Behind The Rise And Fall Of Forever 21, The Family Is Also A Family.

Last month, Forever 21, a fast fashion chain, filed a bankruptcy petition. The application documents review the history of the company. However, this part feels like reading a memoir or a special play on a network drama.
Below the title of the bankruptcy petition, there are photos of Do Won Chang and Zhang Jinshu (Jin Sook Chang) and two daughters. One of the headlines is "always fighting: stories about courage, determination and passion". This article highlights the unusual success of Chang's husband and wife: they emigrated from South Korea to the United States in 1981 and built billions of business empire from scratch.
In the reference document, the two daughters of the company's top executives have received an undergraduate degree from the Ivy League university and an internship in the Forever 21 store during the summer vacation. Investopedia.com explains that even with only one page, these stories are enough to interpret the American dream.
The couple had a unique success story. Forever 21 is not an ordinary family business. During its heyday, the company has hundreds of stores in the world, with annual sales of more than $4 billion and over 43 thousand employees. Now, as part of bankruptcy, Forever 21 is moving out of 40 countries, and plans to close 199 stores in the United States, accounting for more than 30% of the total number of stores in the United States.
Former employees and industry experts pointed out that the conservative management style of Chang's husband and wife was an important reason for the collapse of the Forever 21 empire. They have demonstrated their views by invoking the Forever 21 real estate lease agreement and the poor marketing strategy in recent years.
Erik Gordon, a management expert at the Ross School of business at University of Michigan, said: "it is very common for the founder to be arrogant. But if the company has been successful for a long time, arrogance will be a fatal factor. Forever 21 Neither has a board nor an asset analyst to verify the company's status quo.
Gordon added: "you can live in self created soap bubbles for a long time, but one day, soap bubbles will burst."
For decades, this privately held retailer has remained highly mysterious, and the rare internal information disclosed in the bankruptcy application documents gives people a glimpse of the company's condition. Forever 21, including 6 top executives, including 3 executives, interviewed The New York Times on the condition of anonymity and signed a confidentiality agreement, telling them about their experience in the company.
Forever 21 bankruptcy due to failure, coupled with changes in consumer preferences and shopping habits in the industry, will have a profound impact on thousands of employees and their distributors and shopping centers. The chain said it will continue to operate hundreds of stores, including online stores, in the future. A spokesman for the company said the Zhang family did not comment on the article.
The company is named Forever 21 because chief executive Zhang Dongwen believes that 21 is the most enviable age. The company is based on the idea of identifying fashion trends, and works with distributors to quickly put products into stores and sell them at low prices. In the early days of the company, Zhang Dongwen was responsible for managing the relationship between the owner and the distributor, while his wife Zhang Jinshu led the design and marketing team.
Former employees of the company said that the top floor of the La Inc headquarters in the United States was Zhang Dongwen's world, where he worked out a company strategy; he kept quiet outside his office; and at the bottom was the site of Zhang Jinshu's buyer and planner. When they left the building, they needed security checks. 3 former employees said that just this year, Zhang Dongwen himself signed and approved the staff to laugh and asked the executive for a lunch or a Uber receipt.
Zhang's two daughters finally joined the top management team. Linda (Linda Chang), regarded as Zhang Dongwen's heir, served as executive vice president, while his youngest daughter Esther (Esther) served as vice president of marketing.
Unlike the company's biggest fast fashion competitors, the couple did not let Forever 21 go public. The bankruptcy filing pointed out that the listing "reduced the chance of wealth generation transmission."
The company's core team also includes another Korean American couple: Forever 21 president, former supplier Alex Ok (Alex Ok) and his wife Seong (Eun Kim), who works in the marketing department. In the company, some people call Zhang Jinshu and Kim Sheng en "wife group". These two women have the power to choose the clothes that can be put into the Forever 21 busy stores from numerous styles. The bankruptcy documents show that Zhang family owns 99% of Forever 21, while Alex Yu holds 1%.
The company's 5 former staff members pointed out that with the expansion of business, Mr. Zhang and his colleagues had worked hard to recruit experienced executives, but they did not believe in people outside the family. They say that in recent years, Forever 21 has eagerly recruited experts, hoping to rectify several parts of the company, but later ignored all the suggestions from technology to marketing put forward by these experts.
In September of this year, American singer Ariana Grande filed a lawsuit against Forever 21. Some former employees mentioned subsequent developments. Two former employees said that at that time, Forever 21 dealers had urged the company to cooperate with Grande to help promote the 2014 holiday advertising, but the management eventually hired the Australian rapper Iggy Azalea. Now, in the face of the more famous Grande, Forever 21 defends that the company's online advertising is a model similar to Grande's.
Zhang's Christian belief also had some influence on their way of running the company. Forever 21 bright yellow shopping bags are printed with a passage from the Bible, John, third, 16. Zhang Dongwen said that this passage "shows how much God loves us" and hopes others will understand this love. Several former employees of the company say they sometimes see the Bible on the conference room and on Zhang Dongwen's desk. These employees point out that department heads are related to Zhang family or church, but they do not have any retail experience, which is common in companies.
"We occasionally recruit employees who worked in Forever 21. From these people's mouth, we know that companies never allow them to view their overall performance. They only have permission to report their respective departments' performance," said Margaret Coblentz, former director of e-commerce at Charlotte Russe. She added that Forever 21's competitors thought the company was "unitary and mysterious."
