PROBLEM FACED BY FOREVER21

Forever 21, the beacon of lowbrow fast fashion, appears to be in a tight spot.

Fast fashion continues to inundate the apparel market, but Forever 21 remains on the
lower end of the spectrum. Forever 21 has been subject to lots of criticism lately, and with
so many other places to shop, the brand is in a tough position.
The retailer, which is private, does not disclose financials.

But a recent Wall Street Journal report indicated the brand was in talks to secure a $150
million loan to pay for the leases on its massive stores.
"Forever 21, which discloses little about its finances, has predicted that sales would rise
10% this year to $4.7 billion," the Wall Street Journal writes. "But people familiar with the
company say its sales and profit have tapered off after years of strong growth."
Recently, H&M sued Forever21 for copywright infringement. According to The Fashion
Law, Forever 21 ripped off H&M's cheeky "Beach Please" tote bag.

H&M alleges in its complaint that Forever 21 began selling a nearly exact version of the
bag (pictured above right) - knowing that H&M was offering its own "Beach Please" bag.
H&M is asking the court to order Forever 21 to immediately and permanently cease
manufacturing, marketing and selling its version of the “Beach Please” tote and to pay up
all of the profits it has made from its sale of the bag.
According to Forbes, Forever21 has been a accused of more than 50 copyright law
violations. Diane Von Furstenberg, H&M, Anna Sui are among the fashion retailers who
have sued Forever21 for replicating their clothes, designs and fabrics. Adobe also accused
for stealing its computer software to run registers.
So the main problem faced by the brand Forever21 is that rather than creating it’s own
designs it replicates the designs of others brands and sell them.

SOLUTION TO THE PROBLEM

The main problem faced by the brand is the lack of creativity and originality. The
customers can surely buy the items similar to the ones available at other stores displayed
at lower prices but they fail to find anything new. This issue can be combat by hiring new
designers to create the designs according to the fashion trend and the need of their
customers. More surveys and research should be done to generate more awareness about
the upcoming fashion trends. Instead of copying designs of other brands more light
should be thrown on emulating originality in their designs. More and more designs
should be created and should be made available to the customers in all sizes and colours
to give variety and choices.

Executive Summary
FOREVER 21 has seen some remarkable accomplishments
over the past 30 years. With a goal to become an $8 billion
company by 2017 and open 600 stores in the next three
years, it’ll be exciting to see the company achieve in three
years what it initially took 30 years to do. Forever 21 sells men's and women's clothing and
accessories. Stores can be found throughout the U.S. and in Canada, Europe, Japan,
Korea, and the Philippines. The company is headquartered in Los Angeles, California.
Forever 21 has expanded to more than 450 stores in the U.S. and nearly 100 locations
internationally. It charged into Europe, put its foot into China, and now has its sights on
Latin America. Bank of America estimates the company's sales at upwards of $3.5 billion
— in line with many big teen retailers.
The big players in teen retail, like Abercrombie & Fitch, Aeropostale, and American Eagle,
will feel the pressure. Gap has also been squeezed by Forever 21, as it sees revenues and
margins getting eaten away.
Forever 21 is becoming a fashion department store that caters to all members of the family
— not just teens.
That means a broader set of customers are being gobbled up by the retailer as it releases
new lines targeting men and older demographics. Yet, at its core, Forever 21 still has a
similar target as the big teen retailers – 18- to 24-year-olds.

Brief History
The founder of Forever 21, Do ‘Don’ Won Chang migrated to America in 1981 from Korea.
As a new immigrant Chang had to do two jobs to feed his family. He worked as a janitor
and served coffee at a gas station. Chang noticed that many of the people who would
come to the gas station in luxury cars were all in the retail industry. He soon decided to
enter the apparel market. Chang and his wife Jin Sook launched Forever 21 just three
years after migrating to America. They initially sold clothing designs popular in Korea to
the Korean-American people living in Los Angeles. The first year for Forever 21 saw
$700,000 in sales. By 2009 Chang’s two daughters Linda and Esther joined the family
business in the marketing department. In 2014, the Changs family worth was Five billion
dollars. They are now ranked number 86 in the List of Richest People in America and
number 93 on the Forbes 400 list.

