The End of a Fashion Era?
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Forever 21, a large retail chain, filed for Chapter 11 bankruptcy and will be closing almost 200 stores (CNN). Some of these closures will be in the United States, but the company will be effectively exiting the European and Asian market. Operations will still run as usual, but the bankruptcy has gone along with a current trend of brick-and-mortar fashion stores closing shop over the past couple of years. While this is along the trend of the so-called “Retail Apocalypse,” Forever 21 specifically had some missteps that left the store vulnerable to financial turmoil.
One of the glaring pitfalls of Forever 21 was its gravitation towards big box stores in malls. Forever 21 stands as the sixth-largest leaser from Simon Malls (Bloomberg). The company tried to establish an equity deal with Simon to exchange company stake with rent forgiveness, but the talks broke down, which may have signaled that the mall company did not see much speculative value in equity (ie having a share of the company), at least over receiving the rent owed. While there are other mall-based retailers that suffered in the last couple of years, including American Apparel and Aeropostal, companies like Primark have been faring better. AB Foods, Primark’s parent company, reported that sales for the year are expected to rise by 4%, despite a more gloomy forecast of sales over time (Retail Gazette). Despite the forecast for sales over time, AB Foods are actually expanding Primark, including a new storefront in New Jersey. This signals that there is some room in the market for fast fashion mall locations, but Forever 21 does not seem to be capturing enough customers to keep up.
It may seem at first that Forever 21’s troubles may stem from a growth away from fast fashion, given that generation Z shoppers are spending less on clothes and more on experiences and entertainment. However, fast fashion retailers are still alive and well, but fast-fashion buyers are gravitating towards online shopping and street wear. As online shopping gains more of a foothold in the market, Forever 21 cannot seem to keep up or draw in new teenage customers. The store, which is supposed to be “fast fashion,” cannot keep up with current trends.
Forever 21 is a store that is also slowly falling prey to the so-called “Retail Apocalypse,” but while their woes are not necessarily unique, there are certain bad decisions and market conditions that specifically contributed to its turbulence. With its focus on large stores at mall retailers, Forever 21 has been hit with the consequences of lowering mall traffic, which is only exacerbated by its reckless expansion into foreign markets. As young shoppers look towards online retailers, Forever 21 has not been able to capture the new customer base. Forever 21 may also be suffering from just simply being out of the trend loop, thus causing its “fast fashion” model to backfire. Forever 21 may still be acting optimistic during its bankruptcy reorganization period, but this may be the beginning of the end of a fashion era.