Forever 21 was once
among America’s fastest-growing
fast-fashion retailers. It transformed its
once penniless founders into billionaires, established itself as
a powerhouse in the fast-fashion world, and, at its peak, made
$4.4 billion in revenue. But the once flush
company is now preparing to file
for bankruptcy. So, what happened? Back in the day, Forever 21 embodied the
American dream. In 1981, Jin Sook and Do
Won “Don” Chang moved to Los Angeles from
South Korea with no money, no
college degrees, and speaking little English. To make ends meet, Jin Sook
worked as a hairdresser while Don worked
as a janitor, pumped gas, and
served coffee. Until he noticed that
“the people who drove the nicest cars were all
in the garment business.” So three years later,
with $11,000 in savings, the Changs opened a
900-square-foot clothing store called
Fashion 21. The couple took advantage
of wholesale closeouts to buy merchandise from
manufacturers at a discount. Their system worked. The store made $700,000
in sales its first year. Fashion 21 was initially
only popular with LA’s Korean
American community. But the Changs
leveraged their success, opening new stores
every six months, which broadened the
company’s customer base at the same time. They also changed the
name to Forever 21 to emphasize the idea
that it was “for anyone who
wants to be trendy, fresh and young in spirit.” The company’s key to
success was simple: cultivate a huge following
by selling trendy clothing
for low prices. While this is something
that today’s consumers pretty much expect, Forever 21 was one
of the first to do it. And they were the fastest. Jin Sook was eventually
approving over 400 designs a day. Which meant the
company could sell trends as they were happening. Even if some of those designs
landed Forever 21 in trouble. But while other brands
and designers might not have been
Forever 21’s biggest fans, customers couldn’t
get enough of their affordable styles. As a result, Forever 21
became one of the largest tenants
of American malls, with 480 locations
nationwide. And by 2015, business
was booming. Forever 21’s sales peaked, with $4.4 billion in
global sales that year. As for the Changs? They became one of
America’s wealthiest couples, with a combined net
worth reaching an estimated $5.9 billion
in March 2015. Forever 21’s goal
was to become an $8 billion company
by 2017 and open 600 new
stores in three years. But the company’s
aggressive expansion would also lead to
its downfall. Part of what made Forever 21
popular in the first place was its fast-fashion model. Even though its products
were always mass-produced, they still felt unique
because its stores only sold select styles
for a limited time. However, as the company
focused on growing bigger, its styles became more
“cookie-cutter.” As a result,
Forever 21 started to lose touch with
its core customers, while competitors like
H&M and Zara rose. No longer the trendsetter, Forever 21 became
the butt of the joke. It’s also no longer the
fastest in the game. Internet brands like
Fashion Nova churn out celebrity- and
influencer-inspired styles at a rapid-fire pace. And as e-commerce
has continued to boom, traditional retailers
like Forever 21 have struggled to adapt to changing consumer
behaviors. According to a March
2019 survey, millennials make 60% of
their purchases online and overall prefer
online shopping over going to a
physical store. Yet, Forever 21 continued
opening new stores as recently as 2016, even expanding
existing stores to take over multiple
floors with mens, childrens, and
home-goods sections. Which could help explain
why Forever 21’s sales are estimated to
have dropped by 20% to 25% in 2018. On top of that, the Changs, who still own the company, have lost more than
$4 billion from their personal
net worths. The company overall is
now $500 million in debt and considering
filing for bankruptcy. Forever 21 has already
started downsizing its stores. And as one of the largest
tenants of America’s malls, a widespread shutdown
of Forever 21 could exacerbate what’s
already being referred to as the “retail apocalypse,” which has already closed
more than 15,000 retailers across the US and could shut down
75,000 more, according to investment
firm UBS. But bankruptcy
doesn’t always mean the end for
a company. In fact, it could give
Forever 21 time to restructure
and bounce back. The company could
shut down its least profitable stores and try rebranding itself. But in an age of cheap
internet boutiques and fast-fashion empires,
this might not be enough. So it turns out Forever 21 might not be forever
after all.