American Giant, a sustainable business model?
American Giant is an apparel company based out of San Francisco, specializing in making hoodies. They have an interesting business model that was outlined in the popular magazine style blog site Slate. The blog author Farhad Manjoo, wrote a very positive review (read here) of the company’s process, as well as the garments being produced. The result was an overwhelmed American Giant, that left them being out of stock for…well between when the article was written in December til now, through the foreseeable future. Manjoo hyped the company so much, even titling his article “The Greatest Hoodie Ever Made”, that the failure of American Giant to maintain stock forced a follow up story (read here) explaining how the overnight notoriety almost killed the company. There are definitely aspects of American Giant’s business model that I like, and aspects that makes me wonder if it can stand against the only test that matters, time. American Giant is a microcosm of a much larger question; is it feasible to manufacture in the US right now?
American Giant Attributes
- Internet Based Sales – They do not use distributors, retailers, nor do they have a brick and mortar store. This is the day and age we live in. American Giant has every opportunity to be full successful selling their garments direct to the customer in this manner. With social marketing and/or a very well placed article hyping the company, there is no reason not to be able to reach the same amount of end customers, as the traditional model with multiple middle men. From raw cotton to a completed garment the textile can go through as many as 8 sets of hands, with a markup at each stop.
- A Quality Product, Made in the USA – I think the days of the cheap easily broken, easily replaced products is coming to an end. The United States is cycling back to a “built to last” mentality. American manufacturing is, as it always has been, a synonym of quality workmanship in the eyes of Americans. There is a sense of pride in driving, wearing, having, owning, etc… “American Made”. American Giant evokes this with high design, quality textiles, and skilled workmanship. All things Americans don’t mind paying a premium for.
American Giant Obstacles
- Higher price of doing business – Labor prices, equipment, storage, shipping are all more expensive operating in the United States without distribution. In the end, they make up for it with reaping more of the profit, but increases the rate of default as a start up. As it was stated in Manjoo’s article
- Slow – “The bottom line, for us, is that this wasn’t about the failure of the supply chain,” Winthrop says, “It was about planning. And if we plan correctly from now on, we should never be in that situation again.” Bottom line is the whole manufacturing process is slow. From Manjoo’s article “American Giant’s pipeline—the time it takes from ordering raw material to getting a bunch of sweatshirts—is about 3 1/2 months long.” A long time to have assets tied up for future sales, and a whole lot of speculation and risk come into play.
- Limited Selection – There isn’t a lot of variety to the line. Not a lot of color, style, or size options. Not everyone is going to want that weight of cotton, or a fitted cut, or those colors. Or the industry may trend away from all of it, or hoodies all together. Though I doubt the last. Variety helps protect against those things.
Klothwork will be rooting for American Giant’s success
American Giant has a path to success, it’s not straight and it’s fraught with danger, but they can see sunlight. They have doubled down their investment in order to meet current demand. For them keep that demand or increase it, American Giant will need to stay current. The article that spring boarded them to relevancy will not keep them there. With them increasing production and adding new lines, they will need to ensure the quality that dubbed their product “The Greatest Hoodie Ever Made”. Higher up front costs of American manufacturing gives American Giant a smaller margin for error, and a timer to reach success. I suppose we will have to wait and see if we will be talking about American Giant as an American Manufacturing success, or if the American process is too expensive and slow. Klothwork hopes to be wearing our American Giant hoodies as soon as they aren’t back ordered.