How a made-in-America brand is dealing with the Covid-19 pandemic
25 MARCH 2020
Bayard Winthrop, CEO of American Giant, is working to maintain partnerships with suppliers while pulling back on marketing outreach.
Retailers with local supply chains are at an advantage during the Covid-19 pandemic as disruptions hit global manufacturing infrastructure.
San Francisco-based apparel brand American Giant, wholly manufactured in the US, is working directly with partners to navigate the pandemic.
Uncertainty remains: online sales have dropped 40 per cent, and the brand has paused hiring and store openings.
Bayard Winthrop, founder and chief executive of apparel company American Giant, has been taking calls in his new San Francisco office: the driver’s seat of his black 2017 Toyota Tacoma truck. Parked within reach of his Castro home’s Wi-Fi network, his laptop sits on the centre console, and his phone connects to the car’s hands-free speaker system. His three kids, aged three, five and nine, remain inside the house with his wife, Alice.
Winthrop’s car has become a central point for the company during the coronavirus crisis in the US. The brand’s San Francisco employees began working from their homes last week with the city’s shelter at home orders. Its stores closed in the following days. With uncertainty ahead, the shape of the American economy has changed almost overnight, and government and medical directives and consumer behaviour have evolved rapidly. In addition to San Francisco, cities including Los Angeles and New York City are also sheltering in place.
While its e-commerce store, which is responsible for the majority of its sales, remains open, American Giant’s online sales have plummeted 40 per cent since the outbreak began to spread in the US. That’s left him to reconsider production levels and work with US-based suppliers to come to a mutually agreeable solution.
All over the world, company leaders are reevaluating their businesses, managing remote work and moving to cut losses or shore up operations amid coronavirus disruptions. Retailers and malls from Harrods in London to Printemps in Paris are expected to remain closed for weeks; brands including Chanel, Armani, Burberry and Ralph Lauren have cancelled or postponed shows and events, and companies including Prada and Inditex, owner of Zara, are reporting a steep downturn in sales amid the distractions of Covid-19.
While global supply chains are suddenly interrupted and unpredictable, the US’s apparel manufacturers are, for now, operating fully. American-made brands are finding that close relationships and proximity to suppliers and manufacturers — and their ability to be nimble with turnaround times and transportation — are helping manage the economic shock.
The perks of local production
Kristen Fanarakis, founder of Senza Tempo, a fashion line aimed at professional women, says she isn’t cutting back on orders from the factory she works with in Los Angeles to protect the factory, where she says workers are following social distancing rules with tables moved six feet apart, and a doorman in the building controlling entry. The factory has been making face masks with deadstock fabrics and donating them, she says, to fill in between client projects.
“The atelier is still running, and I haven’t pulled any of my planned production because whatever I make will be in style in three months or three years,” she wrote in an email. “Having a front-row seat to the economic meltdown of 2008 and retail haemorrhaging during that period left a deep impression on me. I knew that I needed to find a creative way to better insulate the business from inevitable economic risks. The entire model enables me to be more nimble than I otherwise could be.”
Los Angeles Apparel, an LA-based factory that employs about 475 workers, has switched a large portion of his production facility over to sew cotton face masks, which are priced at $10 retail and $5 for wholesale, says Dov Charney, the factory’s owner. Despite the demand for them, the first masks the factory made were not FDA-approved, he says, but he said he is securing more functional materials, such as an antimicrobial wash, and is in conversations with the US Department of Health and Human Services regarding standards.
The factory is hiring workers to keep up with demand, while working within health restrictions, including taking workers’ temperatures several times a day and practising social distancing, according to Charney. (Charney is the former founder of American Apparel, where he was ousted in 2014 amid allegations of financial management and sexual harassment. He denies the allegations.)
At American Giant, as Winthrop calculates production levels that make sense under the circumstances for American Giant’s hoodies, sweatpants, T-shirts and other US-made comfort clothing, he has reached out to 15 of his company’s main suppliers to ask for their flexibility in shifting or cancelling deliveries. “Every one of them was saying, we are standing ready to be helpful. We’re in this together,” Winthrop says.
He notes that his ability to navigate the crisis is being helped by operating on the same shores as his entire supply chain. Every one of American Giant’s suppliers, down to its zipper supplier YKK, is located in the US.
Since founding American Giant in 2011, Winthrop has sourced yarn, fabrics, notions such as zippers, and even raw materials such as cotton and wool in the US (sometimes the company sources wool from New Zealand). He has purchased factories for cutting and sewing near Raleigh, North Carolina, where hand sanitising stations were recently installed amid a disinfection regimen. He has built relationships with cotton growers, sheep-rearing ranches, yarn-spinners and denim makers who he is now depending on to give him flexibility if he has to cut back.
“I’m worried about the impact that our decisions will have on them,” he says. “We have liquidity now — we can partially pay. We’ve got to be good partners to them.”
Managing morale and marketing
Beyond production, other operations have faltered or become more difficult as the reality of the situation sets in. The company is on a hiring freeze and will hold off on filling open jobs for product development, raw materials procurement, finance and customer service. “Any forward movement has to pass muster with my CFO and me,” he says. In a move that could be a harbinger for commercial real estate markets, he has put a hold on plans for three new retail leases, saying that he would sign only if offered “can’t lose” deals — six months of free rent, a small security deposit and an out after one year.
Several new software and technical contracts, such as a website automation program that he had planned to implement this year, are also on hold. “If our business stays down 40 to 50 per cent for the rest of the year, we’ve got to get into save-the-business posture,” he says.
Even as sales fall, the brand has struggled with how to market apparel in a time of crisis, and Winthrop temporarily backed off on the company’s marketing emails. “People are not racing out to buy a T-shirt from us,” he says. “I don’t want to be selling right now — it doesn’t feel appropriate.” (Over the weekend, the brand plugged its casual apparel in an email, positioning it as a new wardrobe for those staying home or returning from “essential work”.)
There is little consensus in the apparel industry on the best way to approach marketing fashion amid a pandemic virus. The RealReal, Neiman Marcus, the Outnet and many brands are actively marketing and holding sales, often, but not always, mentioning the new state of affairs.
Maintaining morale and office communications with a headquarters that is now based in employees’ homes is also a new challenge. “We’re stumbling all over each other. There are kids screaming in the background. Dogs are barking,” he says.
After his daughter’s teacher began an online programme reading children’s bedtime stories, Winthrop realised the importance of regular communications and started holding an optional, daily 45-minute dial-in morning call with the entire team. He opens with an update on operations, does a quick “circle of leadership” with further updates on supply chain and other issues, and then opens the call to a chat about any subject for 30 minutes.
Counterintuitively, parts of American Giant’s business showed stronger than usual results in recent weeks. While online sales fell, sales rose in the company’s stores in San Francisco, Los Angeles and New York before the stores closed amid California and New York shelter-in-place orders. And the rate at which people opened the company’s emails are meaningfully higher than usual, he says. Winthrop says he has no explanation for either of these phenomena, but he’s curious about their clues to consumers’ current mindsets.
“What experts have gotten wrong is there’s only so much modelling on a spreadsheet is going to get you,” Winthrop says. The eager-to-help supportive responses he received from suppliers and the sense that they are all pitching in with a common goal, he says, reflects the connected-community ideals on which he originally founded the company. “There is so much humanity that is emerging that is so wonderful.”