Case Report: Forever 21

Executive Summary

This paper is a synthesis of the current situation of Forever 21 and its business

development in the global movement of clothing and fashion companies, seeking to identify the

congruent and destabilizing points of its current business strategy, considering how the internal

and external factors of the brand influence this strategy to glimpse improvements in it.

Forever 21, as an avant-garde company in youth fashion, stands out in this market with

the objective of being "a fashion industry leader making the latest trends accessible to all while

inspiring unique style and confidence" (Forever 21, 2022), present in more than "540 locations

globally and online" (Forever 21, 2022), being its main marketing strategy the direct sale of its

products to the final customer.

The current context of the youth clothing brand Forever 21 is set in the following issues:

firstly, the company has been re-emerging after a financial restructuring due to "debts and

lawsuits for copying designs, as well as complaints for labor exploitation" (Reina, 2023), which

resulted from the acquisition of the company by a holding company headed by Simon Property

Group; likewise, it is noteworthy that the restructuring of sales, due to the debts, led to the

migration of a large part of its offer to the virtual market, thus reducing the number of stores that

were once open to the public.

Currently, Forever 21 competes in the global youth apparel market with other brands such

as Stradivarius, H&M, and Zara, as well as other brands such as Supreme, Urban Outfitters,

Lululemon, and PacSun, which has generated a high demand market with rapidly changing

clothing trends among young centennials. Therefore, an aggressive campaign in networks is

expected in the short term, the consolidation of the virtual store and a network of suppliers with

the quality standards demanded by today's young people, in the long term.
 Background Information

The fate of South Korean emigrants in the so-called "American dream", from hard work

and maximizing savings, in a household formed by the marriage of Do Won Chang and Sin Sooc

Chang, the idea of creating a brand, a trend, a clothing store that could please the youth and their

desire to be wearing, wearing the latest trends of the season is gestated.

In the effort and hard work of this couple of husband and wife, between the development

of more than one daily work, having to reduce their rest time to the maximum in order to fulfill

their dreams, they illuminate their dream thanks to the discovery or inspiration of Do Wong as a

night salesman in a clothing store for young people: "I realized that the people who drove the best

cars worked in the clothing industry" (Infotextil, 2019).

Since the mid-1980s, the South Korean married couple founded what we know today as

Forever 21, a company that reached a turnover of $700,000 USD in its first year of operation, and

quantified a fortune of more than $3 billion USD to date; unfortunately, lawsuits for copyright,

design plagiarism and labor exploitation made the South Korean married couple's dream come to

an end, declaring the company bankrupt and selling it to a business alliance led by Simon

Property Company.

And it is that, at the end of the day, the franchise model ends up being the most relevant

for the development of the sale of fast ode or youth clothing, and Forever 21 has not been the

exception, since, through strategic alliances with retailers and the exploitation of the brand the

merchandise "is sold and distributed a lot, there are numerous variations within the style and

entrepreneurs offer different prices to suit the needs of each consumer" (p. 150), generating

friction between the sales capacity of the clothing store and the verisimilitude of the design that is

offered for sale.

new styles entails a "launching cost is very high since the investment that represents the design of

the product, the fashion shows, the catalogs to present the collections and other costs have not

been covered" (Bun, 2013, p. 149); even so, in the process of growth of the new trends it is

identified that "manufacturers copy the most salient details and simplify the remaining ones to

respond to the growing demand", as long as they do not incur in copyright infringements and

plagiarism.

Already in the period of maturity, if a trend can be positioned in the collective memory of

young people, "it can become a classic and will continue to be consumed for several seasons and

will be offered with some detail that updates it or with some change of fabrics or colors" (Bun,

2013, p. 150), but due to the low advertising and the high demand for products, which can lead to

labor exploitation in countries with legal flexibility, the processes of decline and obsolescence are

already identified in the same paradigm, since strategic alliances with retailers become

"liquidations because they need to pay their suppliers and because they want to have room in the

store for the new collections" (Bun, 2013, p. 151), leaving little or no margin for the budget with

possible financing or entrepreneurial purchasing power to sustain the business.