Business Key Points

• Forever 21’s success stems from its ability to challenge top design houses in the
rapidly developing ready-to-wear trends while maintaining some of the most
competitive prices in the market.
• With its owners valued at USD 3.1 billion as of March 2018 and a goal to become an
USD 8 billion company and open 600 new stores in the next 3 years, Forever 21
remains a privately held company.
• The Chang’s see their success stemming from their realization early on that old
people want to be 21 again, and young people want to be 21 forever. They have
been functioning on this model since their first store, and still do so today as their
business continues to rapidly grow.
• The Companies in the clothing industry uses the mix of the psychographic,
demographic and geographic segment. The variables like age,
expectations, gender, income group, region, family size, loyalty, social class,
 price sensitivity, personality attributes, and lifestyle. Forever 21 uses above
segmentation strategies for the same.
• Mass targeting strategy is used by the company to be competitive in the
fashion industry and target the customer group with the distinctive
features and offerings.
• The speciality retail store has positioned itself based on young, trendy and
fashionable offerings which create the image of being young or ahead of
fashion. The company has positioned itself based on value-based positioning
strategy.

Key Challenges
Labor disputes: Forever 21 recently faced disputes over their workers’ labor conditions
and pay. The Los Angeles Labor Department reported than an investigation into Forever
21 uncovered evidence of “significant” violations of federal laws on minimum wage,
overtime, and record keeping by vendors supplying the company. The suit is ongoing,
which means that it will continue to tarnish the brand’s reputation as well as limit desire
to work at the company.
Piracy lawsuits: While Forever 21 has already faced a multitude of piracy lawsuits (they
have been sued more than 50 times for copyright infringement) they have made no
changes to their design and production practices. Unless they begin using more unique
designs or make deals with some of the designers they are “inspired” by, they will be
forced to pay settlement after settlement until enough designers find a way to protect
their designs more concretely. At that point, Forever 21 will have to completely re-
approach their production model. This may include a transition closer to that of Zara’s in
which they have over 200 designers but participate in the same streamlined production
process. Forever 21 does not need to change their production model; they simply need to
expand the designs of what they produce.
Product quality dilution: As a company whose defining quality is its price point,
Forever 21 will need to maintain a competitive price despite changes in the market. This
will force the company to find ways to save money in facets of production and historically
when this occurs, the quality of the product often declines drastically. In addition to this,
customers’ expectations are becoming more and more discerning. Forever 21 will need to
balance price for a minimum level of quality in their apparel.
Managing brand architecture: As Forever 21 continues to grow and acquire new brands,
they are constantly developing their sub-brands in their brand architecture and their
brand design themes. If these changes become too frequent customers will potentially
lose their loyalty to the brand as the brand loses its unique Forever 21 identity.
Transitioning power: As a business based largely on family, Forever 21 remains a
privately held and owned family operation. As the daughters have graduated from their
respective universities they are taking on larger roles within the business, clearly being
groomed for an eventual transition of power. The older daughter is said to eventually take
control of the company but this will inevitably lead to changes in the management and
possibly operation. Forever 21 needs to make sure that even under new and younger
leadership, they maintain the brand the founders so tirelessly built.

Competitors: Forever 21 has been extremely successful at maintaining its unbelievably

competitive prices, significantly lower than that of Arcadia Group Ltd.’s Topshop and
Inditex SA’s Zara, both of which target a slightly older consumer. In many categories,
Forever 21’s products are even less expensive than Swedish company Hennes & Mauritz
AB’s H&M’s products. As the fashion landscape continues to shift towards an immediate
transition from runway to wearable, other brands are entering the market Forever 21
previously dominated. If Forever 21 continues to focus on location and store development,
they will be able to combat this change head on as their customer reach is significantly
larger than its competitors.

Industry Analysis
The large and often overwhelmingly over-sized Forever 21 stores are already present on
almost every continent and continue to multiply in number. Their department store-sized
locations allow for all of Forever 21’s more specifically catered brands to be sold all under
one roof. Their ability to maintain a store overflowing with different styles and target
consumers stems from their successful branding of the buy-it-now culture. Fresh
merchandise arrives every day in contrast to other similarly modeled stores like Zara
where new merchandise only arrives twice a week. A typical store will roll over 20 percent
of its stock in a given week and this constant turnover is key to the chain’s appeal: If you
like something, you have to buy it right now, because you may never see anything like it
again.

Production model: Forever 21’s strengths lie largely in their production model.
Typically, mid-market competitors need three to six months to take an item from design
to rack but for Forever 21, the cycle is reduced to weeks. Forever 21’s use of larger fashion
houses’ designs allows them to produce so quickly. Immediately after the season’s latest
styles hit the runways or trade shows, they are duplicated by the company’s journeyman
designers around the world, and often arrive on shelves before the originals do.

