The Fall of Forever 21
Forever 21, a world-famous fashion brand, is known for its low prices products. In the past, Forever 21 had about 800 stores in 48 countries, 430,000 employees, and a turnover of up to USD 4.4 billion. In 2015, Forbes announced that the founder of Forever 21 and his wife ranked 222nd on the US Rich List. At that time, the net assets of them were USD 3 billion. As a global fashion empire with more than 30 years of history and brilliant achievements, no one would have thought that Forever 21 officially declared bankruptcy on September 29, 2019, and terminated operations in forty countries around the world, just keeping Mexico and Latin America stores and global e-commerce services.
Have you bought Forever 21 products? What do you think is the main reason for their failure? Experts have some analysis on the experience of Forever 21’s decline, which can be used as a warning for the enterprise.
First of all, high expenditure on rents was a major breach. With the rise of e-commerce, in the past ten years, all retailers have shrunk physical stores to developing online sales platforms. However, Forever 21 has gone the other way. Its physical stores increased from 480 to 600 between 2010 and 2014. Even more, it increased to 800 stores in 2018. According to the official website of Forever 21, each store occupies a huge average area of about 1,100 square meters. In addition, the lease agreement is often over ten years long. Such long-term rent will eventually become a heavy financial burden for the company. Retail consulting firm customer growth partners speculates that the rent of Forever 21 may account for as much as 38% of its revenue. The huge storefront not only cost high rents to maintain but also required a lot of manpower.
However, Forever 21 did not hire enough staff for every store. Customers often complained that the salespersons were hard to find, the clothing is randomly piled on the floor, and even the full trash cans are not cleaned by employees. As a result, the consumer experience is greatly reduced. Apparently, the continuous…