Is Forever 21 Shein's Biggest Victim Yet?

Summary

The Business of Fashion Podcast: "Is Forever 21 Shein's Biggest Victim Yet?" – Detailed Summary

Release Date: March 18, 2025
Host: The Business of Fashion
Guests: Kathleen Chen (BoF Retail Editor), Sheena Butler Young (Senior Correspondent), Brian Baskin (Executive Editor)

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1. Introduction: Forever 21's Second Bankruptcy

The episode begins with Sheena Butler Young and Brian Baskin discussing the latest blow to Forever 21, a cornerstone in the fast fashion industry. On March 18, 2025, Forever 21 filed for bankruptcy in Delaware for the second time in six years, signaling a probable end to its widespread U.S. presence. The anticipated closure of hundreds of stores marks a significant decline, with the brand's future existence likely limited to licensed products under different ownership.

Notable Quote:
Brian Baskin [00:19]: “Unlike last time, there's little hope the retailer will come out the other side.”

2. The Rise and Fall of Forever 21

Kathleen Chen reflects on Forever 21's pivotal role in popularizing fast fashion among millennials. She recounts the brand’s influence during her high school years, highlighting how Forever 21 made trendy, affordable fashion accessible to a broad audience. The retailer's strategy of releasing a vast array of styles in small quantities created a sense of urgency among consumers, fostering immediate purchases over long-term savings.

Notable Quote:
Kathleen Chen [01:12]: “Forever 21 was the first fast fashion retailer to really hit the scene and to really go mainstream.”

3. Factors Leading to Decline

Several factors contributed to Forever 21's downfall:

• Overexpansion and Mismanagement: The brand expanded too rapidly, opening an excessive number of stores, which strained resources and diluted brand identity.

• Intense Competition: Zara and H&M emerged as strong competitors in the fast fashion space, offering similar products with better management. As Shein and Temu entered the market with even faster and cheaper offerings, Forever 21 struggled to keep pace.

Notable Quote:
Kathleen Chen [02:48]: “Zara and H&M dominated in the early to mid-2010s, whereas Forever 21, I would say I associate it with the late aughts.”

4. Authentic Brands Group's Acquisition

In 2020, Authentic Brands Group (ABG), known for its extensive portfolio of licensed brands, acquired Forever 21's intellectual property post-bankruptcy. ABG's strategy involves monetizing brand names through licensing rather than reviving the brands with new retail strategies.

Notable Quote:
Kathleen Chen [07:08]: “There is a difference between monetizing a brand and really operating it, running a label with longevity in mind.”

ABG formed a joint venture with Simon Property to manage Forever 21, but this unconventional ownership structure may have hindered cohesive brand management. Jamie Salter, CEO of ABG, later admitted that acquiring Forever 21 was likely his biggest mistake, indicating strategic misalignments and insufficient investment in brand revitalization.

Notable Quote:
Sheena Butler Young [08:46]: “Jamie Salter... said in January that buying Forever 21 was probably the biggest mistake he'd made.”

5. Competitive Disadvantages and Tariff Impacts

Forever 21 faced significant challenges from online competitors like Shein and Temu, who benefited from the de minimis exemption allowing them to import goods under $800 without tariffs. This tax advantage enabled these platforms to offer lower prices, putting Forever 21 at a competitive disadvantage since it imported goods through traditional, tariff-applicable methods.

Notable Quote:
Brian Baskin [15:20]: “Forever 21 was blaming the fact that its competitors could take advantage of this loophole while Forever 21 was bringing stuff in the old fashioned way.”

6. Leadership Under Winnie Park and the Glass Cliff

Sheena Butler Young discusses the tenure of Winnie Park, Forever 21’s CEO post-bankruptcy. Park navigated the company through tumultuous times but eventually departed for a role at Five Below. Her leadership was initially scrutinized under the "glass cliff" concept, which suggests that marginalized individuals are often placed in precarious leadership positions during times of crisis. However, Park successfully maintained her reputation and moved to a thriving retailer, indicating effective leadership despite the challenges faced.

Notable Quote:
Sheena Butler Young [19:15]: “She is fortunate in that she led them through some tough periods and was able to leave with her reputation intact.”

7. The Future of Fast Fashion

Looking ahead, Kathleen Chen anticipates a continued bifurcation in the fast fashion industry. She predicts that the term "fast fashion" may evolve as brands either move towards higher-end, affordable fashion or compete fiercely on low-cost offerings. The impending removal of the de minimis exemption poses a significant threat to ultra-fast brands like Shein and Temu, potentially leveling the playing field. However, sustaining success will require more than just competitive pricing; it demands creating a unique brand identity and aligning with consumer desires for quality and trend relevance.