Use of online and mobile technologies: Forever 21 launched their online shopping site
early on, cognizant of the e-commerce trend that was booming during the early 21st
century. Today, a large proportion of its sales come from its website as it is able to reach a
wider geography of consumers. Also, realizing the increasing influence of mobile, the
Forever 21 brand also has a mobile application which consumers can make purchases
from, and rate the brand’s clothing on a scale of “I like it” to “Not my style” – this allows
the team behind apparel design to understand consumers’ ever-changing tastes and
preferences, especially in the volatile world of retail fast fashion. This also results in
reduced spend on the mass production of items that might not be popular with their
target fashion customers, reaping twice the result from its marketing spend.
However, as Forever 21 uses almost identical designs they continue to face lawsuits from
other brands, designers and production factories for copying the physical patterns of the
designs. These constant piracy lawsuits may shed a negative light on the owners, but it
has yet to affect the company’s revenue, particularly because the Forever 21 customer base
continues to get expensive designs at unbelievably cheap prices

Financial Performance
Forever 21 has been ranked 103rd in the Forbes list of Americas Largest Private Companies
(Dec 2016) and has been valued at $8 billion (based on Market Capitalization method). The
brands’ revenue stands at $8 billion as of Dec 2017.

Forever 21 has operations in around 68 countries across the world and is the
fifth largest specialty retailer in the USA with an annual turnover of USD 4
billion and over 28,566 employees worldwide.
The company have been sponsoring and participating in various fashion shows which have
helped the company in increasing the brand visibility in the market and thereby the brand
recall.

Forever 21 competes in the market based on assortments, replenishment of stocks,

availability, price, penetration to the emerging as well as developed nations and fashionable
and trendy clothing. It competes with companies such as Chanel, Zara, Only, Madame etc
in one or more segments.

Forever 21's competitors

 • Jollychic.
• Urban Outfitters.
• Abercrombie & Fitch.
• Inditex.
• H&M.
• American Eagle Outfitters.

Forever 21 doesn't release its sales numbers because it's a private company, but it started
showing signs of trouble in 2016 when the New York Post reported that it was struggling to
pay the bills. It also closed two of its biggest California stores. In 2017, the brand shifted
focus towards its concept stores. It announced plans to open 70 more locations of its
discount-store chain, F21 Red, in addition to launching its beauty concept, Riley Rose.

Unlike competitor Forever 21, H&M is a public company that releases its sales numbers. In
the first quarter of 2018, operating profit at H&M decreased 62% following another massive
sales drop in the fourth quarter of 2017. Business Insider's Mary Hanbury reported that
analysts believe H&M has a brand issue because it's not the cheapest store, and its clothes
are not the best quality nor the most fashionable.

There are many types of positioning strategies like positioning based on price,
quality usage, competitors etc.
Forever 21 has chosen to position itself based on culture “always changing and
always in style”. the company that keeps you up-to-date with style trends and
keeps that young person inside you alive.

Key Success Factors

Innovation: One vital thing recognizes Forever 21 from its fundamental rivals is its
uniqueness. No dread that you will discover your colleague or companion in the same
outfit from yourself, Forever 21 arranges little mounts and learns it customers to purchase
promptly and not hold up till the following visit. Not purchasing implies gone.
Consistently something new, that is additionally the saying of Forever 21. ‘Get it now, or
it’s gone’ is the productive and benefit creating arrangement of Forever 21. Evidently, Mrs.
Chang, who is in charge of the gathering of Forever 21, surveys around 400 new outlines a
day. The Changs understood that change is fundamental. The perfect idea for the
empowering addict’s era of today. No dead stock, development starts things out.

Easy access and quality: Without any things above $60, Forever 21 is making style
open to all and making itself a substantial potential market. They went from one to more
than six possess brands, offering garments to children, men, additional vast and pregnant
ladies. Everybody can bear to purchase something at Forever 21.