And here we begin to review why the current Forever 21, in an attempt of resurgence after

facing bankruptcy and lawsuits since, in the first instance, the distribution capacity with retail

franchisers had not been the best, which led the attempt to migrate during the first part of the XXI

century to online sales (Editorial, 2019), but the lack of strategic alliances with local distribution

logistics companies did not allow to sustain this line of business to the projected.

Secondly, the primary consumer migrated to new ways of demanding products, i.e., since

young people assumed a virtual purchasing philosophy, it became unnecessary to have large

physical platforms for direct sales to the end customer (Editorial, 2019), which led to unforeseen
operating cost overruns for the Forever 21 brand in a short time, generating an unexpected

financial impact on its income statements and mitigating the margin of action to consolidate the

virtual sales line.

Finally, the same evolution of the consumption trends of young people in the 21st century

changed the rules of the game with which Forever 21 had been selling, that is, thanks to the

adoption within the new consumer philosophy of eco-friendly principles (Editorial, 2019) and to

repel the consumption of fast fashion, the company reduced its share in the youth clothing market

drastically.

Currently, Forever 21, through its new corporate leadership led by the Simon Property

organization, is focusing on the development of a virtual retail platform that will "provide its

customers with an enhanced experience that will support over 150 payment methods in 95

different currencies" (Retail, 2020), in other words, they identified that "e-commerce forms a

large part of the profitable core of our operations, as part of our new global strategy" (Retail,

2020), according to the current brand president, Alex Ok.

Analysis

 SWOT analysis

The SWOT analysis strategy has become an essential tool for the determination of

objectives, within the framework of marketing strategies, when restructuring or carrying out

strategic plans from scratch, either to identify new courses of action in the face of the brand or

product life cycle decline or to determine new strategies for market penetration or sales recovery;

Thus, in determining the intrinsic and extrinsic values of the new path of the Forever 21 brand,

led by the alliance of companies led by Simon Property, as they are seeking to "satisfy the needs
of customers which requires integrated and coordinated efforts of the entire organization"

(Gonzalez and Sarli , 2015, p. 18).

 Strengths

For the identification of strengths in the Forever 21 brand it is important to consider that,

among other things, these should be considered as "the same competitive capacity of the

organization as an achievement that provides this or a favorable situation in the social

environment" (Gonzalez and Sarli , 2015, p. 18); thus, based on the analysis of the current

situation of the company presented in the previous section, two (2) strengths of Forever 21 were

identified:

S1 - Being led by a conglomerate of companies, it can distribute its distribution and

promotion efforts among companies that are experts in these fields, strengthening its market

share, again, focusing efforts on online sales.

S2 - Being led by a conglomerate of companies, it can manage legal issues with greater

intensity, and being able to settle corporate litigation is a fundamental aspect of the globalization

of online sales.

 Weaknesses

For the identification of weaknesses in the Forever 21 brand, it is important to consider

that, among other things, these should be considered as "a factor that makes the organization

vulnerable or simply an activity that the company performs poorly" (Gonzalez and Sarli , 2015, p.

18); thus, based on the analysis of the company's current situation presented in the previous

section, two (2) strengths of Forever 21 were identified:

W1 - There are still perceived debts to suppliers and distributors of the brand from the

previous administration, which delays the processes of massification of online sales.

litigation, is an added value for the company.

 Opportunities

For the identification of opportunities in the Forever 21 brand, it is important to consider

that, among other things, these should be considered as the "environmental forces of external

character not controllable by the organization, but that represent potential elements of growth or

improvement" (Gonzalez and Sarli , 2015, p. 18); thus, based on the analysis of the company's

current situation presented in the previous section, two (2) strengths of Forever 21 were

identified:

O1 - To massify online sales, to be within reach of current consumers, young people who

are immersed in the virtual ecosystem of shopping, fashion, and the promotion of brands through

social networks.