Notable Quote:
Kathleen Chen [21:17]: “I think with fast fashion it can't just be cheap, affordable. I think there needs to be cheap and affordable.”

8. Conclusion: Lessons and Industry Insights

The episode concludes with reflections on the volatile nature of retail, emphasizing that while retail bankruptcies remain a constant, the "retail apocalypse" narrative has been misleading. Instead, the industry is experiencing a significant shift where only the most adaptable and brand-focused retailers survive. Forever 21's story serves as a cautionary tale about the importance of strategic management, brand identity, and adaptability in the rapidly evolving fashion landscape.

Notable Quote:
Brian Baskin [22:45]: “Please be sure to check out our coverage of the Forever 21 bankruptcy and other breaking [e-mail].”

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Key Takeaways

• Brand Expansion vs. Sustainability: Rapid expansion without solid strategic planning can lead to overextension and eventual decline.

• Competitive Landscape: Success in fast fashion requires staying ahead of trends and maintaining competitive pricing, especially against agile online competitors.

• Ownership and Management: Effective brand management is crucial. Licensing-heavy strategies might monetize brands short-term but can hinder long-term revival.

• Regulatory Impacts: Tariff policies and exemptions significantly affect competitive dynamics, influencing who can offer the lowest prices.

• Leadership Challenges: Effective leadership is essential in navigating companies through crises, but external factors can limit even strong leaders' success.

Final Thoughts

Forever 21's journey from a trendsetting fast fashion pioneer to bankruptcy highlights the complexities and challenges within the retail industry. As the market continues to evolve with new players and shifting consumer behaviors, established brands must innovate and adapt to sustain their relevance and success.

Transcript

[Sheena Butler Young]

Foreign hello, and welcome to the Debrief from the business of Fashion, where each week we delve into Our most popular BoF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler Young.

[Brian Baskin]

And I'm executive editor Brian Baskin. On Sunday, Forever 21, the chain credited with or or some would say blamed for introducing fast fashion to America, filed for bankruptcy in Delaware for the second time in six years. Unlike last time, there's little hope the retailer will come out the other side. Forever 21 is expected to close its US stores, which number in the hundreds. And if it exists going forward, it will probably be as a name on licensed products sold by someone else. With us today is BoF retail editor Kathleen Chen, who has been following the ups and mostly downs of Forever 21. Hi, Kat, and welcome to the Debrief podcast.

[Kathleen Chen]

Hi, guys. Thanks so much for having me.

[Brian Baskin]

Fast fashion brands come and go. Forever 21 is not the first one to disappear from the retail landscape. But I think it's fair to say this one's been hitting a little harder than most. Why is that?

[Kathleen Chen]

Well, the end of Forever 21 really represents the end of an era. For a lot of millennials such as myself. Forever 21 was the first fast fashion retailer to really hit the scene and to really go mainstream. I think I was a sophomore in high school when a Forever 21 opened at the mall that I used to go to in Pittsburgh. And before then, it was Old Navy and American Eagle and Abercrombie already. For me, it wasn't cool and anymore, but Forever 21 just changed the game completely. It was like the trendiest things. All the bloggers on blogspot were shopping from Forever 21. And these were, you know, adults living in these coastal cities who were shopping from Forever 21. And I was reading about that fashion online and I was able to go to that Forever 21 and buy something for $10, $15, $20, really, really chic stuff that just, you know, that level of fashion just was not available to anyone before. And it was very exciting. Forever 21 was why it was my gateway drug into. Into fashion.

[Brian Baskin]

So forever 21 has been quite troubled for a while. I think the heyday you're describing is probably 20 years, maybe 10, 10 years. Let's be charitable in the rearview mirror at this. What happened? I mean, why weren't they able to hold on to what attracted all those shoppers in the first place?

[Kathleen Chen]

Part of it was mismanagement. They opened too many stores and expanded too quickly. But the bigger existential threat to Forever 21 was Zara. Zara came around. H and M was there and got better. Zara and H and M dominated in the early to mid 2010s, whereas forever 21, I would say I associate it with the late aughts. And it was the same game that Forever 21 sort of introduced, except in the text. And H and M just did it better.

[Brian Baskin]

And then along comes Shein and Temu.

[Kathleen Chen]

Right, right, right. So even faster, even cheaper. And Forever 21 was just edged out.

