Writer Devon S. Maloney researched the following story within the Boston-area for several months, talking to former employees about the rampant theft and incomplete training policies of infamous clothing manufacturer American Apparel.
This story is presented almost entirely unedited and as submitted.
EVERYONE KNOWS AMERICAN APPAREL has garnered wild international success, with 260 stores in 20 countries worldwide, and shipping more than $545 million worth of clothes from their downtown Los Angeles factory in 2008. There are three retail stores in the Boston area, and the Back Bay location (330 Newbury St.) is one of the company’s 25 top-grossing stores.
But in the past year, AA’s debt has risen by a third. Share prices have dwindled to less than a dollar. Store sales have dropped consistently every month this year—more so than the company’s competitors. With the constant threat of de-listing by the New York Stock Exchange looming and bankruptcy an imminent fear, the question is on everyone’s mind: what gives?
According to AA employees, “what gives” are the employees themselves: The company’s worst-kept secret is a combination of lax security and corrupt management that virtually encourages them to steal, a combination that’s led to employees at multiple retail locations in the United States, individually and in teams, stealing countless thousands of dollars in merchandise from the company.
IN THE PRESS, founding CEO Dov Charney has blamed the company’s downward spiral on immigration reform inspections, which, according to the Wall Street Journal in late 2009, took 1,500 undocumented immigrant employees from the AA factory that year. The accumulation of too many loans and lawsuits from investors over reported earnings have also been reported on.
Julia Moore*, 19, a former employee at a retail store in southern California, who requested anonymity to avoid self-incrimination, estimates that, over a period of six months in 2009, she and a “teammate” working in the stock room were able to walk away with over $10,000 worth of merchandise. Stuffing armfuls of brightly colored sweatshirts, leggings, skirts, t-shirts—whatever would fit—into cardboard boxes and trash bags, the two would feign taking out the trash, disguising the merchandise, and pick up the loads as they left for the day. As she says:
“It was incredibly easy.”
She added that she also encouraged friends to shoplift, surreptitiously leaving merchandise in the dressing rooms for them to take and then ushering them out of the store.
Acknowledging that her activities were less than honorable, Moore qualifies them by deferring to the sentiments of the American Apparel CEO himself.
“In a conference call [with store managers], Dov [Charney] has been known to say something like, if they’re good-looking, he doesn’t care because he wants the product on good-looking people,” she recalls. By virtue of her employment, she, like many of her co-workers, counts herself among those to whom Charney reportedly referred.
“Sure, it’s [messed] up, but I say, ‘OK!’” she explains.
John Hendrick*, 19, another former employee who also preferred to remain anonymous for similar reasons, figures that, in the four months he spent working at one of the American Apparel stores in Boston this summer, he was able to take roughly $500 worth of clothing and accessories, completely undetected. As stock room employees, he and his co-workers had complete control over the thrice weekly shipments that made their way to the shop floor, so stuffing a few items in his bag every so often without raising suspicion was almost too easy.
These aren’t special cases. According to both Hendrick and Moore, most of the employees, at other stores where they have friends in addition to their own, shoplift in large quantities, far more than at the average retail store.
“We weren’t the only team,” recalls Moore. “There was another team, our co-workers, who were operating the same way, at the same time we were. And at the Santa Monica store, I know employees who all work together to steal stuff.” Hendricks confirms:
“Everyone does it. The company isn’t serious, so no one is serious about it.”
ACCORDING TO THE NATIONAL RETAIL SECURITY SURVEY, conducted annually by the Loss Prevention Research Council at the University of Florida, nearly half of the 1.44 percent shrinkage of retail sales in 2009 was due to employee theft. Over $14 billion was lost to those employees, while nearly 15 percent of those reductions involved non-employees like Moore’s visiting friends. In general, employee theft was nearly 10 percent more frequent than external shoplifting.
Shrinkage in American Apparel stores is colossal in comparison with this national average. In a report published by the manufacturer of the radio frequency identification (RFID) chips recently installed in AA merchandise, the clothing company’s shrinkage was 20 percent. Because this tracking technology was only installed last year, and due to the lack of safeguards, the actual fraction of that shrinkage attributed to employee theft is unknown.
In short, there is no cut-and-dry way of assessing these damages, but judging by the numbers quoted by the thieves themselves, and acknowledging how widespread this large-scale theft is, it cannot be said that this loss does not make a significant contribution to the poor health of the company.
The bigger issue, however, isn’t that these thefts happen—it’s how. The first green light for theft is poor management—or even lack thereof.
At Moore’s location, she recalls that the immense shrinkage repeatedly baffled stock room managers. Some stores even lack any management at all. Both Newbury Street locations have lost their in-store management in the past year, adding to the company’s high turnaround rate.
SAMANTHA TRIPOLI*, A FORMER KEY HOLDER responsible for opening and closing one of the Newbury Street stores, says that she and her fellow key holders, despite their inexperience, were required to perform managerial duties, like supervising employees, interviewing potential new hires, and submitting paperwork to the corporate offices. She says that key holders acting as managers certainly contributed to the ease with which employees slipped out with merchandise on a daily basis. Tripoli, now 19 says:
“I was made a key holder when I was 17.”
“Key holders are supposed to check everyone’s bag at the end of their shift, but a lot of the time this is either completely forgotten, or the key holder simply doesn’t care if people are stealing.”
She adds, “Since there’s no serious authority figure, theft is a lot easier amongst employees.”
A disjointed stock room also contributes to the chaos. Stock room employees like Hendrick put the security sensors on the merchandise themselves, and though shipments are supposed to be entered into the store’s system on the day of delivery, lax regulations sometimes allow shipments to remain incomplete up to a month after they arrive.
Beyond personnel, in-house security systems are also essentially non-existent.
“One of the newer managers finally figured out that theft was the reason [for the shrinkage],” says Moore. “But it’s funny—when she finally set up security, they got fake cameras. No cameras, no microphones, nothing. They put so much trust in the store; it’s crazy.”
“I remember seeing the box [from the fake cameras] in the back room,” says Hendrick. “It said ‘now with flashing LED light!’ on it.”
Dr. Read Hayes, director of the Loss Prevention Research Council, says that internal theft is harder to deter than external, but that a number of elements are involved in preventing it.
“Good pre-employment screening is important,” he claims. “Previous experience and overall attitude demonstrate trustworthiness.”
Dr. Hayes and the Research Council also emphasize the shaping of workplace culture.
“Once they’re on board, you have to communicate with them. Thorough training, communication, and making them feel a part of the team—you have to lead and motivate them,” he says. “Building a good, sound culture of honesty and hard work will make employees understand what it takes for a business to protect its assets and survive.”
BUT YOU CAN FORGET ABOUT ANY training process at American Apparel—Neither Hendrick, Moore, nor Tripoli, all three without prior retail experience, were ever officially introduced by a supervisor to the company, its structure, or its policies. Hendrick says he shadowed seasoned workers, while Moore got an even colder read:
“We were put in the store, and we were given a website. Everything else was up to us.”
“It’s about who you are; not what you can do. If you’re attractive, they’re going to hire you. I don’t think they even looked at my résumé.”
Representatives from American Apparel itself could not be reached for comment.
“It’s such an immature company, that they don’t even think about these things,” Hendrick says. “There is a real lack of effort on all parts.”
“Everything you think or hear about the company is just so true,” he adds. “And it really is weird to realize that.”