Analyzing Customer Satisfaction Decline at Forever 21: Causes & Solutions

Nikolas Molina Neha Singh Sopheak Nong Ardha Anil Background In 1984, in Los Angeles, California, Do Won (Don) Chang and his wife Jin Sook Chang founded Forever 21, originally named Fashion 21. The store saw rapid success within its first year, generating sales of $700,000. By 1989, the company rebranded to Forever 21 and opened its first location in a mall in Panorama City, California. Over the next six years, Forever 21 expanded its business, establishing stores across the U.S. and eventually entering the Canadian market. According to Forever 21 they currently have 540 stores worldwide which is nearly a 30% decrease in stores since their height in 2017 when they had 790 stores. Forever 21 offers a wide range of clothing items for men, women, and children. Some of the products they sell are dresses, shirts, shorts, pants, outerwear, swimwear, activewear, and accessories such as jewelry, bags, and shoes. Something that Forever 21 is very well known for is its affordability. The brand's pricing strategy targets budget-conscious consumers by offering trendy clothing at a relatively low price. Forever 21 has a lot of competitors such as H&M, Zara, Uniqlo, Urban Outfitters, PrettyLittleThing, and Abercrombie & Fitch to name a few. What sets Forever 21 apart from its competitors is its ability to keep up with the latest fashion trends at an affordable price. Since they have so many styles and ranges of designs they appeal to a

wide range of customers. They also have quick turnover on their clothes just like H&M, so they always have something fresh. Analyzing the Decline in Customer Satisfaction at Forever 21: Causes and Solutions Business Concept : Forever 21 focuses on producing reasonable, trendy clothing, whereas it frequently utilizes materials that are counterfeit copies of high-end clothing brands. The company's original mission was to provide fashionable apparel reachable for those who couldn't afford designer labels. Although it has in the past led to legal problems, Forever 21, on the other hand, usually is able to prevent any serious consequences from generally copying the visuals of other brands (Gale). Most Forever 21 customers find this copying of creativity appealing because they are curious about what is currently popular in the fashion world but do not want to spend money on the designer goods that started the trends. Copying designer pieces gives Forever 21 a false sense of luxury. Taking advantage of local vendors is another strategy incorporated into the Forever 21 company model in order to rapidly introduce fashionable clothes to the public. In fact, as reported by Gale, 60% of Forever 21's manufacturers are American. While originally a successful concept, Forever 21 is now marketing to customers in the United Kingdom, which makes this concept less advantageous. While the idea of a brand coming from the United States would appeal to Americans, a consumer from the United Kingdom would probably not be as interested in this idea. Finally, Forever 21's original business plan involved an exclusive partnership with EZ Shipping. Forever 21 benefited greatly from this because the shipping costs were reduced. Forever 21 recently lost its partnership with EZ Shopping as a result of a decline in sales, which significantly hurt the retailer (Chung). SYMPTOMS OF FOREVER 21 IN ASSOCIATION WITH POOR CUSTOMER SATISFACTION: ● Higher operational expense & Profitability under pressure

● Low market share on E-Commerce ● Environmental Concerns ● Poor In-store experience HIGHER OPERATIONAL EXPENSE & PROFITABILITY UNDER PRESSURE: The rapid expansion of Forever 21, particularly with the opening of numerous stores, predominantly in mall locations, proved to be a double-edged sword. While it initially signaled growth, this extensive expansion brought about increased operational costs and a failure to adapt to shifting market dynamics, ultimately contributing to the company's financial woes. These challenges eventually culminated in Forever 21's bankruptcy, further burdening the company with escalated operating expenses, including rent and maintenance for mall-based locations. Consequently, Forever 21's profitability has been significantly strained due to the substantial overhead costs associated with maintaining these expansive retail spaces. Additionally, the evolving preferences of young consumers, who increasingly favor smaller town shops and e-commerce platforms over lavish shopping malls, have added to the company's challenges, further impacting its financial performance. LOW MARKET SHARE ON E-COMMERCE Forever 21's limited market share is the outcome of a complex web of factors. The retail sector witnessed a rapid transformation, pivoting towards e-commerce as a dominant force. However, Forever 21 struggled to swiftly adapt, missing the boat on the burgeoning online market. Despite its core demographic being primarily young shoppers who were gravitating towards online convenience, the brand suffered due to its delayed investment in enhancing its e-commerce platform. This setback was compounded by intense competition from established online fashion retailers who had

