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Home / Business / Forever 21's business model was completely out of fashion

Forever 21's business model was completely out of fashion



Forever 21's financial problems that prompted its swift opponent to file for Chapter 11 bankruptcy protection Sunday stemmed from a combination of an over-expanded retail footprint and growing competition, retail analysts said.

"Expanding too much, too soon and primarily at mall locations, contributed to Forever 21's problems," said Alexis DeSalva, senior retail and e-commerce analyst at Mintel Market Research.

Although there were some suggestions that Buyers, especially younger ones, have moved away from fast-fashion chains and prioritized brands that promote social awareness images, Mark A. Cohen, director of retail studies and assistant professor at Columbia University's Graduate School of Business, claimed that the success of competitors like Zara suggested that changing consumer tastes was not ahead of the challenges of Forever 21

. "There is nothing wrong with the genres" fast fashion "and" value pricing "in the eyes of customers," he said.

"Women will still have reasonable fashion , but many are focused on practicality, which is not necessarily associated with trips to the mall anymore, "DeSalva said.

As shopping trends began to shift toward a model that benefited the mind re stores, Forever 21 went in the opposite direction and expanded the size of the brick and mortar footprint. The company, which has 815 stores globally, said it planned to close most of them in Asia and Europe, and as many as 178 of its more than 500 stores in the United States

“[There were] for many stores in too many in Increasingly weak malls that were ever larger in size than Forever 21 could productively manage, ”Cohen said. "Taking advantage of a surplus of cheap real estate in large sizes led them to start shopping categories where they had little or no expertise," he said.

"The whole industry was about who could make it bigger, so they ended up being over-geared," said Marshal Cohen, chief industrial analyst at The NPD Group, a market research firm. "They had a lot of places, they had big places," he said.

Consumers – especially young people – do not spend so much on clothes today, prefer experiences and entertainment.

With rents, Forever 21 is the seventh largest tenant of shopping center owner Simon Property Group, and properties are likely to be a key focus of the restructuring. The company said it would spend the $ 350 million in funding it provided prior to submitting Chapter 11 to "the right size of the store base."

renegotiate existing ones, "said Sucharita Kodali, a retail analyst at Forrester Research.

Today, buyers do not need a store with sparkling malls to discover new brands. "Customer migration from shopping in brick-based stores to the Internet has not helped them," said Columbia & # 39; s Cohen.

While Amazon has played a huge role in changing how Americans shop in general, it has actually had a smaller impact on fashion than other categories of merchandise, Kodali said, adding that smaller online startups today use social media to get direct contact with a customer base in a way that was not possible in Forever 21's heyday of mall time. "There are other fashion boutiques on the web with great Instagram presence that may have played a bigger role," she said.

Moreover, consumers – especially young people – do not spend so much on clothes today. "The younger generation would rather be seen in the right place than wearing the right outfit," Cohen said of the NPD, adding that younger buyers tend to spend more on experiences and entertainment.

clothes spend. They use phones, digital goods, beauty products and streetwear, "Kodali said.

" Consumers still visit malls, but not always to shop, "said DeSalva." The women who traded fast-fashion retailers like Forever 21 when they was younger and when the retailer was at the top now has different priorities. "


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