Bautista, Jan Nicko P.

BSHM 2-1

At its peak, Forever 21 made $4.4 billion in revenue. Here's what led to the brand's
downfall and bankruptcy.

Forever 21 has filed for bankruptcy and will soon cease operations in 40 countries and
close up to 350 stores globally. At its peak, the company made $4.4 billion in revenue and made
its founders, South Korean immigrants Jin Sook and Do Won "Don" Chang, billionaires. The
fast-fashion chain grew quickly and cultivated a following by selling trendy clothing. The
company's filing for bankruptcy comes as e-commerce continues to rise during a "retail
apocalypse" for brick-and-mortar retailers.

Forever 21 was once among America's fastest-growing fast-fashion retailers.

It transformed its once penniless founders into billionaires, established itself as a

powerhouse in the fast-fashion world, and, at its peak, made $4.4 billion in revenue.

But the once flush company is now preparing to file for bankruptcy. So, what happened?

Back in the day, Forever 21 embodied the American dream: In 1981, Jin Sook and Do
Won "Don" Chang moved to Los Angeles from South Korea with no money, no college degrees,
and speaking little English. To make ends meet, Jin Sook worked as a hairdresser while Don
worked as a janitor, pumped gas, and served coffee. Until he noticed that "the people who drove
the nicest cars were all in the garment business." So three years later, with $11,000 in savings,
the Changs opened a 900-square-foot clothing store called Fashion 21. The couple took
advantage of wholesale closeouts to buy merchandise from manufacturers at a discount.

Their system worked. The store made $700,000 in sales its first year.

Fashion 21 was initially only popular with LA's Korean American community. But the
Changs leveraged their success, opening new stores every six months, which broadened the
company's customer base at the same time. They also changed the name to Forever 21 to
emphasize the idea that it was "for anyone who wants to be trendy, fresh and young in spirit."

The company's key to success was simple: cultivate a huge following by selling trendy
clothing for low prices. While this is something that today's consumers pretty much expect,
Forever 21 was one of the first to do it. And they were the fastest.

Jin Sook was eventually approving over 400 designs a day. Which meant the company
could sell trends as they were happening. Even if some of those designs landed Forever 21 in
trouble.
 But while other brands and designers might not have been Forever 21's biggest fans,
customers couldn't get enough of their affordable styles.

As a result, Forever 21 became one of the largest tenants of American malls, with 480
locations nationwide. And by 2015, business was booming. Forever 21's sales peaked, with $4.4
billion in global sales that year.

As for the Changs? They became one of America's wealthiest couples, with a combined
net worth reaching an estimated $5.9 billion in March 2015.

Forever 21's goal was to become an $8 billion company by 2017 and open 600 new stores
in three years. But the company's aggressive expansion would also lead to its downfall.

Part of what made Forever 21 popular in the first place was its fast-fashion model. Even
though its products were always mass-produced, they still felt unique because its stores only sold
select styles for a limited time.

However, as the company focused on growing bigger, its styles became more "cookie-
cutter." As a result, Forever 21 started to lose touch with its core customers, while competitors
like H&M and Zara rose.

No longer the trendsetter, Forever 21 became the butt of the joke.

It's also no longer the fastest in the game. Internet brands like Fashion Nova churn out
celebrity- and influencer-inspired styles at a rapid-fire pace. And as e-commerce has continued to
boom, traditional retailers like Forever 21 have struggled to adapt to changing consumer
behaviors. According to a March 2019 survey, millennials make 60% of their purchases online
and overall prefer online shopping over going to a physical store.

Yet, Forever 21 continued opening new stores as recently as 2016, even expanding
existing stores to take over multiple floors with mens, children's, and home-goods sections.
Which could help explain why Forever 21's sales are estimated to have dropped by 20% to 25%
in 2018.

On top of that, the Changs, who still own the company, have lost more than $4 billion
from their personal net worths.

The company overall is now $500 million in debt and considering filing for bankruptcy.

Forever 21 has already started downsizing its stores. And as one of the largest tenants of
America's mall's, a widespread shutdown of Forever 21 could exacerbate what's already being
referred to as the "retail apocalypse," which has already closed more than 15,000 retailers across
the US and could shut down 75,000

more, according to investment firm UBS.

 But bankruptcy doesn't always mean the end for a company.

In fact, it could give Forever 21 time to restructure and bounce back.

The company could shut down its least profitable stores and try rebranding itself. But in
an age of cheap internet boutiques and fast-fashion empires, this might not be enough.

So it turns out, Forever 21 might not be forever after all.