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Not a story about monsters or ghosts creeping around F21 stores but something way scarier.
Imagine being the powerhouse company in your industry, making $4.4 billion in revenue in 2015. With over 480 locations all over the country, you are one of the biggest tenants in American malls, with more stores overseas. Forward to a few years later, you are now filing for bankruptcy.
This is the story of Forever 21, one of the biggest retail clothing brands in the world. It may seem like the sudden turnaround is too drastic, like any other jump scare in a horror story.
How did it all begin? After all, horror stories do not begin with jump scares. They begin just like any other story.
For Forever 21, it started as a product of the American dream for founders Jin Sook and Do Won Chang who moved from South Korea to Los Angeles. Not having money or the proper experience, they strived to make ends meet with Jin Sook working as a hairdresser while Do Won doubled as a janitor and gas attendant who also served coffee. With the realization that people who drove the best cars all worked in the garment industry, Do Won decided to open a fashion store called Fashion 21 with his $11,000 in savings a couple of years later. While their initial customers were the Korean-American community in Los Angeles, they soon expanded their customer base by opening new stores every 6 months. They were able to get by taking advantage of wholesale closeouts to buy discounted products from manufacturers. This strategy worked well in their favor and were able to accumulate $700,000 in their first year. The name was soon changed to Forever 21 to capture the spirit of the brand in being for anyone who wanted to be “trendy, fresh, and young in spirit.”
Their claim to fame was their ability to gain a huge following through trendy clothes sold at low prices. While this sounds like a lot like what other fast fashion companies now do, Forever 21 was one of the first ones to do it right and was also the fastest in the game. With over 400 designs being approved by Jin Sook, Forever 21 was capitalizing on riding the trends and selling them while they were still happening. That was their recipe to be one of the biggest names as a fast-fashion retailer.
Forever 21’s rise made the Changs into one of America’s wealthiest couples with a net worth amounting to around $5.9 billion in 2015. With an aggressive expansion strategy, they were set to open 600 more stores in the coming years, but this is also their bane.
With growth and expansion in mind, the styles of clothes were selling became cookie-cutter and the butt of jokes to customers who found some of their styles off-putting. Around this time their competitors such as Zara and H&M were starting to rise and capture the fast-fashion retail market, and Forever 21 reacted the way they knew how to aggressively expand.
This is where the protagonist of the horror story sees the red flag yet pretends to see nothing. They still opened new stores in 2016 and even trying to expand their existing stores to be multi-level to include sections for children’s, men’s, and even home-goods even if there was an evident decline in foot traffic. The Changs losing $4 billion from their net worth, Forever 21 is looking at a $500 million debt and is filing for bankruptcy. The company is in talks now to close around 350 stores all in all and halt operations in 40 countries.
But the story is not Forever 21’s alone. There are other characters in this horror story being chased by the monster also known as the “ retail apocalypse ” which has since numbered the days of traditional brick-and-mortar stores in the US, taking down even other decades-old American businesses like Toys R Us, Sears, and Payless.
One of the possible culprits is the rise of Internet brands such as Fashion Nova and ASOS, who churn out influencer-like styles also at a rapid-fire pace with a lot of social media campaigns. The rise of eCommerce has proved to be a competition for these traditional stores like Forever 21 as it was reported that 60% of millennials make their purchases online and prefer to go online than to head over to a store. Forever 21’s fast reaction to the rise of these online competitors and the inability to see a shift in consumer preferences could be attributed to their decline.
But not all horror stories have to end bitterly. It also leaves room for hope. The possibility of bankruptcy for Forever 21 also opens an opportunity for them to rebrand, restructure, and remarket themselves to win their customers back. The kind of bankruptcy they filed for gives them room to reorganize while still being in control of their assets throughout the process. The brand can move to also strengthen their online presence to also capture the market who prefer to shop online.
If you’re also a business owner running a traditional brick-and-mortar store or a company with no strong online presence yet, Forever 21’s horror story doesn’t have to be yours. If anything, you can use their story as a cautionary tale of being too fixated on your own goals you fail to consider other factors such as the importance of online presence in connecting with your customers. Whether an existing business or a startup, connecting with your customers online shouldn’t be a nuisance, and here at iRepublic, we believe it’s something you shouldn’t go through with alone!
We can help you build a website you’ve always desired without breaking the bank. Let your customers get to know your brand online!
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