O2 - Generate distribution networks, with strategic alliances with local companies, where

the company has physical space, to reduce delivery times for online sales.

 Threats

For the identification of threats in the Forever 21 brand, it is important to consider that,

among other things, these should be considered as the "sum of environmental forces not

controllable by the organization, but which represent forces or negative aspects and potential

problems" (Gonzalez and Sarli , 2015, p. 18); thus, based on the analysis of the company's

current situation presented in the previous section, two (2) strengths of Forever 21 were

identified:

T1 - Debts not predisposed in the purchase process, by the new conglomerate of

companies, which may result in millionaire lawsuits, delaying the restructuring processes.
 T2 - The production of clothing with suppliers that lie in their labor bonding and

supervision processes; also, that manufacture fast fashion with materials that are harmful to the

environment, which could result in lawsuits against the brand for lack of environmental

responsibility.

 Interrelation of variables

A SWOT analysis is incomplete if the intrinsic and external interrelationships are not

considered, beyond denoting the qualities and particularities of each one, since "adjusting and

specifying mid-term plans" (Gonzalez and Sarli , 2015, p. 18); the following is the revised

interrelationship with the Forever 21 brand:

O1 and S1 - Generate advertising space in Forever 21's other proprietary brands, driving

usage and interaction of the new version of the online store.

O1 and S2 - Thanks to the brand's new legal muscle, a sales policy can be managed

(considering shipping, payment methods, and returns) that makes it easier for the end customer to

manage their purchases, without legal problems after the purchase.

O1 and W1 - The process of massification of sales on online platforms can be slowed

down, as debts with regional distributors would slow down their participation in the new online

sales network.

O1 and W2 - Reliance on designs not owned and not agreed upon in know-how contracts

could lead to future lawsuits that would limit the financial capacity of the brand's resurgence.

O2 and S1 - Identify key strategic alliances, as nodes in a business network, that would

enable it to improve delivery times and capabilities in the new online store format.

O2 and S2 - Generate insurance contracts, to prevent logistical, quality, or copyright

failures, in the restructuring of the business network chain.

debts are considered as nodes within them.

O2 and W2 - Not being able to generate a rapid design movement, adjusted to the

changing standards of the market niche.

T1 and S1 - Reduction of the brand's shareholder value, which would generate an

impediment to reinvestment of profits from marketing in the stock market, at the end of future

fiscal years.

T1 and S2 - Being involved in legal disputes with other brand owners, lowering its stock

market value and its future financing management opportunities.

T1 and W1 - Failure to settle the legal disputes collected from the past administration,

delaying the corporate restructuring processes.

T1 and W2 - Limiting the productive margin of action to designs that are not within the

new parametric of current fashion, thus limiting its new market share.

T2 and S1 - Brands could become involved in collusion or promote unethical business

practices if previous suppliers are retained.

T2 and S2 - Forever 21's new brand owners could find themselves in legal trouble for

promoting sweatshops and environmental damage.

T2 and W1 - Limit ability to create new business channels, beyond restructuring online

sales, by keeping resources in "old" litigation.

T2 and W2 - If there is no control with clothing suppliers, relapse into complaints for

improper use of competitors' designs.

 Identification of the course of action

SWOT tools, it can be identified that it is of vital importance to develop a network of regional

specialization, hand in hand with retailers who have in their possession and supervision of the

merchandise in the places with presence, to facilitate their contact with local distribution agents,

to meet the online sale near their points; without leaving aside, of course, to consider in the

business restructuring, consider new suppliers and clothing maquiladoras with quality certificates

in their management of human talent and raw material.

