In December, I wrote about American Giant, a San Francisco-based apparel startup that had perfected the hooded sweatshirt. Actually, that’s putting it mildly. I didn’t just write about American Giant. I turned down the lights, put on some Barry White, and, over the course of around 2,000 gyrating words, unspooled my sweet, tender love for the company and its clothes.
“There is really no comparison between American Giant’s hoodie and the competition,” I wrote. “It looks better and feels substantially more durable.” And: “When you run your hand against American Giant’s hoodie, you find a finely textured, rugged, warm exterior.” And: “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.” And finally: “When you wear this hoodie, you’ll wonder why all other clothes aren’t made this well.”
I was just as floored by the way the company made its garments as I was by the resulting products. American Giant designs and manufactures its clothes in the United States, yet the firm has found a way to keep its quality high and its prices comparable to those of other high-end retailers. (American Giant’s hoodie sells for $79, which is more than you’d pay at the Gap or American Apparel, but about the same as hoodies at Levi’s, J. Crew, and Banana Republic.)
American Giant’s trick to maintaining quality at reasonable prices is to cut out middlemen. Clothes you buy at most mall stores are marked up so the retailer, brand, and various buyers can make their cut. That leaves very little money for producing the item itself. American Giant, by contrast, designs and manufactures its own clothes and sells everything through its own website. Because there are no middlemen, American Giant can spend a lot more time and money making better clothes.
My story was a viral hit. It got American Giant noticed by ABC News, Kottke, NPR, and scads of people on Twitter and Facebook. Many Slate commenters complained that the company’s clothes were too expensive, but they seem to have been in the minority. “In the span of about 36 hours we sold out of everything,” Bayard Winthrop, American Giant’s founder, told me when I called him earlier this month. “We were down to the bare shelves. Not a single item was left.”
Replenishing those shelves has not been easy. In the months since my story ran, at least a dozen readers have emailed or tweeted at me to complain that they couldn’t get a hoodie. The company’s products have been backordered since December, with long delays awaiting anyone who places an order. American Giant currently estimates that it will be fully back in stock by the beginning of May. If you order a hoodie right now, you’ll have to wait a month, at least, to get it.
The BBC recently pointed to American Giant as an example of a “catastrophic success”—a business whose instant overnight fame rockets it into doom. Jason Pontin, the editor–in-chief of MIT Technology Review, scolded me on Twitter for destroying American Giant with too much praise. Several readers also wondered if the delay exposed a problem in American Giant’s lauded approach to manufacturing. “Why has it been so difficult to ramp-up after getting what really should have been the greatest break any company can get?” asked one reader. “And, does this actually show their view of manufacturing to be fundamentally flawed? Perhaps this episode just confirms the thesis that the Apple version of a manufacturing process—with Chinese suppliers willing to locate near each other and put their workers through extraordinary demands for time-sensitive production—is the only way to maximize revenue.”
I called Winthrop to ask him about all this. Why couldn’t American Giant keep up, and would it have been able to handle the sudden demand more deftly if, like most clothing companies, it manufactured its goods in Asia?
In a lengthy conversation, Winthrop argued that wasn’t the case. He walked me through the mechanics of the delay—why, exactly, my story had sparked such a lengthy backorder, and what the company has been doing in the past few months to meet demand. He also argued that scaling up has been good for the company. Everything about American Giant is now more giant than before—the firm’s production capacity has increased by 15 to 20 times what it was in December, and it’s now planning on launching new products, including a women’s line that will debut in the spring. “This is a whole new ball of wax for us—we’re entering a whole new phase of growth, permanently resetting the company at a new level,” the company’s founder says.
Before my piece ran, Winthrop had been slightly worried about the holidays. “I’d had a planning meeting with my operations guy, and he warned me that we’d overbought for the holiday season—that we were just too deep in inventory,” he says. “Then your piece came out, and orders started to come in. Within a few minutes I was like, Oh, wait a second, this is starting to pick up steam. I called our e-commerce team and talked to my main contact there, and he told me they were trying to level-load the servers because traffic is rising. And then as we were talking, he says, ‘Dude, I don’t know if you understand what’s happening. In the last minute that we’ve spoken, 55 orders have come in.’ It was just crazy.”
The company slapped up a pre-order page on its blog, promising delivery in a few weeks’ time. Orders kept piling up. “We sold out of all of our January allotment, all of our February allotment, all of our March allotment, and to this day orders are pouring in, every day, like clockwork,” Winthrop says. Eventually the orders completely overwhelmed American Giant’s capacity to make and sell new hoodies—and it was at that point, Winthrop says, that he had to make a big, expensive decision about whether to permanently restructure the business.
To understand this decision, it helps to know the three-step process for making an American Giant hoodie. First, raw cotton gets knitted into spooled fabric, a process that takes about 50 days. Then the fabric must be finished and dyed, which takes about 15 days. Finally, the fabric is cut and sewn into a finished product. This last step takes about 45 days. In total, then, American Giant’s pipeline—the time it takes from ordering raw material to getting a bunch of sweatshirts—is about 3 1/2 months long.
And that gets to the key reason why American Giant’s stuff has been backordered for what seems like forever. Like any business, American Giant has to constantly predict future demand, ordering fresh materials that will only be available for sale three months from now. My story sparked an immediate spike in demand, but, back in December, Winthrop had no way of knowing whether the demand would be permanent. Would people still be interested in American Giant’s sweatshirts in April just because some yahoo on Slate had praised them back in December?
“We had to step back and decide whether this was real,” Winthrop says. “We had to get a certain level of confidence and make a big financial commitment to say, this permanently changes our business.” In other words, Winthrop had to take a big leap of faith. This meant ordering a lot more raw material into the pipeline—an order of magnitude more than American Giant was ordering back in December, at a cost of “millions of dollars.”
Winthrop argues that nothing about the delay suggests a flaw in American Giant’s production process. A three-month pipeline might sound long, but it’s a relatively quick cycle in the garment business. Winthrop believes that if American Giant were manufacturing overseas, many of the steps in the process would take much longer. For instance, to ramp up production so quickly, executives would have had to travel overseas to find new partners to work with. They would also have been unable to monitor the quality of the garments coming out of the new, higher-capacity production system—which, in the long run, would have been terrible for a company that’s trying to distinguish itself by focusing on the quality of its products.
“The bottom line, for us, is that this wasn’t about the failure of the supply chain,” Winthrop says. “It was about planning. And if we plan correctly from now on, we should never be in that situation again.”
This seems like a reasonable explanation for the delay, though I think it’s a little pat. One of the promises of hosting your business on the Internet is that, thanks to viral marketing, you can become an overnight hit. For lots of Internet companies there’s little downside to instant success. If you sell software, your app can go from 10 users to 10 million overnight and, as long as you manage your servers well, you’ll be OK.
American Giant’s story illustrates the problem with applying that same expectation to tangible products. The success of its hoodie revealed a yearning for quality, American-made apparel. But that yearning proved overwhelming for a company that had to rely on an antiquated, slow backend. And it suggests a lesson: If you make stuff that can’t scale at the speed of the social Web, instant demand might be more of a curse than a blessing.
I hope that the delay doesn’t hurt American Giant’s long-term prospects. I still wear the company’s hoodie every single day, and I’ve been waiting for months to get another sweatshirt. I don’t want to wait anymore.
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