It was the embodiment of the American dream. A migrant couple who starts from scratch and rises to the top of the clothing retail industry. But then, that dream plummets to the ground.
Forever 21 became a fixture in fashion and in the wallets of twenty something year old’s. The clothes were fashionable and cheap, and there was a Forever 21 store in almost every shopping mall you could think of.
They were all over the world. And, with the latest fashion trends on hand, they seemed to be here to stay. But Forever 21 was a controversial brand. It grew too fast and had dubious practices.
It’s safe to say that it rocked the world of fashion, for better or for worse. In 2019, it was the everchanging world of retail that rocked Forever 21, so much so that the company filed for bankruptcy protection.
How did one of the world’s most noticeable fashion brands manage to get to this point?
How Forever 21 Began
Korean immigrants Do Won Chang and Jin Sook Chang arrived at the US in the 80’s and they had a rough time. They worked odd jobs, had very little money and no formal education to rely on.
Do Won originally had hoped that, having worked at a coffee shop in Korea, his expertise in this area would be the gateway to success but it wasn’t. He was stuck as a waiter. But he did notice something.
The people who drove the nicest cars were all in the garment business. His instinct told him the way to success was through fashion. So, in 1984, they scraped up all the money they had, $11,000 in total, and opened a small clothing store called Fashion 21. The 900 square foot store was directed towards the Korean American community, its women specifically.
And it worked; the first year raked in $700,000 in revenue. With such results, they felt confident enough to expand, at a brutally fast pace: a new store every six months.
By 1987, the Changs wanted to give Fashion 21 a twist. Their aim was to evoke an eternal desire for youth, a wish to remain in what Do Won himself recalled as the most enviable age: Forever 21.
With a new catchy name, and a profound understanding of their key demographics, Forever 21 did something that seemed a bit odd. Instead of importing garments at a lower operation cost, they choose to produce their clothes domestically.
Why?
Because this way, they had the latest fashion on hand quickly, faster than any other competitor. They would base themselves off ideas seen in Korea and produce them practically on site.
Many of their items were very cheap, meant to be bought, worn, and sometimes, discarded rather quickly. This is called fast fashion, and we will discuss about it later.
For now, let’s just say they were well on their way to becoming an empire.
The Wrong Growth And Expansion
By 1989, Forever 21 had 11 stores all over California. They averaged around 5000 square feet in size and the chain had even opened their first mall-based store. And by 1999, Forever 21 had 100 stores all over the US, some with 9000 square feet or more of space.
To diversify and capture even more buyers, they introduced Forever XXI in 2001; a new, high-fashion concept. Flagship stores opened in major cities like L.A., Miami and Chicago. They were massive, averaging 24,000 square feet in size.
All of this was fueled by Mrs. Chang’s eye for business. Mrs. Chang, and her nearly-clairvoyant ability to predict trends, were part of the catalyst that boosted Forever 21’s upswing.
And, as we mentioned before, their key strategy was fast fashion. Given that the garments intended use wasn’t for the long run, most of Forever 21’s clothing was cheaper and didn’t have the highest quality.
Now, taken into consideration that fast fashion can and has been profitable for brands, but hedging all your bets on it can backfire. Fast fashion requires you to have cheap products that attract customers to the company’s other, more expensive products. So, the loss-making, cheap clothes work as a gateway, as a hook.
To be successful with fast fashion, companies need to control variables like growth, supplies, and production cost. With regards to this last item; how do you make cheap clothes? The answer is sweatshops, which we will discuss about later.
The Changs knew they had to cater to bigger audiences. So, in 2006, they introduced the men’s line, a lingerie line in 2007, and a plus size brand in 2009, as well as makeup and cosmetics. In 2010, they opened a 90,000 square foot store in Times Square, with a visitor frequency of over 100,000 people per day.
It came as no surprise that, by 2015, Forever 21 brought in $4.4 Billion in sales and Do Won and Jin Sook had a net worth of over $5.9 Billion. By 2018, there were 800 stores all over the world, and the chain hired a total of almost 43,000 people.
All of this while they kept the core business in the family, as their two daughters, Linda and Esther, stepped into the company and helped expand it. The company was indeed expanding at an extremely high rate.
Forever 21 didn’t pay attention to one very particular detail: Online Business. Their ecommerce was merely 16% of their total sales and this made them very vulnerable to online shopping competition, which was evidently the future. Then, there was the company image.
