American Apparel: Unwrapping Ethics
In a quick span of time, American Apparel has emerged as one of the leading Apparel companies in the US with a unique business strategy of appealing to consumers who look for natural beauty. Over the years since it was founded, American Apparel has earned reputation for its policies like sweatshop-free environment, and environmentally friendly business practices. These policies have made it one of the most respected apparel manufacturer in USA. It continually implemented social welfare programs for its employees like English language training, medical care, and job security. But the company has been facing an allegation regarding some its business practices like advertising and sexual harassment of its workers.
Overview of STP of American Apparel
Apparent segmenting, targeting, and positioning of the target market is the key for the success of any marketing campaign. American apparel segments the markets in which it operates basing on the age of the customers. It targets the young adults who are aged between 20 to 35. Unlike other apparel manufacturers in the US, American apparel positioned itself as a brand which gives importance to real beauty and natural elegance of a person.
Overview of the 4 P’s of American Apparel
Below is the overview of the 4Ps of American Apparel:
American apparel focused on knitwear products like T-shirts and underwear for young adults aged 20+. Apparel made by the company followed the latest fashion trends, but looked simple without any logos imprinted on them. It mostly used organic cotton and recycled fabric scraps for making its products.
Since the products were targeted at young adults with low income levels, its products were moderately priced. Low prices helped it get the attention of price conscious young customers
Americal Apparel emphasized on natural beauty while promoting its products. Images of non-photo-shopped models were used in its promotional campaigns to project natural elegance. To suit to the tastes of its target audience, the company used sexually explicit (skimpily dressed models) in its sexy advertising campaigns.
Since the company followed an anti-outsourcing strategy, all the products of American Apparel were manufactured in US itself. It operated its own stores in major cities across 20 countries in the world.
Overview of 3 C’s of American Apparel
Being a new player in the apparel market that started its operations in the year 1998, American apparel had the aspiration to be the preferred apparel brand for the young adults. It differentiated itself as a company which uses organic materials in making its products and as a company with pro-labour policies. American Apparel targeted young customers with its slim fit clothes that are moderately priced. These customers generally had annual incomes of less US$ 100,000 and prefer simplistic style. The competitors to American Apparel brands are well established mid range brands like Van Heusen and Levis which mostly get their goods manufactured in the cheaper Asian markets.
CORPORATE SOCIAL RESPONSIBILITY
As part of its corporate social responsibility, American Apparel gave importance to several issues which affect its employees, customers, and the general public. American Apparel was credited for following pro-labour policies with regard to immigrant workers. It mostly hires legal migrant workers into the country and never outsources its manufacturing to cheaper Asian markets. Paying wages which are double to California’s minimum wages and providing various other benefits like on site medical care, free English language classes, subsidized lunches, and employee stock options, American Apparel always gave importance to the welfare of its employees. It also gave importance to the conservation of the environment in which it operates. Most of the products that were made by the company used organic cotton and recycled fabric scraps which made them easily recyclable. It used renewable sources of energy for its production activities like solar power which reduced its dependence on power produced by burning fossil fuels. The firm was also involved in a lot of charitable activities like donating money and clothes to charitable organizations. It played a key role during natural calamities like Hurricane Katrina and Haiti earthquake by donating garments made by it to the affected people.
The above corporate social responsibility initiatives that were followed by American Apparel brought it lot of benefits in the form of a positive impact on the company value. A favorable image with regard to its pro-labour support and anti-sweatshop commitment helped it to stand out as a company fostering positive community. Many customers and public in general appreciated the company regarding the ethical initiatives contained in the company’s business model. The increased awareness among the people regarding the corporate social responsibility initiatives and ethical labour practices made many younger people to prefer the products of American Apparel.
PROBLEMS FACED BY AMERICAN APPAREL
Despite the positive image it had among its various stakeholders regarding the pro-labour policies and commitment to environmental friendly business practices, American Apparel was facing some problems with regard to its promotions and allegations of sexual harassment of its employees. As the products of American Apparel are targeted at the younger customers, American Apparel’s promotions features explicit images of boys and girls clad in skimpy clothing. This made many people allege that its advertisements were borderline pornographic. American Apparel defended its promotions stating that its ads targeted people who targeted people who desired sexual freedom. Critics of the promotions of the company argued that a company with a progressive stand on immigration can’t have a backward approach regarding the representation of women in its ads. Antoher problem faced by the company was regarding the sexual abuse of its employees. The founder CEO of the company, Dov Charney (Charney) himself faced a US$ 25 million-dollar sexual harassment lawsuit from one of its employees. He was also accused of foul language on the factory floor, which was considered inappropriate for the workplace. Allegations of inappropriate content in its promotions and sexual harassment at the workplace can turn out to be serious problems for American Apparel as they will tarnish the positive image it had among the customers. As the fictitious example regarding the experience of a mother given in the case shows, a negative perception regarding the practices followed by the company can also hit its business performance in the long term.
STEPS TO BE TAKEN BY CARNEY
In order to effectively ward off the problems that may ensue the criticism regarding it promotional programs and allegations of sexual harassment, Carney needs to bring some changes to the marketing strategy of the firm and the sexual harassment policy of the firm. With regard to the promotional campaigns, Carney should do away with its explicit ads featuring underdressed women. He should explore other promotional strategies like buzz and viral marketing which are being used with excellent results by companies like Nike and Chipotle. He should remember that there are other better promotional strategies which can attract the attention of customers effectively. This will make the company to better align its promotional strategy with the other elements of the firm’s overall business and marketing strategies. With regard to allegations of sexual abuse, the firm should come out with a new sexual harassment policy which has zero tolerance towards people who sexually abuse coworkers. Coming to allegations of sexual exploitation by Carney himself, appropriate independent investigations should be carried out by special committees to look into sexual harassment issues. It should also stop the practice of collecting full-length, self-portrait photographs of new employees joining the organization.
VALUE IN ENGAGING MORE SOCIALLY RESPONSIBLE ADVERTISING
Some of the practices followed by American Apparel like using its own employees as models in the ads can severely impact the company value. By coming with a more socially responsible advertising, American Apparel can make the brand appealing to more number of customers. Even though the company’s main target market is young adults, older people like parents can also have a say in purchase decisions of young customers (as seen in the example given in the case). It can also better leverage the positive image that the firm enjoys with regards to the other issues related to its corporate strategy. A better image regarding the socially responsible advertising practices can boost the business prospects of the firm in the long term.
- Schuette, Brittany, Hwan, Sueng, Lee, Mark, Cotte, June. “American Apparel: Unwrapping Ethics.” Richard Ivey School of Business Foundation, 4 Aug. 2012.