Forever 21’s bankruptcy story is a stark lesson in the world of fast fashion retail. Founded in 1984 by Korean immigrants Jin Sook Chang and Do Won Chang, Forever 21 captured consumer attention with trend-sensitive apparel at highly competitive prices. The visionary behind this rapid rise was Jin Sook Chang, whose merchandising acumen drove the brand’s explosive growth.
According to Mike Appel, CEO of Forever21 competitor Rue21 from 2017-2020, Mrs. Chang’s merchandising strategy was revolutionary in its simplicity: she selected every piece of merchandise personally, sourcing broadly but purchasing shallowly to maintain freshness and urgency.
Larry Meyer, who served as EVP, SVP and board member at Forever 21 over a 12 year span, explained the strategy clearly: customers knew that ‘if I don’t buy it today, the odds were it wouldn’t be there next week and it wouldn’t be there at a lower price later.”
In remarking on how little inventory they kept, Meyer also said, every customer knew that if they bought something, “another girl wouldn’t be wearing it.” Customers understood they had to come in and find what could be uniquely theirs for a very attractive price or risk missing out. Meyer described the prices as “lower than valet parking in LA.”
Appel says the strategic misalignment leading to Forever 21’s decline started when Mrs. Chang stepped back from merchandising decisions. The company expanded aggressively he explained, venturing into unfamiliar categories like cosmetics and menswear and opening larger stores requiring deeper inventory. Having more inventory available in stores removed the urgency and excitement that initially captivated customers. Appel says the new types of products and the deeper inventory meant one thing: more risk.
One thing remained unique about Forever 21 as it grew into a multibillion dollar business: its governance. The absence of external directors meant strategic decisions went unquestioned, making it difficult to recognize when the company was losing its direction.
Appel says that Forever 21’s first bankruptcy filing in 2019 was not merely due to competition from online retailers such as Shein and Temu, as commonly believed. He emphasizes that internal strategic errors were important contributors to the bankruptcy.
That bankruptcy resulted in the acquisition of Forever 21 by Simon Property Group, Brookfield Property Partners, and Authentic Brands Group in 2020. Appel says that the mall operators stepped in as a defensive maneuver to prevent having large empty retail spaces in their malls and not necessarily out of a belief in the brand, the strategy or the likelihood of a turnaround.
Appel says Forever 21 is a cautionary tale that highlights the importance of leadership, disciplined merchandising, customer centricity and strategic adaptability. It underscores how essential it is for retail brands to be deeply connected to their customers, constantly innovate, and leverage technology effectively to remain relevant. A strong balance sheet is also a requirement; without that, it’s hard to have the flexiblity to maneuver and recover from mistakes.
Appel cites Zara, Abercrombie & Fitch, Aritzia, American Eagle Outfitters, the resurgence of the Gap and how Walmart has improved its fortunes in fashion as proof that great merchandising can still win in almost any market segment.
And so it goes: retail continues to be fueled by innovation and retailers who lose their way and the market is unforgiving. It’s possible that technology and AI will replace great merchandising talent but if that’s ever going to happen it will be a long time away. For now, merchandising skill and staying true to core competencies has no substitute and nothing is Forever.