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Forever 21 bankruptcy: 5 reasons why it may have happened



Forever 21 is starting to age.

The iconic youth-focused fashion retailer announced to its customers on Monday that it is actually filing for bankruptcy despite trying to close business development rumors in a newsletter 10 days before. Under Chapter 11 of the US Bankruptcy Code, Forever 21 will remain open while "taking positive steps to reorganize the business."

Up to 178 stores will close across the United States ̵

1; which is sure to hurt thousands of employees who depend on a revenue source for retailers. The operations are also said to stop in 40 countries.

For some devoted buyers, the announcement comes as a shock. However, a number of brick-and-mortar stores have struggled to keep money flowing with the rise of e-commerce juggernauts such as Amazon that provide the convenience of fast shipping.

Fashion outlets that have shuttered part of their business or have left the business altogether include other notable malls such as Payless, Kohl, Dressbarn, Topshop, Ralph Lauren, Lord & Taylor and more.

Forever 21, founded by the Korean-born American man and his wife Do Won and Jin Sook Chang in 1981, grew to assemble a network of over 800 stores while joining multi-billion dollar companies. Despite this, the trendy fashion chain that covertly biblical verses about eternal life on the shopping bags could not be spared from what some have called the "retail apocalypse."

Here are five reasons that may have contributed to Forever 21's fall. .

1. Rapid expansion

SANTA MONICA, CA / USA – APRIL 18, 2019: Forever 21 store's exterior and trademark logo.

In Forever 21's "About Us" section of their website, it acknowledged that it was the fifth largest specialty retailer in the United States and aimed to "become a $ 8 billion company by 2017 and open 600 stores over the the next three years. ”However, just like with any other aggressively expanding business, there is a lot of debt that comes with it.

The company also revealed that the average size of a Forever 21 store is 38,000 square feet, while the largest is 162,000 square feet. A market study that observed the average rent paid in square feet in the United States for industrial space found that companies classified under "special purpose" paid $ 6.50 per square foot. If that figure matches today's standards, a 38,000-square-foot Forever 21 would cost around $ 247,000 for rent alone. Similarly, a 162,000-square-foot location would have cost an incredible $ 1,053,000.

2. Bad publicity

According to a report from the social media analysis site Sprout Social, nine out of ten customers will stop buying from brands that lack transparency. These findings are detrimental to Forever 21 since the company has been involved in back-to-back lawsuits for trademark and copyright infringement for many years.

Photo shows example of Forever 21's unauthorized use of Ariana Grande brand, September 3, 2019. (Source: lawsuit)

Regardless of designers of large households to small indie brands, Forever 21 has created a knockoff version for customer acquisition. Gucci, Adidas and Puma are just a few big dogs who have tried a courtroom match with Forever 21. Pop singer Ariana Grande has filed a $ 10 million lawsuit over the brand of "stealing her" image and likeness.

3. Fast fashion and the competition

Forever 21 may be known for its rapid duplications, but they are not alone in the fast fashion world. Competitors such as H&M and Zara have been vying for the same consumer base that wants trendy clothes at a reasonable or reasonable price point. Popular London-based e-commerce brands such as ASOS and Pretty Little Thing have also made a profit with their lucrative celebrity collaboration.

The Instagram-famous Los Angeles-based brand Fashion Nova has also given Forever 21 a run for its money with shameless knockoff business strategy that churns out replicated designs in less than 24 hours.

4. Changing Consumers

Conversely, there is a basis for purchase that is opposed to everything fast fashion stands for. These customers are generally concerned with the environment, whether through minimizing waste or not supporting an industry that has created harsh working conditions. This desire for sustainable fair trade has enabled the second-hand market to grow to an estimated $ 28 billion worldwide, according to a consumer survey by analysis firm Statista.

FILE – In this Saturday, November 28, 2015, file photo, Janae Melvin is about gifts at Forever 21 in Kansas City, Kan. (AP Photo / Charlie Riedel, File)

The demand for body positivity in the fashion industry has also affected Forever 21 despite the fact that the store has a dedicated plus size and crease parts. in American stores. Outside of the small selections that these departments have, Forever 21 highlights its ultra-thin models more often – which may have alienated the full base that is said to have a purchasing power of around $ 46.4 billion, according to business management consultants at Coresight Research. [19659003] Forever 21's shipping of free diet bars over the summer also didn't help the brand's image.

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5. Unfocused Warehouse

Although the majority of Forever 21 stores offer different choices, the brand seems to have expanded its reach too far. With its other lines such as XXI Forever, For Love 21 and Heritage 1981, the store has carried a mixed bag of styles that are both overwhelming and in conflict with customers' inner Marie Kondo call for minimalism.

A mall store in Forever 21 & # 39; s beauty-focused sister store Riley Rose. (Riley Rose)

The store also tried to make a home decor, technical accessories and cosmetics line that is cheap in price but lacks durability. Forever 21's sister brand, Riley Rose, who sells third-party beauty products, never took the path the company hoped. Even top beauty retailer Ulta is struggling with a changing market that promotes skin care over makeup.

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A January report in Business of Fashion said Forever 21 had its view on double the number of Riley Rose stores. It does not seem to happen while the business is reorganizing its strategy during bankruptcy.


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