Controversies
Production cost in the clothing industry have always been controversial. The cheap end price is only the tip of the iceberg. In 2001, amidst their early expansion, employees from a Los Angeles factory sued Forever 21, alleging conditions that more closely resembled a sweatshop than a factory.
Amidst these allegations were altered time cards, long work hours, payments below minimum age and in some cases no pay at all. This case generated a three year boycott against Forever 21 and though it was eventually settled in 2004, the chain’s image certainly took a hit.
Then in 2014, the US Department of Labor’s Occupational Safety and Health Administration (OSHA) recommended Forever 21 to be fined with $100,000 for serious safety hazards in the stores. Of course this was pocket change for them but the buck didn’t stop there because it wasn’t only about employee conditions.
Designers claimed Forever 21 was copying their work that included heavyweights like Diane Von Furstenberg, Anna Sui, Gwen Stefani and Trovata. Companies like Autodesk and Adobe filed a joint lawsuit against the company for using illegal pirated copies of their software. For a company which was turning in billions, the least they can do was pay for one license.
Now, remember all those stores, well in some malls, they had also inflated sales figure to lure in renters – they are facing a lawsuit for this.
Also, some of its jewelry products had toxic cadmium in them. To top it all off, the company has been accused of pushing a religious agenda. You see, the Changs are born again Christians and have consistently placed religious phrases in their products, such as Holy and Thank God, Jesus Loves You, etc. Even the verse John 3:16 is printed in their clothing.
Whatever their beliefs, it’s evident that the company didn’t have a clean slate. In fact, it’s a very messy one. But, did all this help in the company’s demise?
The Demise
Controversies might not have been the ultimate cause for the brand’s demise but they did help in denting an operation that was already getting out of hand. Forever 21 had expanded too quickly and Mrs. Chang admits to it.
”We went from seven countries to 47 countries within a less-than-six-year time frame.”
Jin Sook Chang
7 to 47, in less than six years, is a lot for a retail store. Remember when we discussed about the complexity of fast fashion? Well, again, here’s what she had to say.
”When we grew so quickly, there was a lot of complexity that we did not foresee. We weren’t set up with the supply chains to support that kind of globalization. Having to tailor our assortment for different countries created a lot of nuances that added up to a big puzzle problem for us.”
Jin Sook Chang
So, in summary, Forever 21 had too much success. They expanded too quickly and didn’t have a good grasp on the entire process. That’s never a good combination. Added to this, consumer behavior was changing. People don’t go to shopping malls anymore as much as they used to.
Let’s see some numbers now.
In 2018, the company had sales that averaged $3.3 Billion. A good number, right? Not so much when you compare it to 2016, when they had sold $4.4 Billion. That’s a decrease of $1 Billion in just two years.
The chain had a lot of stores that were big, shinny, but expensive to operate, around 800 of them. Debt was piling up.
Though they tried to avoid bankruptcy by downsizing, it was eventually inevitable. In 2019, the company filed for bankruptcy protection. This is when an individual or company has too much debt and can’t pay it, so they ask to reorganize the entire debt operation.
It doesn’t mean the company is dead, it means there’s another chance hopefully to become profitable again. Though this announcement shocked the world at first, some weren’t surprised.
Here’s what Mark Cohen, a business professor had to say:
”It’s a self-inflicted catastrophe. This is a bonanza for the competition and it’s another death knell for the malls. They are in that way have already lost a Sears, Macy’s, Penny’s, and are struggling with footsteps diminishing every day.”
Such a big company wasn’t just going to disappear.
A Look Into The Future
The company was given a chance when they applied for protection. And they have acted. In efforts to rescue the company, the Changs closed a lot of the stores. 350 stores to be precise.
They also ceased operations in 40 countries to focus on their most profitable locations and injected some effort into their e-commerce platforms. Remember how their ecommerce was forgotten?
Well, they took notice and worked on it. Will it be enough? We don’t know. But it has grown from 16% in 2016 to 25% in 2019. Keep in mind that their sales and entire operation is much smaller now.
They have also ramped up their marketing and created alliances with Amazon and other online retailers, but somehow it feels as though there’s something missing.
They aren’t too specific on what they are going to do. Perhaps, they don’t even know. But one thing’s for sure. What made them great is extinct. The days of massive stores are gone: there’s no longer a need for them. This might not only be the tale of Forever 21, but rather the tale of many other department stores.
Maybe as museums, or as an exotic destination to travel to. For now, all we know is that Forever 21 can stay alive, only if they break away from the past.
