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The Fashion Logistics of Catastrophic Success

Often times, you'll hear companies talk about their "slow growth strategies" — careful, well-laid plans for a steady but not overly ambitious future. There are several benefits of this approach: For example, it often can be executed without taking on massive amounts of debt. It's easier to keep the quality of products or services high, since it’s easier to be selective in hiring employees and striking partnerships with suppliers — and easier to maintain oversight over operations once they’re in place.

In other words, at times it's smart to learn how to walk before trying to run.

But what happens when success is so rapid, so unexpected that a company finds that it can't keep up? Can companies scale up quickly enough to meet demand without bankrupting themselves, sacrificing the quality of their products or abandoning their values? Take, for example, the "catastrophic success" of American Giant, an online-only hooded sweatshirt company based in San Francisco that skimps on overhead in order to maximize the investment in its product.

In December, a Slate writer named Farhad Manjoo penned a 2,000-word lovesong to the company titled "This is the Greatest Hoodie Ever Made." Here's how he described the sweatshirt:
“There is really no comparison between American Giant’s hoodie and the competition... It looks better and feels substantially more durable... When you run your hand against American Giant’s hoodie, you find a finely textured, rugged, warm exterior... Before I wore American Giant’s hoodie, I couldn’t ever picture a hoodie looking unslouchy. This one makes it look like you spent a minute considering your wardrobe before you rushed out the door... When you wear this hoodie, you’ll wonder why all other clothes aren’t made this well.”
In addition to how the hoodie looks and feels (and how long it will presumably last), Manjoo was clearly enamored with American Giant's story and production model as well. The hoodies are made entirely in the United States using higher quality materials than are often found in more expensive garments without running up prohibitively expensive manufacturing costs.

So, for American Giant, a company that relies heavily on word-of-mouth marketing, that's pure gold from a PR perspective, right?

Well, sort of. In a follow up article last week, Manjoo said that the original piece quickly went "viral," spawning stories by several other prominent news outlets as well. The company's sales soared. They sold out of their existing inventories within 36 hours. And then they sold out of their future inventories. A million dollars worth of orders came through in two days. The company estimates that won't be fully re-stocked until May.

Suddenly, American Giant found themselves scrambling to boost production in order to meet demand. But scaling up this quickly would be an enormous fashion logistics challenge even for well-established companies with deep pockets, extensive apparel supply chain management experience and existing relationships in manufacturing hubs such as China. For a young start-up with limited capital that makes all its products in one of the most expensive cities in the world? Instant success can quickly turn into instant doom. According to the BBC, which profiled the company:
"We talk about catastrophic failure. Catastrophic success is equally an issue," says Karl Stark, chief executive of Avondale, a strategic advisory firm that focuses on building and growing companies.

While American Giant had scaling built into its business plan, it didn't anticipate having to do so in such a short time frame. As a result, it only took pre-orders on its most popular style, the zipped hooded sweatshirts, while being unable to restock the other styles of clothing, like T-shirts and sweatpants, that had also sold out.

On paper, Mr Winthrop had been doing everything right regarding plans to grow the business. In practice this can only go so far when unforeseen events occur. "Inventory planning, your systems, your ability to scale... that's all great in theory," he says. "In reality, you're sitting there making a buy for a holiday season. We're planning for x, you make a bet on inventory for x. And you have a holiday season that is 50 times x, it's impossible to plan for that."
Manjoo was scolded by industry experts for lavishing too much praise on the company. But for American Giant, the experience wasn't fatal. The company didn't panic, stayed the course, invested carefully in expanded production, and is better off now than they were before. According to American Giant's CEO, Bayard Winthrop, the company has increased capacity by 15 to 20 percent and is even launching several new product lines this spring.

American Giant simply had the apparel logistics flexibility and skill to adapt quickly. And at The Apparel Logistics Group, our apparel 3PL services can help your company similarly adapt to unforeseen developments — whether a hurricane, an economic slump or spectacular success — that leave your best-laid plans crumpled up in the waste bin.
Posted: 4/12/2013 11:20:36 AM by Global Administrator | with 0 comments


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