[Sheena Butler Young]

It's like you make this format and someone comes behind you and does it better than you did. It's sort of a sad but becoming a recurring theme in retail before we jump forward to sort of where they are today, the role that Forever 21 played in shaping consumer expectations around price and trend cycles and fast fashion. Like, even the micro trend, it's really fast fashion on steroids, which is what Forever 21 introduced over 20 years ago. How do they shape consumer landscape as we know it today and what we expect for price?

[Kathleen Chen]

I mean, Forever 21 did the small batch thing that Shein is known for. So basically they would come out with, you know, a million styles in six months, and it would always be in really small quantities. And so if you liked a polka dot skirt, you would have to buy it right there, right then, because you know it's gonna sell out. Or you could wait and bet on maybe Forever 21 releasing a similar product in a couple weeks, in a couple months. But I think it really changed the consumer mentality as well, of instead of, you know, waiting for discounts like you would at the Gap, Forever 21 was really good at making people, incentivizing people to buy something right, right there, right then. And this was before AI, but somehow forever 21 just always hit on the trends. And maybe it was easier in 2008, 2009, when there wasn't TikTok and there weren't all these micro trends and they.

[Sheena Butler Young]

Could predict, they could tell you what you wanted to wear, whereas now the consumer is sort of telling them.

[Kathleen Chen]

Yeah, yeah, I think it's really hard to fathom because, like, that was when, you know, we. I subscribed to magazines like Teen Vogue and Seventeen, and this was when fashion was something that you sought out versus it being something that's just sort of inundating in your everyday life because you get on social media or you get online and there are ads everywhere. And part of why Forever 21 hasn't been so relevant anymore, you know, beyond the fact that it went bankrupt five years ago and then it was managed by Authentic Brands Group, which we'll get into later. But it just. It hasn't been top of mind. It's. It's not. You know, you don't see influencers peddling forever 21 the way that you see influencers still promoting Shein. And I think that's a huge factor. You have to spend that money to be relevant. And I think at a certain level, it does make a difference in your business performance.

[Brian Baskin]

Well, let's actually get into Authentic Brands right now. I mean, they're the ones who basically brought them out of that last bankruptcy back in, I think, 20 or 2020. And it was a really unique ownership structure. Why don't you tell us sort of how the company was structured for these last few years and also who Authentic Brands Group is, because they're quite interesting themselves, for sure.

[Kathleen Chen]

Yeah. So Forever 21 first filed for bankruptcy in 2019. And in 2020, the IP was purchased by Authentic Brands Group, which is this mega licensing portfolio of brands.

[Brian Baskin]

And they were buying everyone back then. Right? They bought Brooks Brothers.

[Sheena Butler Young]

Yeah. Reebok, Nautica.

[Kathleen Chen]

Yeah. Nine West Aeropostale. And they own a bunch of celebrity IP as well. And they are. I mean, they are just so good at that game, purchasing these distressed brands and then extracting value out of them through allowing manufacturers to use these brand names to create products. It is a very salient business model and makes a lot of sense. But I do think there is a difference between monetizing a brand and really operating it, running a label with longevity in mind. And Jamie Salter, the CEO of Authentic Brands Group, he is an incredible businessman, but I'm not sure if the company is actually putting money into the brands that they own for awareness and for relevance among consumers. And I think this is a problem that all of the brands in that portfolio have. But Forever 21 was purchased by Authentic alongside Simon Property, which is a mall landlord. And they created a joint venture called Spark Group. And a lot of other authentic brands IPs are in that portfolio. And then earlier this year, Authentic sort of recalibrated its portfolio to create a new entity called Catalyst Brands. But the setup is similar. Authentic owns the IP and the real estate partners help operate the actual retail footprint.

[Brian Baskin]

And I think JCPenney is tied up in that somewhere, too.

[Kathleen Chen]

Yes, yes.

[Sheena Butler Young]

It's quite a wonky, if that's the right adjective, ownership structure. I thought it was interesting. Jamie Salter, the CEO of abg, or Authentic, we're calling it now, said in January that buying Forever 21 was probably the biggest mistake he'd made. I mean, they put a lot of effort into, like, different strategies. Like, he was also saying at that time that they had done this partnership with Sheehan, that he saw some good Runway, some good results from, but not quite finding its footing. What do you make of him casting it as a mistake? What do you think that means?

[Kathleen Chen]

I think it just means that forever 21 can't beat shein, and it can't partner with Shein to the level that it would like to.

[Brian Baskin]

I think the bigger problem here is probably less the authentic brands approach and more the involvement of Simon. And not that Simon mismanaged forever 21 per se, but that, to me, says they thought of this as a mall play, as a physical retail play for a very. What is now a very online concept, which is this ultra fast, disposable fashion. I mean, I don't know when the last time was any of you went into a Forever 21, but you do feel like you're in the physical embodiment of, like, the Shein website. And, like, like, that's not a fun place to be. I don't think.

