Forever 21 Sings the Brick-and-Mortar Blues

Julija A. Image
ByJulija A.
October 01, 2019

Another brick-and-mortar store bites the dust. Fashion retailer Forever 21 filed for bankruptcy on Sunday, September 29.

With unrelenting competition from Amazon and other online sellers, Forever 21 succumbed to the kinds of pressures that face traditional retailers in the digital age. Changing fashion trends, the millennial generation’s disdain for fast fashion, and the convenience of online stores over brick-and-mortar outlets all contributed to the decision to seek bankruptcy protection.

Forever 21 is a privately held company that managed for a while to sell lots of inexpensive clothing based on trendy styles. The chain’s popularity has declined in recent years as it faced competition from similar stores like Zara and H&M.

The chain was also a victim of changing tastes. Millennials and Gen Z shoppers say they are looking for more than low prices. They’re interested in ethically sourced garments. Younger generations are more eco-conscious on average, and their shopping preferences seem to lean away from fast-fashion. They prefer organic materials over cheap fabrics, and secondhand items are also rising in popularity. Thrift stores like thredUP are particularly popular because they combine affordable secondhand merchandise with the convenience of online shopping.

Forever 21 has 815 stores in 57 countries. The company says it intends to focus on restructuring and shutting down a few of international locations so it can concentrate on core operations. In the bankruptcy filing, the chain requested court permission to close as many as 178 US stores outside of focus markets.

The Forever 21 team seems to be focused on clearing inventory at the moment. Starting Monday, September 30, the Forever 21 website offered low-price deals across a wide range of items. With tops currently on sale for less than $3 and pants for $20 or less, it’s clear that prices have been slashed.

Gabriella Santaniello, the founder of research company A-Line Partners, says Forever 21’s bankruptcy is likely to create pressure for other retailers as well. They will have to lower their own prices to move inventory.

Santaniello says said that Forever 21 did very little to differentiate its brand from others: “They used to have a bit of an older customer, but customers have become more conscious of where they spend their dollars. They want sustainability, they want to feel represented and I don’t think Forever 21 particularly stood for any of this.”

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Retail analysts say that another reason for Forever 21’s financial troubles might be low prices paired with large sales floors. “Forever 21’s large stores have been the key to their downfall,” says Jane Hali of research firm Jane Hali & Associates. “How can you have profitability on sales per square foot with these large stores?”

Compared to competitors Zara and H&M, Forever 21 has a lot more stores spread all across the US - and they’re not all profitable. In addition to shuttering US outlets, Forever 21 says it intends to close most of its stores in Europe and Asia.

Since 2017, several large retailers have shut down. Stores like Sears and Toys ‘R’ Us have filed for bankruptcy as shoppers increasingly turn to online stores instead of malls.

The long-term survival of brands revolves around sustainability and providing an online experience for their customers. They also need to find a way to make their brands stand out.

According to the bankruptcy court, Forever 21’s assets are priced in the range of $1 billion to $10 billion.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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