Amazon’s foray into fashion may soon be accelerated with a new and unlikely addition: American Apparel. The struggling retailer is holding its bankruptcy auction Jan. 12, and Amazon, Forever21 and wholesaler Next Level Apparel are among the brands reported to be interested in bidding for American Apparel, according to Reuters.
If Amazon wins the bid for American Apparel and keeps the brand in the U.S., it would certainly be a shot in the arm for a retailer that has been battered at every turn. Once popular for its sweatshop-free ethos and “Made in the USA” labeling, American Apparel hasn’t turned an annual profit since 2009, when a run-in with the Immigration and Customs Enforcement agency forced the retailer to terminate 1,800 manufacturing employees.
With Amazon’s capital and resources, American Apparel would be able to take a fast-fashion approach to its business, responding to apparel trends more quickly than competitors that make clothes overseas. The retailer could also bolster its manufacturing and supply chain efficiencies, which have been difficult to sustain due to high costs.
And despite the brand’s negatives (American Apparel’s $177 million debt and its attempts to distance itself from ousted former CEO Dov Charney), the move offers benefits — including giving Amazon a faster entrance ramp into apparel via a familiar brand.
“Amazon needs a buy like this,” said Paula Rosenblum, Managing Partner at RSR Research, in a RetailWire discussion. “I don’t believe it has the time to build its own private label and American Apparel has a certain amount of brand equity and cachet in today’s world. I don’t think the brand does as much for Forever 21.”
Amazon’s foray into private label apparel in 2016 showed that the e-Tailer is serious about going into the fashion business. With the American Apparel brand, Amazon would gain an even stronger position with Millennial consumers.
“For Amazon, Millennials as a digital native group are an important segment that they target (as in with Amazon Go), and private label apparel is becoming an important source of growth,” said Mohamed Amer, Global Head of Strategic Communications, Consumer Industries at SAP in RetailWire. “American Apparel can help nicely in both of these areas and add ‘made in the USA’ to boot. They would give Amazon an immediate, and diverse, store footprint across the U.S. and in key cities in Europe and key Asian markets. However, Amazon could also shed the stores and focus on the manufacturing/wholesale portion of the business.”
Bidders Still Must Top $66 Million Gildan Offer
Any successful bid from Amazon or another brand would have to top a $66 million stalking horse bid by Canadian apparel maker Gildan Activewear, which American Apparel agreed to when it filed for bankruptcy for the second time in November 2015.
Gildan’s offer does not include American Apparel’s stores, but includes an option to keep its manufacturing plants, which employ about 3,500 workers, in southern California. But the activewear brand plans to preserve only some of the California production should its bid prevail.