What happened to Forever 21?

Forever 21 is a North American fast fashion retailer founded by the husband and wife team Do Won Chang and Jin Sook Chang in 1984, making $700,000 in revenue during its first year and by becoming a global player with over $4 billion in revenues and across 480 locations in the US alone by 2015. Only four years later, a 32% drop in global sales forced Forever 21 to file for bankruptcy. Several factors, such as too aggressive expansion, lack of proper online commerce strategy and lack of focus might have contributed.

Aspect	Explanation
Founding and Growth	Forever 21 was founded in 1984 by Do Won Chang and Jin Sook Chang in Los Angeles, California. The store initially sold clothing for women and quickly expanded its product offerings to include men’s and children’s clothing, as well as accessories and beauty products. The brand gained popularity for its fashion-forward items at budget-friendly prices, attracting a young and diverse customer base. The company’s rapid expansion led to its presence in malls and shopping centers across the United States and internationally.
Global Expansion	During the late 1990s and early 2000s, Forever 21 experienced significant growth and expanded its reach beyond the United States. The retailer opened stores in Canada, Europe, Asia, and other regions, capitalizing on the demand for fast fashion. Its ability to quickly respond to emerging fashion trends and provide a wide range of clothing options at low prices contributed to its global success.
Challenges and Bankruptcy	Despite its initial success, Forever 21 faced several challenges in the 2010s. Changing consumer preferences, a shift toward online shopping, and increased competition from e-commerce giants like Amazon and fast-fashion rivals impacted the company’s sales. Additionally, Forever 21 was criticized for alleged labor violations and environmental concerns related to its manufacturing practices. In 2019, the company filed for Chapter 11 bankruptcy, citing financial difficulties and a need to restructure its operations.
Store Closures and Restructuring	As part of its bankruptcy proceedings, Forever 21 announced plans to close numerous underperforming stores and reevaluate its business model. The company aimed to focus on its core markets and online presence while reducing its physical store footprint. The restructuring process included renegotiating leases and streamlining operations to improve financial stability. Forever 21 also explored collaborations and partnerships to revitalize its brand.
Acquisition and New Ownership	In February 2020, Forever 21 emerged from bankruptcy under new ownership. The Authentic Brands Group (ABG) and mall operators Simon Property Group and Brookfield Property Partners jointly acquired the brand. Under the new ownership, Forever 21 planned to relaunch and reposition itself in the retail market. The acquisition aimed to leverage the brand’s recognition and heritage while adapting to the changing retail landscape.
E-commerce Focus	The relaunched Forever 21 placed a stronger emphasis on its e-commerce operations, recognizing the growing importance of online shopping. The company invested in its online platform and digital marketing strategies to engage with consumers in the digital space. It also adapted to evolving consumer preferences by offering sustainable fashion options and expanding its product range. Forever 21 aimed to combine its fast-fashion legacy with a more sustainable and digitally relevant approach.

Table of Contents

Background

Forever 21 is a North American fast fashion retailer founded by the husband and wife team Do Won Chang and Jin Sook Chang in 1984. Both were poor immigrants working menial jobs who recognized that the wealthiest people in their area were in the garment business.

The first store – called Fashion 21 – opened in the Highland Park district of Los Angeles and was targeted at the local Korean-American community. It was funded with $11,000 – a small sum of money but everything the two siblings had at the time.

Fashion 21 was an instant success, amassing $700,000 in revenue during its first year. More stores were continuously added over the years, with global sales peaking in 2015 at $4.4 billion across 480 locations in the US alone.

Only four years later, a 32% drop in global sales forced Forever 21 to file for bankruptcy. Most of its North American stores would close down, as would international operations in 40 countries.

How did Forever 21 fall from grace so quickly?

Aggressive expansion

As a fast-fashion retailer, the success of Forever 21 was reliant on mass-producing clothing items that still felt unique and trendy to the consumer buying them.

However, the continued focus on expansion meant more people would end up wearing the same item by default. Styles and trends started to become more mainstream, eroding the company’s competitive edge and causing it to lose customers to rivals such as H&M and Zara.