 Porter’s 5 forces

The model proposed by Michael Porter to delimit the context in which a company

develops, in a specific geographic space, has made it possible to review from extrinsic

perspectives the variables that affect the company, from the relationships of the company's

customers to its relationships with competitors, suppliers, and competing or complementary

products; for the case of Forever 21, the five variables that Porter (Hernandez, s.f.) proposes to

identify a company in its competitive environment will be explored:

 The threat of entry of new competitors

Considering Forever 21 as a global company, with tradition in the youth clothing market,

which was displaced by competitors that have had a similar competitive background, in terms of

time and global coverage, the new philosophy of the environmentally friendly and low-demand

niche market would be seen as a threat, motivating the entry of small local companies with

promoting tendencies of such consumer philosophies, that is, local companies that can meet the

demand for youth clothing in specific geographic areas will be a new competition; considering

the above under the premise, for the new small local companies, that "they are not interested in
their survival and growth, but in the benefits they can bring at a given time", becoming a new

barrier for Forever 21 the current philosophy of the end customer (Hernandez, s.f., p. 3).

 The threat of possible substitute products

The main threat to Forever 21, regarding the sale of its product, lies in the new paradigm

of clothing for prolonged use by young people, especially if they present quality certificates that

prove their development in favorable working circumstances, with recyclable or biodegradable

products and that can be within reach in their acquisition, that is to say, that there is no need for a

physical displacement for their purchase, with a simple address would be seen the integrity of

these "new" products; considering the above under the premise, for the new small local

companies, that "customers will be inclined to the substitute product if the quality and

performance are superior to the used product", becoming a new threat for Forever 21 the type of

alliance that is generated with its manufacturers and distributors (Hernandez, s.f., p. 7).

 Bargaining power of suppliers

Recalling that, in Forever 21's recent history, one of the reasons for the bankruptcy of the

previous administration was the numerous and numerous complaints about the origin of its

products, from manufacturers of doubtful reputation, especially in the context of the certification

and proof of good labor practices, the new restructuring of the business must be framed in the

premise that "the inputs offered maintain, increase or improve the quality of the good"

(Hernandez, s.f., p. 8).

 Bargaining power of customers

Taking up the theme of the philosophy of environmental concern, reduced demand by

taking advantage of the purchase in bulk, consumption of garments with an extended life cycle,

quality certification of the origin of the products, and the ease of obtaining them under virtual
shopping parameters, it is key that Forever 21 considers wearable trends, through new

differentiating lines, since this new line "are those that the customer identifies by its design,

brand, and quality superior to others" (Hernandez, s.f., p. 9).

We have already made a presentation of the main competing brands against Forever 21,

which in their production and sales processes have not yet started the massification of online

sales, especially of certified products in optimal working conditions and materials that minimize

their environmental impact, i.e., "the tendency of consumers to substitute one product for another

will be greater the more similar the products offered by the companies" (Hernandez, s.f., p. 11).

 A sixth force?

Within the investigative development of Porte, the different local governments have been

identified as "part of one of the five forces according to the role they play" (p. 12); even so, from

the perspective of Forever 21, and its history of complaints against unethical conditions in terms

of labor, environmental and competitive, not only local governments should be considered within

the corporate restructuring that is taking place, but also the guidelines of the World Trade

Organization, in terms of patents and use of prototypes of the competition.

 Porter’s strategy in Forever 21

In the first instance, in the revisions to the definitions of Porter's three generic strategies

(Experto Gestiopolis.com, 2001) to generate a line of action that increases the competitiveness of

a company, it is identified that: global cost leadership" focuses on the staggering of the

production, distribution and sale of a good or service to reduce the impact of the production costs

of the unit to be sold; "differentiation" lies in the creation of products that are differentiated in the

market, i.e., that customers identify that good or service as acceptable to their standards of value,

purchasing power and need, since they cannot find any other like it; and, finally, the "focus or

concentration", which tries to satisfy market demand, according to the characteristics of a

obtain greater profits.