[Sheena Butler Young]

Oh, gosh. I don't think they were going for the physical embodiment of a Shein website.

[Brian Baskin]

Well, they kind of were they invited. She. And you could return your shein purchases at forever 21. Not that. I mean, who returns a Shein purchase? But, like, it. You know, they had, like, these oddball ideas, like, I want to read the headlines. We've run about Forever 21 since ABG bought them. Shein will sell Forever 21 clothes. Forever 21 launches a Barney's collection. Forever 21 bets you want to dress like your Roblox avatar. Forever 21 relaunches in Japan as upscale retailer Forever 21 makes China market comeback. I mean, it's just like, let's throw everything at the wall, see what sticks. And I guess nothing did.

[Sheena Butler Young]

Kat, why do you think some of these reinventions didn't work? I mean, they followed the turnaround playbook to a T, it seems like, and nothing really stuck.

[Kathleen Chen]

I'm not really sure if they did, Sheena. I mean, it is incredibly difficult, historically for a brand to go through bankruptcy and come out on the other side revitalized. For every J. Crew or True Religion, there are a handful of American Apparels or Wet seals or Rue 21. Talk about another fast, fashiony mall retailer. But the problem with WET Seal Route 21 and now Forever 21 is that these retailers never really had any kind of identity. I think it's hard when you're playing for value and you're playing for trend, which has become a commodity in fashion. And then if you look at the mall retailers that have done really well, American Eagle Outfitters, Abercrombie and Fitch, even Pacsun I've heard, is doing well. These are players that have spent so much money on one, defining their respective brands and two, developing products that their customers want. And it's not about just chasing fashion, fashion, fashion the way that I think Forever 21 never got out of the way that Shein dominates. It's about going the other direction and creating products that your customers want at a level of quality. That is the name of the game for Abercrombie. And they've just been killing it for the past five years.

[Sheena Butler Young]

So you draw a very important or several very important distinctions between Forever 21 and its contemporaries that are successful to that point. Is this a predictor of more bankruptcies to come? Like, what does it have in common with other retailers that are still in business that could maybe go down this path? Or does it not have much in common with them?

[Brian Baskin]

Yeah. Who's next to GoCag name names?

[Kathleen Chen]

Oh, man. Well, there's always, there's always retail bankruptcies. But I think S and P put out a report saying that retail bankruptcies are actually on track to decline this year. But you know, I think there's at least a handful of big ones every single year and we can attribute it to the retail apocalyp anymore. Remember guys, in like 2017, every other one of my stories had retail apocalypse in the headline, but it wasn't the retail apocalypse.

[Brian Baskin]

Right.

[Kathleen Chen]

It was just this shift that was happening where the divide between the winners and the losers became so much bigger, more divergent.

[Brian Baskin]

Although I will note the S and P report you mentioned and this general thinking that maybe the worst is over for retail bankruptcies was before the outlook for retail in the US and consumer sentiment in particular really started to darken. Kat, you've written about this as well. How has the overall picture changed? Setting aside forever 21.

[Kathleen Chen]

Yeah, you're right. With the tariffs in mind. Not good. The outlook is not good. It's been a lot of, I would say, panic in the industry. Not only because consumer sentiment is going to plummet, but also because the tariffs will have a very substantial impact on these fashion businesses and especially in the sort of lower level mass retail where a lot of the manufacturing is still based in China.

[Sheena Butler Young]

The other elephant in the room is this de minimis exemption that specifically was called out by the CFO in Forever 21's statement and filing. That that was a huge fact. Which obviously, I mean, you can explain it better than me, but it's. If you're importing something that's less than $800 in value, you don't pay taxes or tariffs on it. And the Trump administration is going after getting rid of that. But right now it's in place and it's. It's wind to the back of retailers like Temu and Shein, right?

[Kathleen Chen]

Yes. So it's the platforms that ship directly from China to the US that are exempt from any kind of duties because it's under $800. This loophole has been around for a really long time, but it wasn't until 2016 that the value that was exempt from tariffs went up to 800 from $200.

[Brian Baskin]

And just to be clear, Forever 21 was blaming the fact that its competitors could take advantage of this loophole while Forever 21 was bringing stuff in the old fashioned way in container ships and, and selling it through stores, which meant they had to pay tax on pretty much the exact same clothing that she and Itemu didn't.

