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Management in Action: Fast FashionWas Forever 21 Fast Enough?

Do Won Chang and Jin Sook Chang arrived in the United States from South Korea in 1981. For three years, the married couple worked hardhe pumped gas and waited tables, she styled hairand by 1984 they amassed $11,000 in savings that they used to purchase a single retail clothing store in Los Angeles. By 2014 they were billionaires, running one of the most recognizable fashion retailers in the worldForever 21.¹ And as they required of even their most senior executives, you can call them Mr. and Mrs. Chang.²

FAST FASHION, FAST GROWTH

Forever 21 was a pioneer in fast fashion. Under this model, companies produce and sell on-trend clothing quickly and cheaply, making most current styles affordable and accessible to a wide range of consumers. Fast fashion is inexpensive and customers have little expectation for quality. Instead, the imperative is to get of-the-moment styles into consumers hands within weeks or even days of the trends first appearing on reality TV or influencers social media accounts.³ Forever 21 was a massive success, and the company grew very big, very quickly. At one point Forever 21 had almost 500 stores in the United States and more than 800 stores globally.⁴ As the so-called retail apocalypse took even the most established brick-and-mortar brands out one-by-one, Forever 21 leaned in. Eventually, having a Forever 21 store became a virtual requirement for any struggling mall that wanted a chance at survival.⁵

CONTROL PROBLEMS

What was it like to work in the upper echelons of such a massive and successful company? Former executives paint a picture of a tightly run ship. The inner circle of executives consisted of the Changs, their daughters Esther and Linda, and their close friends, married couple Alex and Seong Eun Kim Ok. Over the years only a handful of other close confidants entered and left the group, and some senior executives say they dont recall having a single email from or conversation with either of the Changs. The small team operated largely in isolation from the rest of the company, and every decision had to go through Mr. and Mrs. Chang.⁶ These decisions have been scrutinized in recent years as stories of poor planning and mismanagement surfaced. Insiders recall watching huge shipments of inventory stagnate in warehouses as they waited for the Changs to approve the items, then shipping at expensive overnight rates to make up for the lost time. There also are accounts of expensive mistakes in international operations, including shipments of shoes and cosmetics being confiscated at customs because the company hadnt acquired proper import licenses. Much of this inventory wound up in dumpsters.⁷ The Changs were presented with big data, including market trends, previous years sales figures, and inventory projection, but they seemed to make subsequent decisions without regard for the pertinent data. Orders mostly reflected some combination of the Changs gut feelings, Western style preferences, and North American weather patterns. In some years this resulted in too much inventory, in others, not enough. It also led to international stores stocked full of clothing that was inappropriate for local weather, norms, and customers.⁸ There is little evidence that the Changs made any substantial changes to the companys processes, systems, or supply chain in recent years. By 2016 the Changs and their daughters had loaned the business at least $20 million and had borrowed another $18 million from a company in the Philippines. Their international stores werent turning profits, and the company had begun to quietly close some stores and downsize others.⁹ It also opened new stores that year and expanded several existing ones.¹⁰

NOTHING LASTS FOREVER

Retail has changed dramatically in the past 30 years. A young adults shopping experience in 1986 would be unrecognizable to todays Gen Zers and young Millennials. Data show that the 18- to 24-year-old demographic (Forever 21s target market) continues to increase its preference for online shopping.¹¹ Young consumers also place significant value on corporate social responsibility.¹² While Forever 21 was busy maintaining laser focus on physical expansion, direct competitors like Zara were adapting with sustainable clothing lines and streamlined online shopping experiences.¹³ And some recent playersASOS and Revolve, for exampleditched the idea of physical stores altogether. Without the weight of retail space, these companies respond to trends almost instantly and can get new fashion into customers hands in record time.¹⁴ Forever 21 had increasing difficulty staying competitive in this landscape.

WHATS NEXT FOR FOREVER 21?

The Forever 21 corporation filed for Chapter 11 bankruptcy protection in September 2019. According to the filing, the Changs owned 99% of the company and Alex Ok owned 1%.¹⁵ Their decision to file for Chapter 11 bankruptcy provided an opportunity to reconfigure operations as they attempted to stabilize and, hopefully, come back stronger.¹⁶ The company sold hundreds of store locations along with its LA headquarters and distribution center and negotiated over $100 million in deductions to its rent payments.¹⁷ It planned to abandon operations in Europe and Asia altogether and focus instead on its more lucrative markets in Mexico and Latin America.¹⁸ Some experts worried that the Changs continued refusal to cede any equity as they negotiated with creditors would ultimately be the companys downfall. Others were confident that Forever 21 would weather the storm.¹⁹ In February 2020, the Changs reached a deal to sell the companys retail stores and e-commerce sites for $81 million.²⁰ By May 2020 the remaining Forever 21 shell corporation appeared to have little funds left to cover payment plan installments or legal fees, and the United States Trustee Program (an arm of the Department of Justice dedicated to federal bankruptcy cases) recommended that the filing be dismissed or converted to a Chapter 7 bankruptcy (liquidation).²¹ As fashion analyst Anusha Couttigane put it, Forever 21s experience should serve as a cautionary tale for retailers that are slow to innovate and embrace change.²²

What type of organization is Forever 21?

• mutual-shares

• for-profit

• nonprofit

• mutual-benefit

• government

The Changs were presented with big data, including market trends, previous years sales figures, and inventory projection, but they seemed to make subsequent decisions without regard for the pertinent data. Based on this information, what type of skills did they seem to be lacking?

• conceptual

• human

• quantitative

• technical

• ethical

Based on the case, Forever 21 failed the most at which challenge?

• managing for happiness and meaningfulness

• managing for inclusion and diversity

• managing for ethical standards

• managing for career readiness

• managing for competitive advantage

There is little evidence that the Changs made any substantial changes to the companys processes, systems, or supply chain in recent years. Based on this information, they seemed to lack which career readiness competency?

• resilience

• positive approach

• emotional intelligence

• openness to change

• social intelligence

A fashion analyst mentioned that Forever 21s experience should serve as a warning that competitors should not be slow in innovating or embracing change. Based on this advice and what you know about managerial roles, what type of role should other clothing retailers focus on?

• negotiator

• liaison

• figurehead

• entrepreneur

• disseminator