"How much do you pay for underwear?"
That is what Dov Charney, the disgraced founder of American Apparel (APP) , asked me 20 minutes into our 90-minute chat, as we were discussing value-based pricing. An on-brand query from a man known for sleaziness, sure, but it caught me off-guard because his tangent was preceded by shop talk: Charney spoke passionately of his intentions for his latest venture, Los Angeles Apparel. It's a carbon copy of American Apparel, now owned by Gildan Activewear, but "newer and better," he contends, and it all comes down to the "Made in L.A." model, which he explains as less a sentiment than it is pragmatics.
What's absolute is Charney's refusal to attribute the failure of his old company to anything other than the "hostile hedge funds" that ousted him. That, in spite of several claims of sexual harassment and other questionable behavior toward women. He also said he lost his business "by way of fraud, securities crime."
In the interview, Charney addressed his haters, the retail apocalypse and Roger Ailes, the late Fox executive ousted over alleged sexual harassment of female colleagues.
Read on, maybe cringe, or maybe feel inspired by this 48-year-old man's commitment to his vision.
Q. What are your goals with Los Angeles Apparel?
A. I want to do it all over again and refine operation, pursue automation more aggressively and maintain financial security of the company. Online retail is superimportant, and [with] my pursuing rapid urban manufacturing, we're talking about even shorter production times. By doing this, we avoid the two evils in retail: markdowns and stockout.
Q. Some think that your new company is exactly the same. Is that valid?
A. It's a similar model, but this is a refined version, because it's smaller with newer equipment, and now I have 30 years of experience. Things [in fashion] have even gotten more precise and more tense—if people really want something these days, they want it now, not in two days. The volatility of demand is so intense, that the question becomes, how do you accommodate them? It all comes down to managing inventory.
Q. Are you saying, it doesn't matter?
A. There's this notion that American Apparel failed because it went bankrupt. The story behind that bankruptcy, I don't know, because I wasn't there. We proved while I was there that this model of rapid replenishment, rapid urban manufacturing worked. Made in L.A. worked.
Most retailers don't make clothes they design. We did some exploration, and now we're going back into the waters again. With a new company, we plan to do a better job this time around.
Labor Dept finds apparel workers making as little as $3.44/hr in LA. Dov Charney has a solution...https://t.co/dQiMXuJHCK— Jeff Macke (@JeffMacke) September 1, 2017
Q. Didn't lagging sales bring American Apparel down?
A. My opponents justified my removal by using distorted numbers. At one point, we had sales of more than $630 million. But after I left, three things happened: the gross margin declined and the top line died. And then they eliminated the entire creative team because conventional thinkers don't get it. I hired an inexperienced team because I knew they'd be more more effective.
Q. Why are you sticking with retail when most are screaming apocalypse?
A. Retail is going to be healthy, but it has to go through a forest fire. There will be trees at the end of it. Think about all the store you love shopping in: the vintage stores, the bookstores, gift stores! Who buys a gift online if they have no idea what to get? Brick-and-mortar will always be relevant. Retail is fine: it's just going through massive "correctioning."
Q. "Made in America" has a new meaning in the era of Trump. What's your take?
A. Made in U.S.A. doesn't mean you're a nationalist. We do not support the ideology of America first. If you go to our mission statement, it says we support free trade. [Former Russian leader Mikhail] Gorbachev tore down that [Berlin] wall. We believe in capitalism, the efficiency of the American worker, and that we can advance the worker by advancing manufacturing itself. I can make both an ethical and a pragmatic argument for local manufacturing, but the truth is, the ethical argument from the consumer point of view only goes so far. People still buy what's cheapest.
Q. It seems like the rapid urban manufacturing model would lend well to fast fashion. Your thoughts?
A. It's a solution to fast fashion, for sure. I mean now, there's only one guy in fast fashion doing domestic manufacturing. But it also serves the slower trends because trends don't just die out. We can't predict the behavior of a trend, just like how we can't predict the behavior of a stock. So rapid response-manufacturing is important no matter what apparel trends are.
Q. What's your advice to budding entrepreneurs about failure?
A. When you lose everything and all your wealth is destroyed, what do you do? What I did was call up my grandfather, this 106-year-old Yiddish man, and he said, "Just start another business! My brothers and sisters got murdered in the Holocaust, and you're complaining about business?" The problem with a model society is that we become entitled, myself included. We don't want to get up and fight. But the thing is, you gotta start again. Have a cup of coffee. Get a lot of rest. America is really great, you have to admit. Here, shit goes down, but you can always try again.
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Q. Do you have regrets?
A. This security boy in Montreal once said to me, no one's going to take your company away if it's not successful. And he was right. Look at the guy at Uber [Travis Kalanick]. He was a madman, completely crazy. But without him, we wouldn't have Uber. With American Apparel, there were certain things I could've done to focus more on control. I was working night and day, but I could've been more concerned about control issues. Be watchful of hostile hedge funds, hostile private equity firms. They seek control, sometimes relentlessly. They hire PR people and rewrite history. Look what they did with Roger Ailes! If Murdoch wanted Ailes at Fox, he'd still be there. Financial sources will exploit the forces of social justice for their own cause.
Q. Did the media get your story wrong?
A. Absolutely. Nowhere near on my termination notice indicates that I was fired for sexual harassment. The case that was dragged into the media had to do with five lawsuits from 2011, three of which I won through arbitration and the other two I had to settle against my will.
I'm proud that I won the case. Sexual harassment laws are so important to protect victims, and same with discrimination laws. Gender issues are hugely important, but fake news is out there. I voted for Hillary Clinton and what I would've wanted her to say about Trump was, "Forget the allegations. Let's just look at all the things that he can't do and focus on that."
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