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What happened to Forever 21? 🤔 The Raise and Fall 📉


This video was brought to you by us: Slidebean.
Make beautiful slide presentations in no time. Get one free month by signing up at slidebean.com/youtube. It was the embodiment of the American dream.
A migrant couple who starts from scratch and rises to the top of the clothing retail industry.
But then, that dream plummets to the ground. Forever 21 became a fixture in fashion and
the wallets of twenty-something-year-olds. The clothes were fashionable and cheap, and
there was a Forever 21 store in almost every shopping mall you could think of. They were ALL OVER the world. And, with the
latest fashion trends on hand, they seemed here to stay. But Forever 21 was a controversial brand.
It grew too fast and had dubious practices. So, it’s safe to say that it rocked the
world of fashion, for better or for worse. And, in 2019, it was the everchanging world
of retail that ROCKED Forever 21, so much so that the company filed for bankruptcy protection. How did one of the world’s most noticeable
fashion brands manage to get to this point? In this episode of Startup Forensics, we’ll
dive into: How Forever 21 began The wrong growth and expansion Controversies The demise A look into the future This is Startup Forensics: Forever 21 How Forever 21 began. Korean immigrants Do Won Chang and Jin Sook
Chang arrived at the U.S. in the 80’s and they had a rough time. They worked odd jobs,
had very little money and no formal education to rely on. Do Won originally had hoped that, having worked
at a coffee shop in Korea, his expertise in this area would be the gateway to success
but it wasn’t. He was stuck as a waiter. But he did notice
something. The people who drove the nicest cars were
all in the garment business, he said in an interview. His instinct told him the way to
success was through fashion. So, in 1984, they scraped up all the money
they had, $11 000 in total, and opened a small clothing store called Fashion 21. The 900
sq. ft. store was directed towards the Korean American community, its women specifically. And it worked; the first year raked in $700,000 in revenue. With such results, they felt confident enough
to expand, at a brutally fast pace: a new store every six months. DON’T forget this. By 1987, the Changs wanted to give Fashion
21 a twist. Their aim was to evoke an eternal desire for youth, a wish to remain in what
Do Won himself recalled as the most enviable age: FOREVER 21. With a new, catchy name, and a profound understanding
of their key demographics, Forever 21 did something that seemed a bit odd. Instead of
importing garments at a lower operating cost, they chose to produce their clothes domestically. Why? Because this way, they had the latest fashion
on hand quickly, faster than any competitor. They would base themselves off ideas seen
in Korea and produce them practically on site. Many of their items were very cheap, meant
to be bought, worn, and sometimes, discarded quickly. This is called fast fashion, and
we’ll talk about it later. For now, let’s just say they were well on
their way to becoming an empire. By 1989, Forever 21 had 11 stores all over
California. They averaged 5000 sq. ft. in size and the chain had even opened their first
mall-based store. And by 1999, Forever 21 had 100 stores all over the U.S., some with 9000 sq. ft.
or more of space. To diversify and capture even more buyers,
they introduced Forever XXI in 2001; a new, high-fashion concept. Flagship stores opened
in major cities like L.A., Miami and Chicago and they were massive, averaging 24 000 sq.
ft. in size. ALSO remember this. All this was fueled by Mrs. Chang’s eye
for business. Mrs. Chang, and her nearly-clairvoyant ability
to predict trends, were part of the catalyst that boosted Forever 21’s upswing, said
an article in Business Insider. And, as I mentioned before, their key strategy
was fast fashion. Given that the garments’ intended use wasn’t for the long run, most
of Forever 21’s clothing was cheaper and didn’t have the highest quality. Now, take into consideration that fast fashion
CAN AND HAS BEEN profitable for brands, but hedging all your bets on it can backfire.
Fast fashion requires you to have cheap products that attract the customers to the company’s
other, more expensive products. So, the loss-making, cheap clothes work as
a gateway, as a hook. To be successful with fast fashion, you need
to control variables like growth, supplies, and production cost. With regards to this last item: how do you
make cheap clothes? The answer is sweatshops. But we’ll talk about this later. The Changs knew they had to cater to bigger
audiences. So, in 2006, they included the men’s line, a lingerie line in 2007, and
a plus size brand in 2009, as well as makeup and cosmetics. In 2010, they opened a 90 000 sq. ft store
in Times Square, with a visitor frequency of 100 000 people per day. So, it came as no surprise that, by 2015,
Forever 21 brought in $4.4 bn in sales and Do Won and Jin Sook had a net worth of $5.9
bn. By 2018, there were 800 stores all over the
world, and the chain hired a total of almost 43 000 people. All of this, while they kept the core business
in the family, as their two daughters, Linda and Esther, stepped into the company and helped
expand it. Yes, the company was expanding, at a very
high rate. But Forever 21 didn’t pay attention to one
very particular detail: ONLINE BUSINESS. Their ecommerce was merely 16% of their total
sales and this made them VERY vulnerable to online shopping, which was evidently the future. Then, there was the company image. Production costs in the clothing industry
have always been controversial. The cheap end price is only the tip of the iceberg. In 2001, amidst their early expansion, employees
from a Los Angeles factory sued Forever 21, alleging conditions that more closely resembled
a sweatshop than a factory. Amidst the allegations were altered timecards, long work hours, payment
below the minimum wage and, in some cases, no pay at all. This case generated a three-year boycott against
Forever 21 and, though it was eventually settled in 2004, the chain’s image took a hit. Then in 2014, the United States Department
of Labor’s Occupational Safety and Health Administration (OSHA) recommended Forever
21 be fined with $100 000 for serious safety hazards in its stores. Yes, it was pocket change for them, but the
buck didn’t stop there because it wasn’t only about employee conditions. Designers claimed Forever 21 copied their
work, including heavyweights like Diane von Fürstenberg, Anna Sui, Gwen Stefani and Trovata.
Even Arianna Grande sued them for copying the style found in her 7 rings video. Companies like Autodesk and Adobe filed a
joint lawsuit against the company for using illegal, pirated copies of their software.
C’mon! You turn in billions. You can at least pay for ONE license. Remember all those stores? Well, in some malls, they had also inflated
sales figures to lure in renters. (They’re facing a lawsuit for this. ANOTHER one, yes). Also, some of its jewelry products had toxic
cadmium in them. And to top it all off, the company has been
accused of pushing a religious agenda. That’s right. Religion gets into the mix. You see, the Changs are born-again Christians
and have consistently placed religious phrases in their products, such as Holy and Thank
God, Jesus Loves You, etc. Even the verse John 3:16 is printed in their clothing. Is that Stone Cold Steve Austin? Whatever their beliefs, it’s evident that
the company didn’t have a clean slate. In fact, it’s a very messy one. But, did all
this help in the company’s demise? Controversies might’ve not sunk the brand,
but they did help in denting an operation that was already getting out of hand. Forever
21 had expanded too quickly and Mrs. Chang admits to it. 7 to 47, in less than six years, is a lot for a retail store. Remember what we said about the complexity
of fast fashion? Well, again, here’s what she had to say. So, in summary, Forever 21 had too much success? Well, YES. They expanded too quickly and didn’t have
a good grasp on the entire process. That’s never a good combination. Added to this, consumer
behavior was changing. People don’t go to shopping malls anymore. Let’s see some numbers: In 2018, the company had sales that averaged
$3.3 bn. A good number, right? Not so much when you compare it to 2016, when
they had sold $4.4 bn. A loss of $1 bn in just two years. And the chain had a lot of stores that were
big, shiny, but expensive to operate. Yeah, they had about 800 of them. Debt was piling
high. So, though they TRIED to avoid bankruptcy
by downsizing, it was inevitable. In 2019, the company filed for bankruptcy
protection. This is when an individual or company has too much debt and can’t pay
it, so they ask to reorganize the entire debt operation. This basically means another chance to hopefully
be profitable again. And, though at first it shocked the world,
some weren’t surprised. Here’s what Mark Cohen, a business professor,
had to say: But such a big company wasn’t just going
to disappear. The company was given a chance when they applied
for protection. And they have acted; in their efforts to rescue the company, the Changs
closed a lot of the stores. A LOT. 350 stores. They also ceased operations in 40 countries
to focus on their most profitable locations and injected some effort into their e-commerce
operations. Remember that their ecommerce was forgotten?
Well, they took notice and worked on it. Will it be enough? We don’t know. But it HAS grown from 16% in 2016 to 25% in
2019. Keep in mind that their sales and entire operation is much smaller now. They have also ramped up their marketing and
created alliances with Amazon and other online retailers, but somehow it feels as though
there’s something missing. They aren’t too specific on what they are going to do.
Perhaps not even they know. But one thing’s for sure. What made them
great is extinct. The days of massive stores are gone: there’s no need for them. So this might not only be the tale of Forever
21 but rather of all department stores. Where are we headed to? What will happen to all
these spaces? Will the future have clothing stores? Maybe as museums, or as
an exotic destination to travel to. But, for now, all we know is that Forever
21 can stay alive, only if they break away from the past.

