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.