Forever 21 : What is your strength – that customers value?

It is sad to see that Forever 21 filed for bankruptcy. Their backstory is fascinating and the 5 minute video backstory of Korean immigrants achieving the “American Dream” by Business Insider is worth watching. 

Unlike the typical sad “decline of US malls”  story and rise of “online retail” the Forever 21 story has important lessons for all businesses. It is also an eerie reminder of the New Coke fiasco,  To recap, Coca Cola did not realize in the eighties that customers did not drink Coke for taste but  it was all about “being American” – a much deeper meaning.

Here is what the Forever 21 backstory tells us:

  1. Understand what “value” customers see in your product: Businesses are constantly working on getting “new” customers.In doing so, businesses lose sight of why their loyal customers buy from them ? Thus Forever 21 expanded stores and product lines within the mall as the video explains. Their main strength was new clothing designs – frequently changed- at affordable prices. That is why customers visited their stores.
  2. Be careful about scaling: Unlike McDonalds, Starbucks  or Coca Cola where your goal is to provide a  uniform product and experience , Forever 21’s strength was rapid changes in product assortment- depending on the fashion of the day. The supply chain was agile and used to working at short notice. As soon as stores started expanding – something probably went wrong in the supply chain cost structure. Our guess is that the core strength of rapid fashion changes was forgotten. Scale in number of physical outlets and the focus on keeping prices low made the company forget its core strength that their customers valued most. Namely, current fashion at low prices. Like New Coke, shopping at Forever 21 was not equal to shopping at the mall but went deeper. People wanted latest fashions to the extent that the next time they visited the store they would see completely new designs. This had stopped….. yet Forever21 could not pick up the signals….
  3. Test changes small-Listen to Social MediaThere is a reason that McDonald tries out new products (like the Impossible Burger) at a few stores first. They have ways of measuring customer response. If successful, they’d roll out the product nationally. Similarly,  Forever 21 could have tried the new business model (of static fashion i.e. not changing offerings for second visit of the customer) at a couple of stores and seen the response. They also did not pickup social media signals as customers returned unhappy in seeing “nothing new”. Yes, competition from niche online retail was another thing to address but probably that was a lesser problem for them. Since their old model of rapidly changing designs had a supply chain that worked, it only needed online alignment. 

We do hope that our readers will pick up something from the Forever 21 story. We wish the very best to Forever 21 in their efforts to restructure with Chapter 11. 

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