US Insights

Forever 21 failed to safeguard its brand

Anusha Couttigane

Principal Analyst

Retail 10.04.2019 / 09:00

forever21

The fate of Forever 21 is a cautionary tale for retailers that are slow to innovate.

A staple of shopping hotspots worldwide, fast-fashion specialist Forever 21 filed for US Chapter 11 bankruptcy protection at the end of September. Its decline demonstrates how failing to recognise shifts in shopper behaviour and sentiment can put even the biggest businesses in peril.

Around 350 of its 815 stores in 57 markets are slated to close as part of the Chapter 11 plan. As a consequence, the brand, which originated in South Korea in 1984, will likely exit numerous markets where its flagship stores have been highly visible landmarks in key retail locations for years.

Exits from Canada and Japan have already been disclosed, with its Asian and European presence liable to be massively downsized, if not eradicated completely. The company has pledged to continue to pursue growth in Mexico and Latin America.

Forever 21-2

The challenges faced by the Forever 21 brand will come as little surprise to industry spectators. This is not the first time the business has shown evidence of a shaky financial state or been compelled to reduce its estate in order to cut losses. Its UK business has been particularly volatile for a number of years, having shut down several stores since 2016, including its Westfield Stratford flagship.

A failure to heed the warning signs

Part of its challenge has been a slow acknowledgement of the sustainability movement that is galvanizing fashion. Forever 21 is by no means the only retailer offering a value-level fast fashion offer. However, rivals like H&M and even Primark are far ahead in the journey towards repositioning themselves as ethical players that are building in sustainable ranges while still maintaining their chief value drivers. This has helped brands that depend on high volumes to retain relevance even as the consumer world shifts towards slower replacement patterns.

The brand has also attracted significant negative press over the last few years, which has tainted its reputation and brand trust. Incidents like the 2017 data breach, factory worker payment scandals and the Ariana Grande lawsuit compounded other issues that fueled negativity in the social sphere, e.g. its decision to use a white model to showcase Wakanda-themed products from the Black Panther movies and claims of design theft.

Some of the pushback the brand has experienced also stems from a resistance to the relaxation of attitudes towards traditional morals. As a business that has always been public about its religious ethos, this does often position it at odds with the discourse around acceptance and inclusivity, which highlights a contradictory challenge for a Christian brand at a time when other world faiths are being embraced and represented more in fashion ranges.

Wider drivers at play

There are, of course, more tangible issues at play, to which other retailers are not immune. These include the cost of running a large store estate, the pressure to innovate (especially when it comes to technology) and get it right first time, and the trend away from shopping as a social outlet, which has impacted traffic to malls and traditional retail destinations.

This, combined with the explosion of digital-first empires serving Forever 21’s youthful population in new and dynamic ways, have squeezed out the brand in what has become a highly saturated space. As such, the fate of Forever 21 acts as a cautionary tale for retailers that are slow to innovate and embrace change. The future of retail success depends significantly on the ability of businesses to meet new demands with both speed and agility.

Source: Kantar

Editor's Notes

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