Furthermore, the company was unable to adequately invest in its ever-growing supply chain. This meant it took more time to release fresh styles into the market – a major disadvantage for a self-described fast-fashion retailer.

eCommerce

Another victim of the fast and aggressive store expansion policy was eCommerce.

Without a proper online retail strategy, Forever 21 quickly alienated its core millennial market. In fact, it was still opening new stores in 2016 as competitors strengthened their online presence.

Around the same time, general foot traffic in brick-and-mortar stores started to decline.

Product differentiation

Forever 21 was also known to acquire large stores from bankrupt retailers such as Sears and Borders.

Some of these stores were extremely large, with a 90,000 square foot store in Times Square being the most obvious example. With a glut of floor space and a focus on growing revenue, Forever 21 began selling men’s clothes, cosmetics, lingerie, and makeup in addition to its core offering.

Unfortunately, this gave Forever 21 more of a department store feel than a specialized fashion chain. If nothing else, this move put the company in direct competition with established players such as Target and further alienated its core demographic.

Controversies and lawsuits

Forever 21 was sued by employees in a Los Angeles factory over allegations of sweatshop-like working conditions. Workers claimed to receive below minimum wage and in some cases, no wage whatsoever. The case dragged on for three years until a settlement in 2004 with the company suffering reputational damage. Further damage occurred in 2014 when the company was fined for safety hazards in some of its stores.

Multiple designers and personalities also claimed Forever 21 copied their work, including Gwen Stefani, Ariane Grande, and Diane Von Fürstenberg.

As if that wasn’t enough, the company was also caught using pirated copies of Adobe and Autodesk software and selling jewelry containing toxic cadmium.

Collectively, these events cost the company millions in settlements and immense reputational harm.

Key takeaways:

Forever 21 is a North American fast-fashion retailer. A focus on rapid growth helped the company reach $4.4 billion in sales revenue in 2015, but Forever 21 ultimately fell as quickly as it had risen.
The expansion-centric strategy of Forever 21 came at the cost of effective supply chain management and a strong online presence. Both are integral to the continued success of any fast-fashion company.
By acquiring large stores from bankrupt department brands, Forever 21 was forced to sell a wide range of inventory to fill floor space and justify its growth strategy. This alienated an already disenfranchised millennial target audience.

Key Highlights

Forever 21 is a North American fast-fashion retailer founded in 1984 by Do Won Chang and Jin Sook Chang. The company rapidly grew from its humble beginnings, making $700,000 in revenue during its first year and reaching over $4 billion in revenues across 480 locations in the US alone by 2015.
Only four years later, a 32% drop in global sales forced Forever 21 to file for bankruptcy. The company faced numerous challenges that contributed to its downfall.
Aggressive expansion was a key factor in Forever 21’s decline. As the company rapidly expanded its store footprint, it struggled to maintain the uniqueness and exclusivity of its clothing items. The mainstreaming of styles and trends eroded its competitive edge, leading to customer losses to rivals like H&M and Zara.
The relentless focus on expansion also hindered the company’s ability to invest adequately in its supply chain. This resulted in delayed releases of fresh styles, a significant disadvantage for a fast-fashion retailer.
eCommerce was another area where Forever 21 fell behind. Without a robust online retail strategy, the company alienated its core millennial market, as competitors strengthened their online presence. The decline in brick-and-mortar foot traffic further exacerbated this issue.
Forever 21’s product differentiation suffered as it acquired large stores from bankrupt retailers like Sears and Borders. Selling men’s clothes, cosmetics, lingerie, and makeup alongside its core offering gave the company a more department store feel, competing with established players like Target and further distancing itself from its core demographic.
Controversies and lawsuits also played a part in Forever 21’s decline. The company faced lawsuits from employees over sweatshop-like working conditions, reputational damage from copyright infringement claims by designers and personalities, and legal troubles over pirated software and toxic jewelry.
The collective impact of these challenges cost the company millions in settlements and severely damaged its reputation.