June 24, 2024
iStock.com/zodebala
Can Forever 21 Recover With Its SHEIN Partnership?
Forever 21, a fast-fashion retailer, is struggling financially with declining sales and fierce competition from digital-first brands.
After filing for bankruptcy in 2019, the company is now requesting up to 50% rent reductions from landlords to alleviate the strain of expensive mall leases. Managed by SPARC Group, Forever 21 faces difficulties integrating multiple brands and managing high operational costs, including late vendor payments. Issues like poor inventory management and an inability to adapt to changing consumer trends, exacerbated by rapid expansion without sufficient supply chain investment, further complicate its situation.
Despite restructuring efforts and store closures, Forever 21’s extensive U.S. store network remains burdensome amid competition from H&M, Zara, SHEIN, and Temu. SPARC Group, also overseeing Aeropostale and Brooks Brothers, navigates similar challenges, focusing on lease renegotiations to avoid further bankruptcy filings. The retailer’s future depends on successfully overcoming these financial and operational hurdles in a highly competitive retail landscape.
One such solution has been partnering with SHEIN. Under an agreement announced in October 2023, SHEIN will design, manufacture, and distribute a line of co-branded Forever 21 apparel and accessories, primarily sold on SHEIN’s website. This partnership has also included hosting SHEIN pop-up stores within Forever 21 locations and accepting SHEIN returns, both of which are intended to drive positive foot traffic to Forever 21’s stores.
In May, SHEIN announced a partnership with Happy Returns, allowing customers to return online orders at over 300 Forever 21 retail locations. This collaboration aims to meet the increasing demand for flexible return options. Happy Returns’ BORIS (buy online, return in-store) solution facilitates “box-free, label-free returns and exchanges across store networks.” The system includes software and logistics components adaptable to various customer needs.
David Sobie, CEO of Happy Returns, highlighted the company’s capability to streamline returns across retailers’ networks. In the announcement, he stated, “We’re leveraging our technology, expertise and scale in reverse logistics to be the first to enable retailers to seamlessly accept returns throughout their full networks.”
For SHEIN customers, returning items at Forever 21 stores will be straightforward: They generate a QR code via SHEIN’s returns portal, which is scanned at Forever 21 for quick verification by store staff. Additionally, customers receive a same-day discount on their next Forever 21 purchase. Happy Returns manages the logistics post-return, optimizing inventory placement or moving it to e-commerce warehouses. The process ensures transparency with tracking at every stage of return handling.
However, one shopper recently went viral for sharing her bad experience returning SHEIN merchandise at a Forever 21 location. Kat, a TikTok user, shared a cautionary tale about her experience returning SHEIN items at a Forever 21 store, highlighting unexpected challenges and poor customer service. Initially optimistic about the convenience of in-store returns, Kat found herself humiliated by employees who openly criticized her during the process.
Despite normally accepting the loss when dissatisfied with purchases, Kat attempted the return due to SHEIN’s partnership with Forever 21. However, she regretted her decision as she faced disrespectful treatment from store staff. According to Kat, employees mocked her and displayed unprofessional behavior throughout the return process, leaving her feeling embarrassed and disrespected.
Commenters on Kat’s TikTok post expressed mixed reactions, with some sharing positive experiences at other Forever 21 stores and suggesting alternatives like UPS for hassle-free returns. Kat’s story serves as a reminder of the importance of respectful customer service in retail interactions, influencing others’ decisions regarding where to handle returns.
BrainTrust
Jeff Sward
Founding Partner, Merchandising Metrics
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
Georganne Bender
Principal, KIZER & BENDER Speaking
Recent Discussions
Discussion Questions
Will Forever 21’s operational partnerships, like the one with SHEIN, be enough to ensure its survival amidst bankruptcy and intense competition from digital-first brands?
How could Forever 21 address and improve the customer service issues highlighted by Kat’s experience to ensure smoother SHEIN return processes?
What strategic changes must Forever 21 implement to overcome its financial challenges and effectively compete with rivals like H&M and Zara?
