now outdated
On best selling items - raise prices, especially on web and wholesale segments
- Maintain exclusivity and keep high-quality reputation Place Expanded too quickly
Downsize to help to keep costs low
Bring back the exclusivity Promote the idea that they are vertically integrated
More promotion of the 'Made in the USA'
- Made in the USAA (United States of American Apparel) What are the challenges facing AA? Major Financial Issues Failure to revamp product line Various lawsuits facing CEO Advertisements are going too far Bankruptcy Questions Declining sales
Increased operating cost
Declining Net Profit
Large debt ($121.5 million) Still pushing 80's hipster look
Do not make clothes larger than a size 6 Sexual harrassment suits
Advertisements (Woody Allen Billboard) 'Pornvertisement'
Best bottom contest (Women & Men)
Next "Big" thing contest Summary Keeping in line with the mission statement:
"We are trying to rediscover the essence of classic products like the basic T-Shirt, once an icon of Western culture and freedom. Our goal is to make garments that people love to wear."
Keeping in line with the vision statement:
"Cutting-edge, high-quality apparel"
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