US retailer American Apparel files for bankruptcy again – but why did it fail to resonate with Aussie customers?

US fashion retailer American Apparel has closed the doors of its Australian stores as the US company files for bankruptcy for the second time in the last 18 months.

Fairfax reports the US-made and operated retailer has filed for chapter 11 bankruptcy, just 13 months after it filed for bankruptcy in October last year.

Canadian fashion retailer Gildan Activewear has reportedly offered to pay US$66 million for the brand’s inventory supply and intellectual property. Gildan will not be purchasing any retail store assets, it said in a statement.

The deal is expected to be complete by early 2017, and American Apparel is seeking a US$10 million loan to help the brand survive until the deal concludes.

The brand’s three Australian stores have also been placed in voluntary administration, according to a notice listed on Monday.

“American Apparel will no longer maintain an online presence in Australia. We would like to express our gratitude to you for your business,” the brand’s website reads.

After emerging from its bankruptcy in February, the brand says it struggled with a more difficult than expected retail environment.

Read more: US retailer Nasty Gal files for bankruptcy as founder Sophia Amoruso opens up to big crowds on Australian speaking tour

Australian fashion market “lacks sophistication”

Retail strategist at Retail Oasis Pippa Kulmar told SmartCompany this morning the Australian fashion retail market isn’t hostile, just underdeveloped.

“I think we lack a lot of sophistication, there’s a real opportunity for more competition here and we’re not seeing it,” Kulmar says.

“The more competition we see, the more sophisticated the market becomes, and without competition retailers feel they don’t have to try. Australian fashion retailers have to step up.”

Kulmar believes American Apparel’s failure in the Australian market is largely linked to its overall troubles as a brand, noting, “when brands fail in their home markets, they likely fail here”.

The brand has seen troubled times over its lifetime, being first founded in 1989. A former staff member sued founder Dov Charney in 2011 over allegations of sexual assault.

In 2014, Charney was terminated as chief executive officer after a decision by the board of directors.

The business has also come under fire for its controversial and often highly sexualised advertising campaigns.

“The company at heart had massive issues with its leadership and its team, and you can’t escape that in-store. The news you hear about a business isn’t different to the marketing you hear about a business,” Kulmar says.

Too many basic offerings

Kulmar does admit the rise of fast fashion and other retailers providing better offerings likely contributed to American Apparel’s downfall in Australia. The brand primarily offered “basic” clothes, like plain coloured t-shirts, pants, and tights.

“The rise of fast fashion would have definitely made it hard to compete,” she says.

“With basics, people are buying them somewhere else like H&M or Zara, and customers found they had no reason to pay $20 extra for an American Apparel white t-shirt.”

The reason behind that is due to the brand losing sight of its story, says Kulmar, likely impacted by its troubled history.

“When you’re not telling a story, people will find little reason to shop with you. For many, I think the brand failed to resonate with the market,” she says.

“If all you’re selling is basics and your brand doesn’t stand for anything, what does it matter?”

American Apparel’s initial foray into the Australian market was successful, and Kulmar notes there was a desire for the clothing. However, an online only offering may have played better, she believes.

“In the end, they expanded really quickly and failed to solidify their base,” she says.

“In hindsight, an online play would have made more sense or a partnership with an already existing store. But as they say, hindsight is 20/20.”

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Zhompo
Zhompo
5 years ago

They were a brand that couldn’t provide any differentiation from other offerings as the article said, and in a desperate bid to get publicity, used ads that sexualised women and young teenagers in a disgusting way and were publicly slammed for doing so. I can’t recall them trying those tactics here as they would have already gotten the attention of a group like Collective Shout. In a world where Unileaver have abandoned sexist Lynx advertising to protect its entire group that includes brands like Dove, poorly managed companies with poor internal culture (that includes sexual harassment) are likely to wither and die eventually.

Jason Proposch
Jason Proposch
5 years ago

We would be delighted to see greater innovation in the Australian Retail industry. It is a tough market to penetrate but we push ahead with our innovation, called ili!, with a persistent focus on contributing to increasing retail successes. I would love to see a greater level of ‘sophistication’ if that means retail businesses embrace change and take courage to adopt new ideas. A ‘40%’ off sale is not innovative or new when compared to the ‘30%’ off sale. While consumers have been trained to look for the X% off sales, true innovations that understand and take account of consumers’ changing behaviours, expectations and technology trends can contribute to improving profitability and customer service in an increasingly challenging landscape. I took a ‘give it a try’ approach when I co-founded ililoveit.com and I would certainly encourage all businesses, not just retailers, to take a fresh approach to seeking out and trying new innovations. They are a great learning tool, and who knows, they may just take a business to the next level.

Frumpy Female.
Frumpy Female.
5 years ago

You see the sign “American Apparel” and your brain sees “People of Walmart”…(sorry, just can’t help it!)
I’m with Jason on innovation, try not being a size 10-14 cheap and dinky under-25 and wonder why we reject the shapeless garbage on offer and shop online in the UK…..