Trending Thoughts provide the best and reliable stories. Check out our other stories on Trending Thoughts. Forever 21 Inc. went Bankrupt. The most loved fashion brand of teens, Forever 21 Inc. faces a significant downfall with its filing of bankruptcy under Chapter 11. The giant conglomerate says that the move will provide access to a better business environment since Chapter 11 safeguards one from ununiformed creditors. But can it be pointed out that the signs were initially overlooked? Can you even imagine how such visually empowering stores could shut down? Can such beautifully stalked clothes not help out in making the required profits to run the stores? Well, that is the course of the recent fate of Forever 21. Let us check some pre-determined warnings that were overlooked by the company.
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Online business is booming in almost all verticals these days. FMCG still has an edge over outlet retention of customers while products such as clothes, cosmetics, and electronics have moved way too fast in the online segment. Moreover, the channel distribution is cut short, resulting in selling such products at a lower price. Huge discounts on online platforms attract consumers from all sections and especially the age category that Forever 21 was catering to, i.e. 16-25. Along with that, a highly competitive online market where affordable pricing is a major factor for sales gives local sellers an opportunity to sell their products too and eventually takes up a considerable amount of business of some high-end brands or products.
Forever 21 operates in the US where the costs are really high and most of its operational cost turns to sunk cost. Asian and European real estate markets were soaring up high in prices in the 2000s and this was the period when the company invested on a tremendous scale. The vast expansion has led to overconsumption of its own resources. It will still function in Latin America and Mexico which doesn’t have such demarcated issues as in the previous markets. Sluggish sales over time due to low footfall in all the international stores resulted in overstocking and logistic issues. The brand caters to runaway fast chic designs and thus everyday changes in trends meant more designing, restocking, and higher costs. The stores also invested heavily in visual merchandising employing a considerable number of temporary and permanent staff just for this chore.
The brand has massive competition from brands like H&M and Zara for brick and mortar stores. Even one look around the malls in the city you stay can give you a sense of how H&M is expanding in a gigantic way and the huge amount of discounts are offered by Zara. Also, the bankruptcy issue can be traced to fashion forecasting issues where the band had stuck to its signature styles in the segments of bodysuits, jeans, and accessories hardly making any change in different fashion seasons. Whatever accumulated reasons we come across, it can be inferred without a doubt that the way we shop today has changed extensively leading to the low sales volume of such established brands too.
Interestingly, it was today in 1907 that the U.S. President Roosevelt had asked financier JP Morgan to combat the stock market crash and today JP Morgan Chase has provided finances worth USD 275 million to Forever 21. Only time will assure whether the fashion giant would stand on its feet again as the national economy did back then!