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Gildan's Made-in-USA Apparel Pitch Lacking Customer Traction

Gildan Activewear Inc. launched in August its version of the American Apparel brand with a "you decide" offer to consumers about buying domestically produced product. GildanNearly nine months into the manufacturing and marketing initiative, Gildan appears to be lacking enough traction that management may be having second thoughts.

Gildan has yarn production operations in Mocksville, Eden, and Salisbury (all located in North Carolina). The latest Mocksville workforce count was more than 200.

The Montreal-based manufacturer created a "Made in the USA" shop at AmericanApparel.com that allows shoppers to choose between items made domestically and the same items made abroad. Gildan bought the American Apparel brand for $88 million in bankruptcy proceedings.

The American Apparel items are identical in every way, except for where they are made and their cost: The American-made pieces are $4 to $10 more, or 18 percent to 22 percent, compared with those made at offshore Gildan plants in Central America.

The domestic products are being made by contract manufacturers in Southern California, said Garry Bell, Gildan's vice president of corporate communications and marketing. "Both are sweatshop free... identical in quality... ethically made regardless of location... difference in price," according to the marketing pitch.

Glenn Chamandy, Gildan's chief executive, told Bloomberg News that "the truth is that most people are gravitating to the better value."

Bell stressed that "the performance of the Made in the USA collection is still being evaluated. We really do not even have one full selling year under our belts to evaluate yet."

Support

The initiative carries a strategic importance to Gildan in that it expanded online sales of American Apparel to more than 200 countries in April. The marketing pitch is Gildan's way of appealing to American Apparel's marketplace niche among millennials. While Gildan is known for mainstream basic apparel, legacy American Apparel was known primarily for its sexually oriented advertising.

A Reuters/Ipsos poll released in July indicates Gildan's price differential could be too much for the majority of consumers. The poll found that 70 percent of Americans think it is "very important" or "somewhat important" to buy U.S.-made products.

However, 37 percent said they would refuse to pay more for U.S.-made goods compared with imports.

Another 26 percent said they would be willing to pay up to 5 percent more to buy American, while 21 percent capped the higher domestic premium cost at 10 percent.

"It shouldn't be a surprise that Gildan has learned consumers are not willing to pay significantly more for the same garment made in the USA vs. foreign made," said Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest (University) School of Business.

Beahm said that industry experience "has shown that a price difference of 15 percent or more will usually drive consumers to alter their purchase behavior."

"In this case, with a price premium of 18 percent or more for Made in USA, that premium seems to be too much when compared to the identical garment made outside the U.S., and is consistent with past buyer behavior."

Beahm said there is a trend, driven in part by millennials, "to support brands that support causes. However, most consumers don't expect to pay more for that support. Instead, they see it as an investment on the part of the manufacturer, funded out of the company's profits, and not out of a price premium the shopper must pay. Made in USA., while a noble cause to support, does not seem to be enough."

Plans

Gildan announced plans to open a retail store in American Apparel's former hometown of Los Angeles in the fourth quarter of this year. American Apparel's physical stores closed after its bankruptcy and were left out of the deal with Gildan. Gildan projects getting close to $100 million in revenue from the brand in fiscal 2018.

Chamandy told analysts in a conference call that American Apparel is giving Gildan inroads into denim sales. "Overall, it's going very well and it's actually achieving - exceeding our expectations," he said.

Bell said the Los Angeles store, in a former American Apparel site with a smaller footprint, will offer "a full American Apparel consumer experience to compliment the online store."

Chamandy told Bloomberg the store is "going to be like a test model store for us, and then we're going to see where that takes us in the future. We either could franchise, we could open a couple more, we haven't decided yet."

Source:
Winston-Salem Journal

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