American Apparel bankruptcy: Is there still a market for US-made clothing?

American Apparel's Monday announcement highlights how US-made clothing is struggling to compete with fast-fashion retailers taking over the market with cheap, trendy apparel manufactured overseas.

Keith Srakocic/AP/File
Passers-by walk in front of the American Apparel store in the Shadyside neighborhood of Pittsburgh on July 9, 2014. American Apparel said Monday, it is filing for Chapter 11 bankruptcy protection. The company said that its US retail stores will continue to operate and that its international stores are not affected.

It’s been a tough year for American Apparel.

The clothing retailer’s decision to file for Chapter 11 bankruptcy Monday came amid an ongoing feud with founder and former chief executive officer Dov Charney who is suing the company for trying to oust him and criticism “over what many consider to be overly sexualized advertising” of its products, as The Christian Science Monitor reported.

More broadly, however, the company’s announcement highlights how clothing made in the United States is struggling to compete with fast-fashion retailers taking over the market with cheap, trendy apparel manufactured overseas. The industry as a whole faces the question: Can a company make its clothes in the US and still turn a profit?

At first glance, the outlook is grim for US manufacturers. More than 90 percent of all shoes and clothing sold in the US is manufactured overseas; and between 1990 and 2011, the US lost about 750,000 jobs in apparel manufacturing, according to the US Bureau of Labor Statistics.

The reason for the shift is simple: Wages are lower, and therefore production is cheaper, abroad. The BLS estimated manufacturing jobs in the US at $34.74 an hour on average, compared to about $1.36 an hour in China.

The New York Times reported:

Brooks Brothers’ American-made cashmere sport coats sell for $1,395; comparable imported ones go for $1,098. At Lands’ End, American-made sweatshirts cost $59, while the ones made in Vietnam cost $25. The label on an Abercrombie & Fitch American-made sweater, which sells for $150, screams about its American origins. But most of the sweaters for sale at Abercrombie are the cheaper ones priced at $68 and up, and made abroad.

“[A] hard economic truth is emerging,” the Times continued. “Production of cheaper goods, for which consumers are looking for low prices, is by and large staying overseas, where manufacturers can find less expensive manufacturing.”

And it seems many American consumers don’t mind, as evidenced by the popularity of fast-fashion staples Forever 21 and H&M. But, at the same time, there is a sub-group of American consumers who do seek out products made in America. Concerns over job losses in the US – as well reports of human rights violations in sweatshops abroad – have spurred a renewed awareness among these consumers of the value of American-made apparel.

In a 2013 survey, 60 percent of respondents said they would buy US-made clothes and appliances even if those cost 10 percent more than versions made abroad; more than 25 percent said they’d pay an additional 20 percent, according to Consumer Reports.

The industry has been taking note of these changes. The Los Angeles Times reported:

Long-comatose factories are reawakening. In one of the largest apparel factory investments in the last two years, Ralph Lauren pumped $142 million into expanding a factory in High Point, N.C. And Under Armour shelled out $58 million to buy and enlarge a Baltimore plant.

Textile companies built 23 new plants in the U.S. from 2011 through 2013, according to the National Council of Textile Organizations. This year [2014], companies have invested at least $1.8 billion in building and expanding factories, many in the South.

"The business model is at a crossroads," Anne Olderog, director of brand consulting firm Vivaldi Partners Group, told the Times.

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