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Forever 21 files for bankruptcy protection in the US – raising questions over the future of its UK stores

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Forever 21 files for bankruptcy protection in the US – raising questions over the future of its UK stores

Forever 21’s move to file for bankruptcy protection in the US has raised questions over the future of its stores in the UK and elsewhere in Europe.

 

The move is intended to win time for the retailer to reorganise its business. In a letter to customers, the retailer says it “allows Forever 21 to continue to operate its stores as usual while the company takes positive steps to reorganise the business so we can return to profitability and refocus on delivering incredible styles and fashion you love for many year to come.”

 

However, the BBC reports that the US fast fashion retailer plans to “exit most international locations in Asia and Europe”, while continuing to trade in Mexico. Overall, it expects to reduce its stores from more than 800 to between 450 and 500. That raises questions around the future of its three UK stores, which are in Liverpool, Birmingham and on London’s Oxford Street. Forever 21 has not yet responded to our request for clarification on this point.

 

Forever 21 – then trading as Fashion 21 – opened its first store in Los Angeles in 1984 and by 2018 it more than 800 stores in 57 markets around the world. It opened its first UK shop in 2010 and at its peak it had eight stores in the UK. However, its store estate has since reduced significantly in the highly competitive UK market, with three closing in 2016 alone.

 

Today, Jon Reily, former head of ecommerce at Amazon and global commerce strategy lead at digital consultancy Publicis Sapient, described Forever 21 as a “powerful brand that is more valuable than you would think a company entering bankruptcy would appear.” He added: “They understand digital is a force but still depended on the ‘give it to me right now’ of the fast fashion sector.

 

Reily said: “This is another example of giant mall stores being a winning mindset just 20 years ago, and now those who remain are being sent to the cleaners. I expect they will recover from this, but it’ll take extra marketing work to do it. Their core customers are different 21-year-olds than was the case 10 years ago. Topics never mentioned in 2010 like sustainability and social stance are now at top of mind for consumers. Forever 21’s business model of an ever-changing display of what’s new is being eclipsed by firms like Rent the Runway and thredUP.”

 

Kevin Murray, managing director at Greenlight Commerce, said: “Forever 21 axing half of its stores is another direct result of changing consumer behaviour. Several recent reports have highlighted the continuing shift from shopping in-store to shopping online. With its huge stores and slim profit margins, Forever 21 has struggled to compete against the likes of online giants, Amazon and Asos, and with sales falling, its model has becomes unprofitable. By closing stores, the retailer seems to be preparing for a digitally-led future. This makes perfect sense, with a recent study from analysts at Retail Economics indicating that ecommerce sales will account for 53% of the retail market within the next 10 years.

 

"One of the main reasons for this move to online is the convenience it provides consumers. There is an almost unlimited choice of products available at the touch of a button, providing an easier experience for the time-poor modern customer. Brands, such as Asos, are also allowing customers to try out products and try on clothes at home, by offering free returns which allows customers to send back any item for free if they are not right.

 

"As spending habits continue to change and shoppers prefer to do their purchasing online, it is absolutely vital that retailers such as Forever 21 get their ecommerce offering right. Now is the time for retailers to take stock and evaluate their online channel, ensuring it is optimised for the most streamlined and seamless customer experience possible.”

 

Andy Barr, co-founder of online price tracking website, alertr.co.uk, said: “It’s now up to those clinging on to their place within the high street to offer up something unique and different, that appeals not only to those still bringing in footfall, but also those that have already migrated over to online retailers for the majority of their purchases.”

 

 

 

 

Forever 21 is one of the retailers analysed in this year’s RetailX Fast Fashion 2019: Sector Analyst Report.

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