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#Bankruptcy #Forever21 #ThoughtsOnFastFashion

November 1, 2019

Although Forever 21’s sales reached $4 billion in 2014, they are now in the fate of bankruptcy.

Due to excessive expansion, the US fast fashion brand Forever 21 filed for bankruptcy and is going to close 350 stores worldwide, including up to 178 US stores. But they will continue to operate in Mexico and Latin America.

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Forever 21 have three stores in the UK and are currently undergoing a clearance sale of £30 million. Some analysts said that their biggest burden is the size of their huge physical stores. The brand closed more than 700 stores in the US in the first half of this year, more than the number of stores closed in 2018. All their stores in China have been closed. Moreover, their stores in Japan were all closed in October last month.

 

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Forever 21 Announcement on the Group’s Official Website

The industry did not feel much surprised that Forever 21 ended up in bankruptcy. Neil Saunders, Managing Director of GlobalData Retail, said that the bankruptcy of Forever 21 was the result of both the changing clothing trends and tastes, and the mistakes of group decision-making. Faced with fierce competition from rivals such as Zara and H&M, the Forever 21, which has a price range between $4 and $20, lacks significant differentiation and originality. At the time when consumer perceptions are awakened, Forever 21’s low quality and cheap goods have faded out of the sight of major consumer groups.

In addition, Forever 21’s 15- to 25-year-old customer group has a very low loyalty to the brand. Once the products are not up to date and meet the consumer’s fresh needs, they will not hesitate to switch to another brand. Apart from Forever 21’s recent initiatives which include the addition of multi-brand beauty collection store Riley Rose and 21 Red comprehensive concept store, there is no other new activities to capture customers’ needs. Instead, the lawsuits of luxury fashion brands such as Puma, Gucci and Adidas have aroused much public attention but pushed the brand image to fall to the bottom of the public.

In the face of fierce market competition and rising operating costs, this fast fashion brand, which were founded by the Korean-born couple Zhang Dongwen and Zhang Jinshu in the United States in 1984, have been shrinking in size in recent years. Since 2016, they have withdrawn from Belgium, the Netherlands, the United Kingdom, Germany, France, and markets such as Japan and Australia. Most stores in North America have also shut down.

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After 2017, Forever21 began to gradually withdraw from the Chinese market, and successively shut down stores in Hong Kong, Tianjin, Hangzhou, Beijing, Chongqing, etc., and finally completely withdrew in May this year. Last week, the brand announced that it would withdraw from the Japanese market in October.

Some experts pointed out that the decline of Forever 21 is related to the structural transformation brought about by the inequality in the US domestic market. The middle class consumers that Forever 21 has relied on are characterized by high salaries and geographical dispersion. But problems such as de-industrialization and turmoil in the retail market have led to increased regional inequality and geographical concentration of high-income people. As a result, the purchasing power of middle-class consumers have also declined.

Thoughts: The bankruptcy of Forever 21 has sounded the alarm for the development of fashion enterprises. Behind the difficulties and transformations of fast fashion, the era of winning by quantity speed has passed. As the market becomes more saturated, consumer desires and expenditures in clothing are becoming less and less, while the pursuit of comfort and quality in clothing is getting higher and higher. Fashion brands need to reduce plagiarism and imitation in the future, and display more creative and competitive products to consumers.

When change becomes the norm in the apparel industry, whether it is Zara, H&M or Forever 21, the neglect of young consumers’ changing tastes and needs, will only lead to the elimination from the market.

 

Courtesy of ‘The Designer’

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