Forever 21 Faces Bankruptcy Fast Fashion Is Crumbling

Forever 21 Inc. is preparing for potential bankruptcy protection applications, because the cash flow of this fashion retailer is reduced and turnover options are reduced, according to people familiar with the matter.

The company has negotiated additional financing and has worked with a consultancy team to help restructure its debt, but negotiations with potential creditors have so far stalled. According to people familiar with the matter, the focus has shifted to ensure that a potential debtor holds loans for bankrupt assets to enable the company to enter bankruptcy protection, but there is still a last minute agreement to avoid entering some of the court proceedings.

Forever 21 was founded in 1984, the founder is Zhang Dongwen from South Korea. The brand style is dominated by the lively and sweet style of girls around 20 years old. But in recent years, the store has been like a chain reaction in Forever 21 stores around the world. In 2016, Forever 21 pulled out of the Belgian market. Two years later, Forever 21 began shutting down many stores in Europe and North America. Japan's flagship store in the Asian market is also hard to escape.

FOREVER 21 entered the Chinese market as early as 2008, but withdrew from the Chinese market at the end of 2009 due to the location of the first store and the quality of its products. After that, it came back in 2011. In 2011, Forever 21 opened its official website and Tmall flagship store in China. This step is much more than that of Tmall's Zara and TOPSHOP in 2014 and the H&M of the cat store in 2017. But its pace of development is very slow. In China, compared with H&M and UNIQLO, FOREVER 21 has no competitive advantage.

In April 29, 2019, FOREVER 21 China official website, Jingdong and Tmall flagship store began to suspend operation. Within the next month, the brand opened its stores under the Chinese line and promoted its clearance. After that, FOREVER 21 decided to formally withdraw from the Chinese market.

In fact, the international fast fashion giants in the Chinese market, in addition to facing the rising domestic clothing brand, competitors may come from another dimension - the Internet development brand, which makes the market competition unprecedented fragmentation.

On the other hand, with the popularity of social applications such as micro-blog and Xiaohong, young consumers began to pursue individuality and diversified consumption, and no longer satisfied with the short-lived pleasure brought by fast fashion consumption. Fast fashion brands must think of brand outlets in such difficult situations: traditional marketing methods are outdated, following the trend of the times and relying on social media marketing, KOL is a new thinking of transformation strategy.

The rise of the national tide has also given young people a choice, because it has a sense of mission in Renaissance, satisfying the consumption idea of "seeking common ground while reserving differences" among young consumers. It not only satisfies the pursuit of fashion, individuality, but also a return to traditional culture and respect. In recent years, the market of national tide is developing faster than luxury market and fast fashion market. In 2018, the Pacific bird (13.930, -0.01, -0.07%) group achieved a revenue of 7 billion 712 million yuan, an increase of 7.78% over the previous year. In 2018, Li Ning Co's revenue reached 10 billion 511 million yuan, an increase of 18.4% over the same period last year.

Forever 21 most of the products are priced at 4 US dollars (28.67 yuan) and 20 US dollars (about 143.34 yuan). Now consumers are making choices about the availability and morality of clothing, and are getting tired of Forever 21 inferior quality and cheap goods. At the same time, Forever 21 oriented 15 to 25 year old group has a very low loyalty to the brand. Once the product is not updated and meets the needs of consumers, they will not hesitate to turn to another brand.

According to the Beijing business daily, the industry believes that with the rapid development of consumption upgrading and e-commerce, consumer purchase channels and alternative brands are increasing. If fast fashion brand positioning is not allowed, the brand will not be sustained. Therefore, updating the development strategy at any time will be the focus of attention for the fast fashion brand in the future.