Sustainability
Forever 21 goes into an exhaustive concurrence with each of our sellers and their
production lines under which they guarantee to use lawfully qualified laborers, pay them
compensation which are reasonable and legitimate in their ward, and give a situation that
follows their lawful necessities. Our understanding likewise covers issues of time off, free
affiliation rights, nondiscrimination, ecological assurance and security, and forbids the
utilization of constrained or slave work, youngster work. They have a profoundly
prepared Vendor Compliance Team, which advances and upholds legitimate and moral
operations at our outsider manufacturing plant destinations. The Team fulfills this
implementation by leading assessments of our dynamic non-US Vendor producing offices
on an arbitrary premise to guarantee The Vendor Compliance Standards are
comprehended, regarded and taken after. We additionally visit most production lines
before We contract them, to guarantee their office and operations meet with our models.
After every manufacturing plant visit, the Vendor Compliance Team gives a composed
assessment of the processing plant, including any activity things which may require
revision before the following visit. We additionally do our best to give continuous data,
guidance, and support on reasonable work, wellbeing and security, and related issues.
The objective is to work with our industrial facilities to help them enhance and guarantee
reliable consistence. In any case, if we find intense infringement or infringement which
are not adjusted inside a sensible day and age after our remedial activity arrange has been
issued, we may end that plant from our program. Forever 21 trust this procedure helps
with guarding against potential hazardous conditions, working environment wounds or
abuse, and furthermore brings about a general change in processing plant effectiveness
and item quality principles.

SWOT Analysis
Strengths
Strengths are defined as what each business does best in its gamut of operations
which can give it an upper hand over its competitors. The following are the
strengths of Forever 21 :
• Staying in trend: Forever 21 has positioned itself as a retailer that stays on trend
always and true to this it always has the hottest trends for its shoppers in all
categories. The fact that Forever 21 is the one to set hot new trends in fashion is its
biggest strength.
• Something new every day: Forever 21 gives a lot of importance to innovation and a
regular shopper always finds something new in the store every day. This eliminates
the boredom from clothes shopping and makes Forever 21 a hot favorite amongst its
customers.
• Affordable: Forever 21 has clothes starting at USD 60 and has something for everyone
be it kids, ladies, men, youngsters or even serious adults. The brand is also affordable
for most of its shoppers and offers unique pieces of clothing at fair prices.
• Customer Savvy: A recent research by Forbes indicated that Forever 21 is one of the
country’s most customer-friendly brands. Designers who work with the brand vouch
that most of their designs come from the customers themselves and the company has
a very storing system for recording the voice of the customer and ensuring that
feedback is translated into reality in all their designs. The company does not look at
high and spends but focuses more on getting feedback from customers and
implementing it at the earliest possible instance.
• Association with young celebrities: Forever 21 is associated with a lot of new
generation celebrities like Justin Beiber, Lady Gaga, and Emma Watson. Thus the
brand is seen as a trendsetter by the younger generation and is hugely popular
amongst them.
 Weaknesses
Weaknesses are used to refer to areas where the business or the brand needs improvement.
Some of the key weaknesses of Forever 21 are:

• Private ownership: Though Forever 21 is a fast-moving brand with stores all over
the world and an estimated worth of 4.1 billion USD the firm still continues to
be a privately owned business which largely limits its reach to the family only.
• Centralised decision making: Forever 21 being family owned relies a lot on the
decision making prowess of its promoters and is not too open to suggestions
from other stakeholders, This centralized decision-making strategy of the
company is said to be creating a lot of dissatisfaction amongst designers.
• Excessive focus on teens: Right from its name the company has always been
positioned as a young brand.The over association with teens and young adults
has created a hesitation amongst older customers to buy clothes from forever 21
and this may eventually become a risk for the company.

Opportunities
Opportunities refer to those avenues in the environment that surrounds the
business on which it can capitalize to increase its returns. Some of the
opportunities include:
• Growing need for youngsters to stick to trends: In an urban setting the
young adult is not just focused on trends but is forced to dress accordingly
primarily because of peer pressure to stick to fashion norms. For a fashion brand
like Forever 21 which is all about trendy clothing, this presents a huge
opportunity.
• Fashion changes: The fashion industry is in a state of perpetual evolution and
no trend stays for too long. This means that clothes grow out of fashion sooner
and customer tends to shop more often ensuring that their clothes are in vogue
with the latest fashion. This is an opportunity for all clothing retailers.
• Personalisation clothing: Gone are the days when people prefer to purchase
any dress that is comfortable. Especially in higher-end clothing brands people
always exercise caution to ensure that they look different from the crowd with
the result that personalization of the wardrobe will be critical in the future,

Threats
Threats are those factors in the environment which can be detrimental to the growth of the
business. Some of the threats include:
• Economic Crisis: The recession will reduce the propensity to spend on non-
essential items and luxury clothing brands will take a big hit in sales.
• Focus on recycling: There is increased importance given to how clothes can be
recycled to avoid their carbon footprint and the next huge trend will be recyclable
clothes for which costs may be high.

Alternative Options