With the above, we review the current situation of Forever 21, which has developed (also

advised) a strategy of "focus", to promote the development of virtual sales, as a mechanism to

reposition the brand in the collective consciousness of young people who consume fast fashion

(or friendly to the environment and their loved ones? ), despite the fact that, from another

perspective, a "differentiation" strategy can be proposed in terms of product certification in terms

of quality, favorable labor standards and ecological raw materials; even so, the second strategy

could come in the second instance, after a full development of the "approach".

Problem Statement

Forever 21 brands have lost their prestige in the fast fashion market.

 First:

Why? The brand's main niche, young people who focus on fast and current trends, have

restructured their consumer philosophy to one that is friendly to the environment and the beings

that inhabit it.

 Second:

Why? Within the collective consciousness of the niche market, there has developed

criticism of markets with complaints, especially those that have been sued, are being investigated,

or have had complaints ruled against them, in terms of labor exploitation and environmental

impact.
  Third:

Why? Forever 21 had been managed, before its recent sale less than two years ago, under

a production and supplier scheme that did not meet quality standards, not only environmental and

labor, but also distribution and branded collation in the market.

 Fourth:

Why? In search of maximizing their administrative costs, they did not consider the quality

certificates or the minimum acceptable by the market demand, in terms of environmental impact,

productive ethics, and delivery of garments.

 Fifth:

Why? By not focusing efforts on the follow-up, supervision, and control of its suppliers,

Forever 21's previous management failed to focus on the quality of its products and its sales

service and focused on maximizing the escalation of its production costs.

 Root Cause

Forever 21, as a company, did not have a structure for monitoring the quality of its

suppliers, whose monitoring and control system can be considered in the organizational

restructuring that its new owners are carrying out.

Decision Criteria

 Feasibility

According to what has been compiled on the current situation of the Forever 21 brand, the

new conglomerate of companies that are now in charge of the youth clothing company are

making the necessary efforts to clean up debts with suppliers and retailers where they closed

stores, in search of safeguarding what remains of the prestige of the brand that has been

dynamited by the legal processes it has undergone; in other words, the new brand owners of
Forever 21 are in the ability to finance the resurgence of the brand and, to a large extent, its focus

on online sales.

 Strategy and Goals

As a first stop in the resurgence of the Forever 21 brand, a new online sales scheme will

be developed, which will consider the different local distribution facilities that the company has

with more than 500 stores still open around the globe; the new owners of the organization have

set (and it is expected to be a maxim) that the first means of purchase of youth clothing is through

its online store; therefore, an aggressive campaign should be developed in social networks, to

revive the Forever 21 brand in the desire of its niche market, today's youth.

 Problem

Considering that, after having the virtual sales network at its maximum capacity and

before restructuring the business network with suppliers and manufacturers with optimal quality

standards, the aggressive social media campaign becomes a medium-term task, for the new

owners and the salvage of the company.

 Implementation

The new owners of Forever 21 have estimated that, in less than two years, the new

network and online sales platform will be at its maximum capacity, that is, considering a new

network of suppliers to prevent new legal disputes should be managed in parallel with the project

of the virtual store and, in these two years, to carry out the aggressive campaign in social

networks.
 Recommendation

 Consolidate a multidisciplinary legal department:

Taking into account the legal background for misappropriation of designs, and complaints

of labor exploitation, it is important to generate confidence to Stakeholders, especially young

people demanding clothing, that such situations will not be repeated again (medium term).

 Strategic relationships with youth figures in social networks:

It is vitally important that, if an aggressive social media campaign is developed,

consideration be given to generating a network of influencers to reposition the brand, who have

exclusive access to the latest trends and highlight the benefits of shopping at Forever 21 (short

term).

 Establish strategic alliances with local courier companies:

As much as it is "focused" on the development of an online store, which satisfies the

virtual shopping space of young people and teenagers, it should focus on a development of fast

delivery of the items purchased by new customers; which, help to consolidate the new image of

the brand, taking responsibility for the current needs of its young buyers (long term).
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