BUST: John Hunewill Performs an “Autopsy” on Forever 21

Forever 21 is one of the latest major MULO (multi-location) retailers to declare bankruptcy. A discount fashion brand, it was founded in 1984 and was heralded as one of the best discount fashion retailers. But “Forever” turned out to be a stretch.

John Hunewill, Partner at Allen Austin, has spent nearly three decades in retail, working for large, multi-channel retailers across several segments. He also taught a graduate-level course on Global Retailing. He utilized real-world case studies to review all aspects of retail—from merchandising and marketing to operations, real estate, and finance. We sat down with him to unpack (or unbag) the demise of this once-iconic brand and understand the reasons for its failure.

One word — why?

“In my opinion, Forever 21 failed to focus on efficient inventory management, which resulted in aged inventory and margin erosion. They also did not stay current with evolving consumer trends. The onset of Amazon and other online retailers, such as ASOS, provided consumers with convenience and a near frictionless experience. This allowed for alternatives in the fast-fashion category that were quick and easy to get and return.”

Several bankrupt brands have “risen from the dead.” Will this be one of them?

“Personally, I don’t see Forever 21 making a comeback as a multi-channel powerhouse in the fast-fashion category but I wouldn’t rule out a reboot of the brand as an e-tailer since there is so much brand equity.”

Overseas discount fashion retailers are very popular these days. Is “Made in the U.S.” meaningful to consumers at all?

“I would like to see us get back to ‘Made In the U.S.A.’ as a first alternative, but I don’t see that trend happening.  Since January 2000, the United States has lost over a quarter of all domestic manufacturing jobs, a decline of over 4.7 million.  We have evolved to more of a service economy as globalization and increased competition have pushed manufacturing abroad. For this trend to change, the domestic manufacturing costs would need to decrease, or the consumer would have to be willing to pay a much higher premium for the ‘Made in the U.S.A.’ label.  I believe that discount inline brands will stay in focus for the foreseeable future.  There is a market for it and consumers want the benefit of the newness in fast-fashion along with the affordability.  Like any industry, those that operate the best will thrive.”  Source

What can other brands learn from the bankruptcy?

“To survive and thrive, retailers must focus on being the best operator.  To be a leader, they must stay in touch with the needs of their target consumer and offer an experience that surpasses their competition. This means staying ahead of evolving consumer trends, efficient inventory management, reducing operational costs and integrating online and offline operations.   By doing this, they can continue to supply the right product at an affordable price while making a good return on their investment.  Over time, the strong survive.”

The global apparel market is worth about $1.8 trillion, and the retail fashion industry will exist as long as people wear clothing.  Where and how they buy that fashion has changed and will continue to evolve.

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