Daccanomics
Forever 21 was among one of America’s fastest-growing ‘Fast Fashion’ retailers. It had seen exponential growth in business and made at its peak made 4.4 Billion dollars in revenue. It made a huge impact in the world of fashion and was once considered the fastest-growing fashion brand. The company made its immigrant penniless founders into Billionaires while it was the powerhouse in the fast-fashion world. But now the fashion giants are filing for bankruptcy, joining the growing list of fashion retailers felled by heavy competition. So what went wrong for the much-beloved fashion brand?
The founder couple Jin Sook and Do won ‘Don’ Wang started the company with the label Fashion 21. With a savings of 11,000 dollars, they started the company with a single 900 square feet clothing store. The store made 70,000 dollars in sales in its first year, which was a huge success. But it was only popular with the Korean-American community. The founder wanted more from the brand. So they started opening stores all across America which helped them increase the company’s customer base at the same time. They also decided to change the name to ‘Forever 21’. The company was making over 400 designs a day. They changed the idea of fashion bringing fast fashion into the industry which means they were making designs as they were happening on the runway. As its customer base grew the brand became the largest tenant of American malls which eventually led to its downfall.
As the company was growing, the need for fashion was growing with it. What made forever 21 more popular among fashionistas was its Fast fashion model. They sold their designs in-store for a limited time which made them approachable to young customers. But as it focused on expanding business its designs started to get old-fashioned. They couldn’t keep up with the runway fashion as their key competitor grows. They started to lose touch with their core customers. As online shopping was growing forever 21 couldn’t adapt to the changes it needed to compete with the market. People became more interested in buying clothes online. As the Millenials started shopping online forever 21 still was opening new outlets all across the states which led them to their downfall. As the rent is increasing and the competition is growing Forever 21 decides to file for Bankruptcy. The company plans to shut down 178 of Forever 21’s approximately 800 stores after a disastrous expansion outside the U.S. The Chapter 11 court filing on Sunday allows Forever 21 to keep operating while it works out a strategy to pay its creditors and turn the business around.
The company employs about 6,400 full-time and 26,400 part-time workers, court papers show. Forever 21 said it expects to exit most of its outlets in Asia and Europe, and it will shut all of its 44 Canadian stores that provide about 2,000 jobs, according to company statements.
The rapid global expansion left the company stuck with locations that were too expensive and too big, court papers show. Despite having 262 stores in 2015 outside the U.S., it couldn’t achieve economies of scale because of geographical differences in taste and climate. This widespread shutdown of Forever 21 could mean a disaster for retail businesses and a new era of online shopping.
With the Chapter 11 court filing Forever 21 still has a chance to restructure and bounce back with a new strategy to compete in the fashion industry.
