Business

Forever 21 files for chapter 11 bankruptcy protection in the USA

Forever 21, the high-street fast-fashion chain, has filed
for chapter 11 bankruptcy following a severe decline in sales in recent years.

Following its recent decline in popularity among their prime
target market, younger shoppers, the firm has entered into a radical period of
retrenchment.

This will mean all operations outside of the USA, except
Mexico and Latin America will cease. Up to 350 stores worldwide will close.
Through applying for chapter 11 bankruptcy protection, the chain is obliged to
reorganise its debts or even sell large chunks of their assets. The firm’s
spokesman has said that they “do not expect to exit any major markets in The US”.

**The rise and fall of
Forever 21 **

Forever 21, or Fashion 21 as was its original name, was
highly symbolic of the American dream. Opened in 1984 by two South Korean
immigrants to America, Do Won Chang and Jin Sook Chang, the firm was immensely popular
among the Korean community living in California at the time. Over the next two
decades, the company established itself as a global brand.

Their closure comes at a time when prospects are bleak
generally for the high street. Many high street retailers have faced similar
difficulties. House of Fraser, Thomas Cook, and many other large, high street
firms, have found the economic conditions since 2008 to be a bitter pill to
swallow.

An unstoppable monolith keenly featured on most American
highstreets, Forever 21’s business model was synonymous with large firms such
as H&M, Zara, Primark, and so on. The model of selling, conceived by
Forever 21 in 1984, meant keeping a sharp eye on fashion trends and selling
replica garments of the same style. This model is commonplace today, and with
the market now saturated with fast-fashion brands, Forever 21 has struggled to
compete.

Therein lies Forever 21’s problem. Faced with competition
from multiple outlets in the so-called “fast-fashion” industry. Many high street
stores have overtaken Forever 21 as the popular destination for young,
metropolitan, individuals looking for cheap fashion.

This, along with the boom in e-commerce sales, has slowly
eaten away at Forever 21. It is estimated that around 60 percent of young
shoppers prefer their money to be spent online, rather than in physical bricks
and mortar retailers. So-called ‘clicks and mortar’ has become the new norm, a
trend which Forever 21 failed to take the opportunity of.

**How is Forever 21
planning to fight back? **

By filing for Chapter 11 bankruptcy, the firm isn’t in
administration territory yet. In fact, through their decision to file for
chapter 11, Forever 21 will now have the opportunity to reorganise its
operations and assets, and to reassess its business strategy.



A prime example of where the company can begin to reassess
its strategy is in the choice of products they stock. The company has been
routinely mocked on social media platforms for their choice of products,
reflecting a poor understanding by the company of what is ‘fashionable’.

By retrenching significantly and cutting themselves free foreign markets, the firm can now focus primarily on its domestic operations, while hoping to become more efficient.

This will hopefully be enough to satisfy the backer of their large $250,000,000 bailout package, who are betting on Forever 21 following a revised, leaner, business model, which will lead them to long-term success.

From the outset, this will be no easy task. While Forever 21 have learned the lessons from following an outdated business strategy, their biggest fast-fashion competitors have already surged massively ahead. Furthermore, the size of e-commerce is such that Forever 21 may never be able to compete as a physical store again, as online clothing transactions continue to eat away at the high street.

This along with the growing disquiet among the
public due to the environmental impact of fast-fashion stores, the future looks
bleak for the company.

The company was also hit last November with a multi-million-pound claim by singer Ariana Grande. The £8.3 million claim is on the grounds Forever 21 stole her likeness following a dispute in which the singer declined to sponsor a line of clothing by the company.

Following this, Grande claims, Forever 21 proceeded to use a look-a-like model with an uncanny resemblance. Forever 21 was also accused of using branding such as a number seven, identical to the one featured on the music video, "7 Rings", in their adverts.

By bearing their responsibilities to their creditors,
revising down their bloated operations, and by being more attuned to fashion
trends, Forever 21 may well hang on in the near future.

However, the future for
clothing sales will be online, meaning unless Forever 21 radically change their
selling format, they may well find themselves facing administration in the
long-term.

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