Forever 21 has aged: now it's outflanked on sustainability, fast fashion and relevance
Forever 21, the teen-facing fast fashion brand, has filed for Chapter 11 bankruptcy protection in the US and will shut 350 of its 815 global stores. Its substantial real-estate cost, and lagging innovation and sustainability efforts have been blamed for its latest cuts.
The brand, founded in 1984 and once headquartered in Los Angeles, will shut 178 US stores and exit from much of Europe and Asia to instead operate primarily in Mexico and Latin America. The restructure has been a few months coming and it has received $350m in financing to mount a revival.
Linda Chang, executive vice-president, said: “This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21.”
But where did it all go wrong?
At its peak, the company reportedly made $4.4bn in revenue. Those days are now behind it as it grapples with several factors eating away at the hem of its business. One of the brand's defining factors was its polished cathedral-like stores. That it boasts the seventh most expensive retail space in New York is a testament to this strategy. It is also the seventh-largest tenant in Simon Property Group's malls.
Chris Donnelly, chief executive and founder of digital agency Verb Brands warned: "Many will be quick to blame Forever 21’s over-extension into bricks and mortar retail at a tumultuous time for the high street, which is fair, but the bigger picture is that the brand was simply not keeping up with the times."
In his opinion, it has failed to "modernise the brand, digital presence, supply chain. Essentially, even the most successful brands grow up and change – no brand can remain Forever 21".
What does the marketing budget tell us?
The brand’s marketing budget has shrunk drastically in the last two years according to data from Winmo. In the US it dropped from $826,745 in 2017 by 60% to $344,375 in 2018. In 2019, it has already spent $383,607 indicating that brand-building efforts are again underway despite its difficulties.
Digital search comprised the majority of its spend, nothing went into broadcast, out of home or print. Radio' which once took a large share ($391,247 in 2017) only saw $7,449 in 2019.
Most vitally, on Instagram it boasts 16.4m followers to showcase the latest fashions. With 15m on Facebook and 2m on Twitter, there is an audience it can speak directly to – but is it saying the right things?
Chris Moody, global chief design officer, Wolff Olins, believes that consumption habits have changed. "Fast fashion is of course still highly successful but a new generation are rightfully questioning the morals and virtues of the brands they buy from". The brand speaks to a teen audience with the notion that one can be 'Forever 21'. "If you are focusing your entire brand on a demographic, you really have to get what they get."
Jon Reily, vice-president, global commerce strategy lead at Publicis Sapient, believes the brand remains "very powerful". “I expect they will recover from this, but it’ll take extra marketing. Their core customers, 21-year-olds, are different than they were 10 years ago. Sustainability and social stances are now at top of mind for consumers.”
It has been upstaged the likes of Rent the Runway and thredUP “business models that promote sustainability”.
Anusha Couttigane, principal fashion analyst, EMEA at Kantar, said: "Its UK business has been particularly volatile for a number of years, having shut down several stores since 2016, including its Westfield Stratford flagship.”
Rivals like H&M and even Primark are outperforming it striving to become "ethical players that are building in sustainable ranges while still maintaining their chief value drivers."
This helps them retain relevance and tap into a predicted "shift towards slower replacement patterns".
Darren Savage, chief strategy officer, Tribal Worldwide London, said that the cheap, high-end fashion model was cutting edge when it launched in the 80s. That is no longer the case.
Competitors, however, have made sure they have been building a brand beyond the "sole premise of cheap fashionable clothes".
Rebecca Robins, head of global luxury at Interbrand noted that it under-indexed on responsiveness and relevance on its Best Global Brands study. She blamed "a perfect storm of misfired product and over-extended retail footprint in the wrong places and at the wrong time."
With sustainability rising up the consumer agenda, fast-fashion is becoming a harder sell, she said.
Forever 21’s growing pains
In recent years, the brand has dealt with a data breach, issues around worker pay and social media spats, whether that is becoming embroiled in an ad war with Ariana Grande or using a white model to showcase its Black Panther line.
Couttigane hinted that the owners' traditional morals and religious ethos are often at “odds with the discourse around acceptance and inclusivity,” more broadly she hinted “this highlights a contradictory challenge for a Christian brand at a time when other world faiths are being embraced and represented more in fashion ranges”.
Rob Sellers, managing director of GreyBASE, indicated that the brand performance and marketing efforts can’t fully be to blame for the financial woes. Its suffering just as much from “restructuring debt and a lack of strategic vision as it is from changing shopping behaviour”.
Tribal's Savage explained that H&M and Zara have maintained superior physical retail experiences. “Shopping for fashion is the experience of finding something that just fits the bill for a night out, new job, or date. Again, H&M and Zara have kept a laser focus on this in store, creating environments and well-trained staff that combine pop culture, with pop couture. Whereas many Forever 21 stores are tired featureless sheds full of cheap clothes."
Couttigane said the cost of running one of the world's largest store estates, the pressure to innovate, and the trend away from shopping as a social outlet, have hurt the business. Of course, ASOS attests to the difficulties in ditching physical retail too.
Further sniping the at its margin, she said: "The explosion of digital-first empires serving Forever 21’s youthful population in new and dynamic ways, have squeezed the brand out in what has become a highly saturated space”.
As it stands, Forever 21 “acts as a cautionary tale for retailers that are slow to innovate and embrace change”.