Forever 21’s bankruptcy doesn’t mean fast fashion is dead
Now that teen retailer Forever 21 has filed for bankruptcy protection, the autopsies have begun to determine why exactly the once-thriving brand fell apart. One proposed cause: Fast fashion is dying.
Shoppers, however, still look to be buying plenty of fast fashion. It’s just not from Forever 21.
In its rush to grow, Forever 21 took on a rapid global expansion that proved more complicated and costly than it anticipated. It was also slow to adapt to the growth of online shopping. In its home market, it clung to its large network of US stores, too many of them based in malls where foot traffic and sales dwindled.
Beyond these problems, Forever 21 and others have suggested that shoppers are losing their taste for the cheap, trend-driven fast fashion that Forever 21 helped to spread. When the New York Times asked executive vice president Linda Chang whether falling mall traffic or shoppers’ diminishing interest in fast fashion was behind Forever 21’s challenges, she said it was “a little of both.”
Fast fashion’s giants, H&M and Zara, have seen a slowdown in sales growth over the past few years. In the US, the combined market share of Forever 21, H&M, and Zara has fallen from its peak in 2015.
Yet since then, other fast-fashion labels have also rapidly grown. The most notable are the British retailers ASOS and Boohoo, both of which have flourished with ultra-fast, online models. Labels such as Fashion Nova and Missguided have spread too, using Instagram to connect with growing numbers of young women.
Some of these brands have had their challenges in recent months, mostly operational problems as they try to speed their expansions. Missguided reported a significant loss earlier this year after it said it was premature in installing a new tier of management to support its rapid growth. In July, ASOS issued a profit warning after logistical problems at its US warehouse, which was struggling to keep up with demand. “None of these [issues] change the opportunity ahead for us which remains huge,” said Nick Beighton, the company’s CEO, at the time. “I’m clear this is not a demand issue.”
H&M and Zara haven’t lost their fight either. Both recently reported renewed strength in their businesses as they start to see the benefits of pulling back on store openings to focus on growing their digital businesses.
Fast-fashion’s recent sales growth isn’t just happening in newly tapped markets either. “Growth was strongest in markets such as the US, where we grew with 17%,” H&M’s CEO, Karl Johan-Persson, told investors on a June call about the company’s second quarter. Boohoo recently reported 62% sales growth in the US in its first-half results (pdf). ASOS delivered 8% sales growth in the US (pdf) for the first half, a number it believes could have been higher without the operational problems.
One other reason for the rumors of fast-fashion’s decline is the rapid rise of resale and rental businesses, which offer customers more sustainable ways to shop. The main voices pushing that narrative are the companies in those spaces themselves, such as Rent the Runway and ThredUP. They likely are stealing some share, but it’s unclear how much.
Forever 21’s problems seem more specific to the business itself. “First off they lost their way on fashion—used to be really quick in copying higher-end brands. They became over assorted—less impactful on fashion, while quality declined,” one longtime retail analyst told Yahoo Finance earlier this month. “Also the store footprint just kept getting larger and they have some huge 20,000-square-foot stores.”
Fast fashion has proved a remarkably effective model. It’s prompted a number of clothing brands to speed up their supply chains. It may be that Forever 21’s biggest problem is it’s just not as good as the competition.
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