However, Forever 21 has made a big mistake in real estate leasing. In the past few years before and after the recession, the company has expanded rapidly and decided to open several new large flagship stores, which are located in the Mervyn 's department store (now bankrupt), where Borders, Sears and Saks have been rented. In 2011, Forever 21's former director of real estate said in an interview with Bloomberg Businessweek, "Zhang Dongwen has always had a dream of having a truly large store."
These stores are too big, new products can not be filled, plus the turnover problem, which brings a long-term lease burden to Forever 21, just as e-commerce is beginning to pose a threat to the shopping centers in the United States. According to the internal data obtained by the New York Times, the 7 stores in former Mervyn 's department store will not end until 2027 or 2028, which is much longer than the usual tenancy.
Last month, when the company filed for bankruptcy petition, Zhang Linda admitted in the interview that bigger stores had problems. "In addition to dealing with the complex business of international expansion, we need to consider the fact that the larger stores are full of products, which really put pressure on our organization," she said.
She also pointed out that the challenge facing the company is the transfer of shopping center traffic and the rise of e-commerce. Bankruptcy is a "strategic move".
Two former employees of Forever 21 said Zhang Dongwen was willing to design every store for signing every lease, and even though the total number of stores had risen to more than 500, he was still unwilling to close any poor store. Sometimes he just moved a store from one place to another.
Management expert Gordon said: "the problem of Forever 21 is not to store stores in shopping centers, but that they do not withdraw early. If they want to blame somebody, they should stand in front of the mirror and accuse themselves.
Forever 21, without the guidance of local experts, hastily entered the overseas market and opened up a large number of high cost stores: foreign stores surged from 7 in 2005 to 262 in 2015. Two former employees said the company did not understand local labor laws and often made mistakes. For example, companies do not realize that consumers in some European countries have earlier purchases of winter clothing than American consumers. A former employee said that when the company entered Germany, it was not clear that German stores closed on Sunday. It is well known that this area is the old site of rival H&M and Zara - the former is based in Sweden, and the latter is Spanish.
Forever 21 said that the bankruptcy application documents pointed out that as of 2015, the vast majority of international stores were not profitable; in the past year, companies in Canada, Europe and Asia lost an average of $10 million a month. The total rent paid by Forever 21 to stores is as high as $450 million per year.
Mark A. Cohen, director of retail research at Columbia University business school, said: "Forever 21's clothing and fashion interpretation are not matched with fast fashion consumers' preferences. The company has never made full use of market information, so it has not been warned of real estate development and is not immune from the risk exposure they are facing. "
The problem with Forever 21 is not to store stores in shopping centers, but because they do not withdraw early.
Although the company's overseas mistakes have become apparent, Zhang Dongwen and his real estate executives have not stopped gambling but have opened more stores in the US. According to the company's internal proposal in 2015, the company plans to open a new roadside store chain called F21 Red, whose target customers are mothers under the age of 35. The company launched a $1.80 close fitting vest and a $7.80 pair of jeans to attack the Irish retailer Primark who just entered the US market in 2015.
The proposal shows that Forever 21 has opened 6 F21 Red stores, and plans to open 35 stores in 2015, including stores located in common shopping centers. This expansion speed is also surprising to employees who make F21 Red plans. However, the company's internal sales report showed that by 2017, several F21 Red stores had sold less than 50% of the company expected.
It was also in 2017 that Forever 21 launched the beauty chain Riley Rose, hoping to make full use of the Korean skin care products boom, so this project is also regarded as the next growth point of the company. Riley Rose, co founded by Zhang Linda and Esther, is called "pioneering" in the bankruptcy application document. It also categorized the sales of the beauty chain chain and the international departments that were defeated.
Despite the company's past staff's praise of the sisters' professional ethics, they also pointed out that opening Riley Rose in the expensive rental shopping center is a big gamble: though 15 stores have opened this year, they are still working hard to maintain the relationship with distributors. Last month, in an interview with New York Times, the company said that Riley Rose might eventually become a store in Forever 21 store. The company has applied for 9 Riley Rose stores planned to rent before refusing to rent.
In the company headquarters without plan expansion, Zhang Jinshu's business is also constantly making mistakes. According to the bankruptcy application, the sales strategy was based on sales in previous years. Forever 21 bought too little inventory in 2017 and too many in 2018. The company also designs products such as weekend or workday styles, instead of designing categories such as tops or skirts.
Forever 21 has about 6400 full-time employees and 26 thousand and 400 part-time employees when filing bankruptcy applications; in the process of bankruptcy, it is very likely to lay off staff. Forever 21 said that it will change the way of marketing, select business in the US, Mexico and Latin America, and set up the goal of increasing the sales of electronic business to more than 16% of the company's sales volume, and will take other cost reduction measures. The company has already owed $347 million to dealers when filing bankruptcy applications.
In the future, the Zhang family will listen to more new ideas. Board members will grow to 6 from the previous 3 (Zhang Dongwen, Zhang Linda and Alex jade). The new members include Forever 21 real estate director, a lawyer and former CEO of Things Remembered. Forever 21 says the company has also recruited several managers in recent months, including the new chief financial officer. Zhang Dongwen is still chief executive.
Cohen said: "Forever 21 basically has nothing to do with it. The founders had done very well before, and then they could not continue to do it themselves until their business expanded too much.