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already earned the trust of online shoppers. Moreover, the brand's failure to keep pace with shifting fashion trends and evolving consumer preferences may have contributed to its challenges, resulting in a lackluster market share. In summary, the reasons behind Forever 21's meager market share include its sluggish e-commerce adaptation, fierce rivalry with well-established online competitors, and potential misalignment with evolving consumer tastes and fashion trends. This was further exacerbated by a significant drop in revenue in recent years, with the company's market value declining by 10% in 2016, followed by a 15% drop the following year, ultimately plummeting to $3 billion in 2018. ENVIRONMENTAL CONCERNS : Rapid clothing production and turnover by the brand resulted in higher resource consumption, such as water and energy use, as well as significant textile waste production. Fast fashion is frequently manufactured using risky chemicals and unethical methods, which further contribute to environmental deterioration. The problem was made worse by Forever 21's emphasis on affordability, which promoted a disposable fashion culture in which garments were worn only once before being thrown away. The brand came under fire for not prioritizing sustainable and eco-friendly practices as consumers and activists became more aware of the environmental impact of the fashion industry. These environmental issues affected the brand's reputation as well as the growing significance of sustainability in the fashion industry, which Forever 21 found difficult to address. POOR IN-STORE EXPERIENCE :

Despite significant investments in rapid store expansion, Forever 21 faced challenges in keeping its physical outlets up to date with trendy designs. The brand's rapid expansion into numerous locations posed logistical issues, resulting in a disconnect between online and ofﬂine offerings. Customers visiting physical stores expected the same trendy designs available online, leading to disappointment due to inconsistent product availability. This hindered the brand's ability to offer a satisfying in-person shopping experience. Reference: Link Marketing Problems: Forever 21 has faced different marketing problems related to the brand image, and the marketing mix of place which is mainly due to a lack of focus on e-commerce, and a poor customer targeting strategy.

Declining brand image Forever 21 has been criticized for its unethical labor practices, its environmental impact, and its lack of transparency. Moreover, Forever 21 has also been the target of negative social media sentiment. These have damaged the company's brand image and made it difficult to attract new customers. The company received a lot of backlash for not signing the Bangladesh Accord, a legally binding agreement to improve safety measures in garment factories in Bangladesh post Rana Plaza disaster in 2013 which killed over 1000 garment workers. In 2021, when the Bangladesh Accord was replaced by the International Accord with a broader scope and involvement of more countries, Forever 21 didn't sign that either stating that they have their own safety measures in place. Ineffective marketing campaigns Forever 21's marketing campaigns have been criticized for being outdated and irrelevant. The company needs to create more effective marketing campaigns that resonate with its target audience. They were unable to keep up with social media trends and often used outdated strategies. From the graph below, while the majority of respondents were aware of Forever 21, the brand’s popularity is still low (30%) only less than a quarter of respondents had used Forever 21, and brand loyalty was low as well (18%).

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Reference: Link Research objectives: The objectives of this research are to understand: ● How the inability to capture customer satisfaction leads to the failure of Forever 21. ● The likelihood of different factors that can improve Forever 21’s business The first session of the research will focus on how Forever 21 fails to capture customer satisfaction. Next, in the second session will study the different strategies that can improve Forever 21’s business. The research will be structured into literature with different concepts of customer satisfaction and marketing strategy in the fashion industry, followed by hypotheses studies and testing by using the primary data obtained from customers to respond to the objectives of the research. The managerial implication will be also discussed as for recommendation to improve Forever 21’s business.

Citations "Forever 21 is back: CEO reveals plan to open 300 stores by 2025." Fortune, 1 Oct. 2022, https://fortune.com/2022/10/01/forever-21-stores-bankruptcy-comeback-sale-mall-owner s-ceo/ . Accessed 12 September 2023. “Forever 21 brand awareness, usage, popularity, loyalty, and buzz among fashion store customers in the United States in 2022”Statista, https://www.statista.com/forecasts/1335791/forever-21-fashion-stores-brand-profile-in-th e-united-states . Accessed 12 September 2023. Roll, Martin. "Forever 21: Fast Fashion with an Edge." Martin Roll, https://martinroll.com/resources/articles/branding/forever21-fast-fashion-with-an-edge/ . Accessed 12 September 2023. Zippia. "Forever 21 Careers: History and Overview." www.zippia.com, https://www.zippia.com/forever-21-careers-23769/history/. Accessed 12 September 2023. DROP IN MARKET SHARE : https://observer.com/2020/02/forever-21-bankruptcy-deal-chang-family-billionaire/

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665 _ Forever 21 _ Problem Identification (1)

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