Forever 21, From Glory To Decline, Is Founder To Blame?

Forever 21 has been filled with our memories of fast fashion. It is not only a chain fashion shop, but also a family dream. In its prime, Forever 21 had an annual sales of over $4 billion, employing over 43000 employees in hundreds of stores around the world. But now it is like a leaf of withered trees, and gradually withdraws from the markets of 40 countries such as China and Taiwan, and 199 branches in the United States are not immune. Earlier, the brand application for bankruptcy protection was repeated. In the end, when did this brilliant family business take the wrong step to lead to such a situation?

Family management is double-edged?

The founder Zhang Daoyuan (Do Won Chang), Zhang Jinshu (Jin Sook Chang) and two daughters emigrated from Korea to the United States in 1981 and founded billions of fast fashion empire from scratch. "Forever 21" comes from Zhang's family's belief that "21 is the most enviable age", and the brand's young positioning is clear. They observe the changing trend of clothing and cooperate with suppliers to provide products at low prices. At that time, Zhang Daoyuan, who was CEO, was responsible for dealing with the owners and suppliers. His wife Zhang Jinshu was responsible for the design and sale, and the daughters of Linda and Esther, who graduated from Ivy League schools, were also senior management of Forever 21. As the executive vice president, Linda is regarded as the successor of Zhang Dao Yuan.

Zhang Daoyuan has done everything in his own right. A former employee disclosed that he even signed his own expenses bill, and he would check the receipts for lunch or Uber. The family is working together to lead Forever 21 to the position of fast fashion leader, but it is precisely because of this family management mode that it has laid a major crisis for enterprises. Former employees and experts pointed out that Zhang's isolated management style is an important reason for the collapse of the company. Erik Gordon, an expert at University of Michigan's Ross School of business, analyzes:

"From the founder's point of view, this kind of overconfidence and optimism is common, but if you have been successful for a long time, it is particularly fatal. "

"There are no directors and no equity analysts to examine reality for them. He also describes that it is like living in a bubble that he has blown out, though it can last for a while, but it will eventually burst.

Power block dragged behind.

Unlike other fast fashion competitors, Forever 21 has always been family centered and never put power aside. They also include another Korean American couple, the president and former supplier of Forever 21, Alex Ok, and his wife SeongEun Kim, who are also known as "Missuses" with Zhang Jinshu, who are responsible for supervising thousands of styled products and deciding which ones will appear in Forever 21 stores. The documents show that the Zhang family owns 99% of the brand, while Alex Ok holds 1%.

Five of them said that with the expansion of business, Zhang wanted to hire experienced management, but he also had a strong distrust of outsiders. They revealed that in recent years, Forever 21 has recruited many experts to repair business, but they always ignore their new technology and marketing tactics. Earlier, singer Ariana Grande filed a lawsuit against Forever 21, which could reflect the drawbacks brought about by her self complacency. According to two former employees, marketers have suggested that brands cooperate with Ariana, but management has hired rapper Iggy Azalea, and Ariana is now more popular. Forever 21 at that time defended that he only used a model similar to Ariana in advertising, but after that, the image of the brand went down sharply.

Margaret Coblentz, the former e-commerce director of Charlotte Russe, also pointed out that when hiring former employees of Forever 21, they found that they did not know the overall performance of Forever 21, because the company would only provide them with relevant departments' reports. Even employees could not know the company's status, reflecting Zhang's distrust and neglect of his subordinates. This kind of arbitrary management means proved to be a cluster of ills. Even in the face of competition from Zara, H&M and other fast fashion companies, Zhang Daoyuan always insisted on holding shares so that new funds could not flow into the company. It can be seen that the core of this closed power has become the power line to crush the brand.

Ambition is too big to hit the rocks.

To count the fatal injuries of Forever 21, we must not mention its aggressive ambitions. In the years before and after the recession, brands opened large flagship stores and entered large department stores such as Mervyn's, Borders, Sears and Saks. "Real big shops have always been Mr. Zhang's dream," the brand's former real estate executive told Bloomberg Businessweek in 2011. "In 2010, Forever 21 has 480 branches in various places, and has expanded to 800 by 2018. We can imagine how amazing the expansion speed is.

The legacy of this ambition is that the brand is dragged down by the long-term lease. The internal documents obtained from the times show that the seven leases of the brand and Mervyn's will not expire until 2027 or 2028, much longer than the ordinary ones. In a recent interview, the eldest daughter, Linda Chang, admitted that there was a problem in large stores: "to cope with the complex situation of international expansion, we must fill the rent of these shops, which really put pressure on our business organizations. In 2015, Zhang Daoyuan was more exposed to borrow $10 million from her daughter, which shows how serious the company is.

Zhang Daoyuan signed almost every lease, designed every store, and was unwilling to close the bad business. And when they were stationed overseas, they did not have the sense of localization. For example, because they did not understand the local labor laws and made mistakes, or did not know that some European countries usually bought winter clothes earlier, a staff member said that after Forever 21 entered Germany, they did not notice that local shops were usually closed on Sunday. So in the Forever 21 document, as of 2015, most of the international business sites were unprofitable. Over the past year, stores in Canada, Europe and Asia were losing an average of $10 million a month.

Forever 21, where to go in the future?

For the decline of this fast fashion kingdom, Mark A. Cohen, director of retail research at the Business School of Columbia University, gave a concise summary:

"Forever 21 basically has only one move. The founder and his wife performed so well that the company was too large for them to continue to do well. "

The concept of the times is changing. Other fast fashion brands have been catering to the demands of consumers. It seems that H&M promotes the value of environmental protection and aesthetic diversity so as to get rid of the stigma of fast fashion. However, Forever 21 lacks the sense of touch. There is no way to keep up with the trend of "sustainable development". Before that, it was even directed to big customers with slimming food, and a mistake made the brand in a besieged way. In the final analysis, it is not the fast fashion that is out of season, but the wrong management practices of Zhang's family, which led Forever 21 to go bankrupt.

According to Zhang's family, they will listen to the new voice. The board members will add three more to Zhang Daoyuan, her daughter Linda and Alex Ok, including the former real estate director, the lawyer and the former chief executive officer of Things Remembered. In addition, the brand has also increased several new managers in recent months, including a new chief financial officer. Will the lessons of collapse fail to make Zhang Daoyuan restructure and inject new style into the brand? Only time will tell.