Her Campus Logo Her Campus Logo
News

Forever No More: Here’s the Lowdown on the Forever21 Bankruptcy

In late September, Forever21 filed for Chapter 11 bankruptcy.

The company was founded by a young South Korean immigrant couple in 1984. Do Won Chang and Jin Sook Chang believed in the American Dream: that if they worked hard enough, they could achieve high profits and become wealthy. Their dream felt like a reality to the fast-fashion business-owners, until e-commerce took over the retail scene and even faster-fashion retailers such as Fashion Nova and Asos emerged.

Companies often file for bankruptcy if its debts exceed its assets: assets meaning money in their bank account, value of physical items and stores they own, investments, inventory, and anything else that has inherent value. Chapter 11 bankruptcy is a promise to propose a reorganization plan, which is exactly what Forever21 did. The company plans to cease operations in over 40 countries, and close up to 178 United States stores while continuing e-commerce.

In terms of economics, it is more profitable to continue running a dying business than it is to shut it down completely. So although there is hope for Forever21 yet, it may not mean the company will stick around for much longer.

This is an important lesson in marketing both for the Changs and for the greater retail universe. The Changs made a detrimental assumption: that fast fashion would continue growing the same way it had been for years to come. As the company grew, it churned out more and more designs each day, quality decreasing with each, even running into copyright trouble here and there for look-alike designs.

Forever21 fails to read its consumer base: consumers are looking for staple pieces, basics, textures, and current trends. Cheesy lines and cheap textures are no longer cutting it, and consumers are increasingly aware of ethical malpractice. Shoppers are in tune with which stores outsource production to low-wage sweatshops and which stores are not environmentally conscious. Generation Z shoppers are concerned with the environmental impact of cheap clothes from stores such as Forever21 that are essentially disposable. 

 

Executives tend to credit the company’s demise to rising e-commerce rates, and falling dependence on brick-and-mortar stores, and they are partially correct. Forever21 does have an online commercial presence, it’s just not attractive. Many Generation Z shoppers actually prefer the shopping experience provided at brick-and-mortar stores, it’s just that Forever21 isn’t providing it. Forever21 was once the fastest fashion available, consistently emerging with new trend-setting designs, however online retailers such as Asos, Fashion Nova, and Missguided are much more in-tune with trends, and are able to put out quality designs faster than Forever21. This is partially thanks to Forever21’s dependence on brick-and-mortar sales, but also a fundamental flaw of the company.

Forever21 is going under not because of the cutthroat fast-fashion market, where retailers such as Asos and Missguided copy-catted Forever21’s success and stole its consumer base. Forever21 is going under because an idealistic couple following their American Dream got carried away and forgot to take the temperature of their consumers. As much as my heart goes out to them, other retailers did what they did, and did it better. The company’s failure does not affect the couple’s personal assets, so I do not hesitate to advise you all to stop shopping at Forever21. The company utilizes sweatshops and other unfair business practices and is unlikely to fairly compensate employees who are looking at losing their jobs.

The bankruptcy is a lesson for us all: it is easy to get caught up in success, but it is important not to lose sight of goals along the way. A business model must change and grow with success, not use it to stay stagnant.

 

Source (1, 2, 3, 4, 5, 6)

Photos (1, 2,)

Julia Oktay

U Mass Amherst '22

Julia studies Operations and Information Management, Business Data Analytics, and Psychology at the UMass Amherst Isenberg School of Business.
Similar Reads👯‍♀️