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21 thoughts on “What happened to Forever 21? 🤔 The Raise and Fall 📉

  1. Great job Caya, love these videos. When you are in Brooklyn, come work remotely from Class & Co (you'll be my guest). Keep these up friend.

  2. Seriously guys make a startup forensics that ended in a exit buyout or something similar successful. Try whatsapp or Instagram.

  3. Nicely done. Other chains like Gap, American Eagle and Abercrombie are also going down into that rabbit hole. Do think there still opportunities for storefront retail business, but it will have to integrate innovative online services and strong social media branding. It's the full experience that goes beyond just the clothes that this generation is looking for. Lifestyle brands that takes a 360 approach to product, customer service and technology.

  4. Thanks man you’re such a huge blessing to me I’m the founder and CEO of Jetaga! An e-commerce startup in Lagos Nigeria.

  5. So where is the demise? Donald Trump file for bankruptcy 6 times and became the president of the United States. You do understand that demise means death.

  6. All comments thank only Caya 🙁 !! then I would like to send my thanks to the other staff behind these videos
    Thanks Paula,Thanks Elena for your cool animation. And special thanks to you Maria who will like my comment.

    huh
    finally thanks Cayasso. you are all awesome guys

  7. What I learned from this:

    1. Aim only for the right amount of success that you and your company can handle.
    They're company could not handle the growth rate that they drowned in their own success and had to downsize.

    2. Focus on the what is beneficial for your customers.
    They failed to innovate and therefore got outcompeted by online shops that their sales decreased a significant amount.

    3. Treat your employees right!

    Controversial that damages the company's reputation also damages its revenue. Create an ideal work environment for your employees and treat them as the base o your operations.

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