American Apparel had two options: remain a niche brand with a rich, volatile personality or become a successful, global alternative brand. It tried to do both and failed.

I like American Apparel. So much in fact, I named it my favorite brand of the past decade. It is now on the brink of financial disaster. How did it come to this?

Three reasons: 1. It's misunderstood. 2. It grew too much, too fast. 3. There is a conflict of interest.

First, how could such a failure of a brand appeal to me? For a minute, strip away all prejudices and hearsay and look at it objectively. Let's start on the surface: American Apparel has beautiful design. To a discerning eye, the layout and typography is flawless. To the casual viewer, it's simple and unique. The photography is an extension of their utilitarian nature — raw and untouched; real people not supermodels. The voice and messaging reflect their sarcasm and sense of humor. It might not be pretty, but it is definitely not dishonest.

It's a true American brand. Made in the USA, simple as that. It's arguably the most affordable American-made clothing you can buy. And true to the American way, they believe in things. Immigration reform. Gay rights. Environmental sustainability. AA has an opinion and it is damn vocal about it.

Here's where things fall apart. There are two main perceptions of the brand: 1. The "premium" blank t-shirt company — premium quality blanks at a premium price. 2. The sleezy hipster-Gap. Because of these two things, the American Apparel as we know it cannot exist tomorrow. On the first point, the recession killed demand for premium OEM product. Everyone went for the "Hanes Beefy T". On the second, the market cannot reconcile AA's volatile image with its mainstream aspirations.

American Apparel really has two options:

1. Destroy, rebuild, and come back as a more focused, niche company while maintaining its personality. In this realm a brand seemingly derives power through exclusivity.

2. Give up its personality (at least the raunchiness and politics) to become a successful, global "alternative" brand (à la Uniqlo or Apple). Here, the secret is not going full milquetoast. The key is maintaining a friendly, neutral personality while injecting a bit of style. This option is very difficult. Apple and BMW have perfected the formula. The engineers and  designers get to do their thing, hard-core enthusiasts appreciate it, and casual shoppers are not offended.

You cannot have it both ways. There comes a point where integrity, personality, or beliefs must be sacrificed for growth. Having to first and foremost please shareholders, or sell to "the most" people, your image will get diluted. I want AA to come out of this mess successfully, but I'd also hate to see it lose its modern-greasy charm. There's a place for the American Apparel as we know it, just maybe not in malls. Diluting your brand will alienate the enthusiasts while barely carving a dent in the casual shopper's mind. That is brand purgatory, the worst place one can exist.

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