[Kathleen Chen]

Yes, exactly. Because she and Temu don't have to pay tariffs by skirting direct shipment, Forever 21 is at a disadvantage.

[Brian Baskin]

I wonder if Trump had stuck with his plan to kill that loophole if we wouldn't be seeing this bankruptcy today. I think creditors might have given Forever 21 a little more time if that had gone away, but I guess we will never know.

[Kathleen Chen]

I don't know if I buy that. I don't think it's just the fact that the prices are lower. I think if they're not hitting on the right trends, if they're not visible, where customers find influencers, I don't know, affiliate links. If they're not in the market, then they're not going to be able to compete with Shein and Temu even if their prices are just as low.

[Sheena Butler Young]

So we're not buying what the CFO has attributed this decline to, which is which is our competitors have a cheaper loophole to get goods into the country. And also we tried everything.

[Kathleen Chen]

Personally, I do not.

[Brian Baskin]

They tried everything except selling clothes people wanted to buy. We'll be back with more of the debrief right after this.

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[Brian Baskin]

Quiz we talked about Forever 21 being mismanaged but actually for a while there after that first bankruptcy they had a pretty well regarded CEO, Winnie park who had come from Paper Source and she had some good ideas and I think her reputation is more or less intact despite how the company ended up. But Sheena, you talked to her fairly early in her tenure. Can you tell us about her approach to the company and you know why it might not have worked?

[Sheena Butler Young]

You know, it's interesting. I will what I learned from Winnie in talking to her was a feature that we'd done about the glass cliff and if anyone's not familiar with that, it's this idea that women or people from marginalized communities are tapped for leadership roles when like the situation is so dire it's unlikely to turn around and then the person is is hired and they're essentially pushed off the glass cliff. And so there was chatter when Winnie park was brought in to lead forever 21 post bankruptcy that she was sort of a glass cliff higher. And she contextualized it differently and said, I don't think that's the case. I think when things are so challenging, they pick the best and brightest. Which she said that could be is often a woman or someone from a marginalized community. She is fortunate in that, like, she led them through some tough periods and was able to leave with her reputation intact. In fact, she landed at 5 below, which is a more, I think people would say, a more exciting and successful retailer right now with the Gen Z and the Gen Alpha audience. And she landed there in December. So right before, right before the going got really tough, she managed to leave with her reputation intact, which I think is smart. It's smart of her.

[Brian Baskin]

I love Five Below. I mean, they sell really cheap stuff as well. I mean, I'm sure for what, you know, they sell, like, everything from candy to, you know, posters and room decor and makeup aimed at kids. And it's a lot of, like, cheap stuff, probably made in overseas, you know, very similar in some ways to Forever 21, but it feels a little more fresh and modern and curated even. Although I'm looking now at her appointment and 5 below sales are also in decline when they brought her in. So maybe she just hopped from one glass cliff to another.

[Sheena Butler Young]

Oh, well, let's hope it's not a glass cliff, but hope transformational.

[Brian Baskin]

My daughter certainly hopes Five Below is not going anywhere.

[Sheena Butler Young]

You know, we've talked a lot about contemporaries and competitors at Forever 21 that are more successful. But fast fashion isn't exactly just on a unrelenting upward trajectory. It has its own challenges. What do you think is the future of fast fashion? Where does it go from here?

[Kathleen Chen]

That's a great question, Sheena. I think the bifurcation of fast fashion is going to continue, and maybe in five years that term is going to be very abstract because it's not going to be the iteration of it that we've seen in the past 10 years. You have in the text going super elevated. And to an extent, H and M is trying to straddle this balance between elevated but also affordable. We'll see how that goes for H and M. And then you have the very, very, very low end with Shein and Temu, which were explosively growing in the last two years. But I feel like among consumers, these platforms are starting to lose their luster. The threat of de minimis going away is looming and I don't know there's going to be a next big new thing on the horizon. And again, it's just so hard to try to compete on value alone. You guys mentioned five below. Then I also think of TJ Maxx. These are value players, but there is an element of surprise and delight in that shopping experience. And so I think with fast fashion it can't just be cheap affordable. I think there needs to be cheap.

[Brian Baskin]

Affordable and and that is a lovely note to end on. Please be sure to check out our coverage of the Forever 21 bankruptcy and other breaking [e-mail] Our stories are available to BOF Professional subscribers only and you can find a link to sign up in the episode Notes. You've been listening to the debrief, produced and edited by Elizabeth Olivia Davies and Eric Brea. I'm Brian Baskin.

[Sheena Butler Young]

And I'm Sheena Butler Young. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcasts.

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