Poll
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At the outset of the partnership, it was always obvious that Shein had the upper hand. It is dealing from a position of strength and is using Forever 21 to help round out its online ranges and to develop more of a physical retail presence via pop-up stores. By contrast, Forever 21 came at things from a position of weakness. It wanted Shein to help boost flagging foot traffic and drive desperately needed sales. The problem is that a weak brand cannot be saved by teaming up with a strong one – see JCPenney and Kohl’s and their respective Sephora deals. Forever 21 needs to do the work to improve its proposition and to right size its real estate (many of its stores are way too big, for example). Until it does this, Shein may take the edge of issues, but it will not save it. The only thing that may make a material difference is if Shein decides to acquire F21.
This is an interesting case because often when a retailer struggles as much as F21 has, it’s easy to point the blame at the assortment strategy. F21 does actually have clothing that is extremely on-trend. I really think that if they revamped their digital business and relied less on stores, they could succeed again. They need to focus on their technology so that their consumer can shop them the way they want to and can with other brands.
No one knows how long Shein will last, but it’s tough to bet against a retailer that offers $6 shoes. Shein’s partnership with Forever 21 has the potential to boost both brands.
If the claims in the video (employees mocked her and displayed unprofessional behavior throughout the return process) are true – and I’ll make this a bigger “if” that might seem normally warranted – then they have issues beyond, and apart from, their partnership with Shein.(We’re entering into the “that should never, ever happen” territory.) But beyond that, what exactly are their strengths? They sell cheap – in every sense of the word – duds to people who just a few years ago were in diapers; so its not like they’re some kind of aspirational retailer (nor can they even appeal to rebels who “want to shop where my Mom wouldn’t” since it didn’t exist in Mom’s time). Their entire strength is being the first and/or cheapest to market whatever the whims of fashion dictate are hot. That’s a foundation of quicksand to build a lasting brand upon.
Prime real estate, large store footprints, product returns and intense rivalry all add up and threaten margins. Viral complaints from dissatisfied customers threaten loyalty. Rightsizing stores, ensuring fewer and smoother returns, and delivering a pleasant customer experience are a good place to start for Forever 21 to get unstuck.
A partnership with SHEIN, or any other brand, is not going to be Forever 21’s savior. The focus on simplifying the in-store return process, which clearly isn’t optimized around the customer experience, seems more than a bit misguided. Forever 21 is competing for the same customers as too many other brands, who are frankly more interesting to that demographic. – hence why sales have continued their rapid decline. The company needs to reinvent itself while reducing burdensome rents, among other significant issues. SPARC group is simply overwhelmed in attempting to operationally integrate disparate brands – signally lack of a clear and achievable vision.
This article points out two separate issues. Will the partnership with Shein work? Who knows? Two competing sellers of cheap clothing will either help or cancel each other out.
The rudeness of the Forever 21 employees is the real story. If they were rude to the woman on TikTok then they are likely rude to other customers as well. The comments on her TikTok back her up. Forever 21 can’t afford to alienate shoppers.
Retailers today live or die based on customer perceptions. Even when you sell $5 shirts, you can’t afford to lower your service levels.
Shein will help to slow down any demise of Forever 21, but unless Shein decides to outright purchase Forever 21, the impact will be only temporary. Forever 21 needs to address many of its real problems. Db
SHEIN can’t be a savior for F21. Margins on super low-cost items won’t generate enough to bail out F21.
F21 is hampered by its physical retail estate, and a partnership with SHEIN isn’t going to do enough to fix the fundamental issues at the heart of the business. With so many fast fashion competitors, many offering an overall better customer experience, with seamless omnichannel operations, acquisition would be the best solution overall.
I was slightly optimistic when I first read about Forever 21 and Shein becoming partners. But not because I am a fan of fast fashion. Quite the opposite, actually. What I thought was intriguing was the possibility of a mall retailer learning how to operate on a highly condensed Time/Action calendar from one of the masters of that game. I’m not optimistic about cheap, disposable fashion going away any time soon, but if it can become more data driven, then maybe the unsold inventory and waste issue can be mitigated over time. So to me, it was a smart move for Forever 21 to make a “if you can’t beat ’em, join ’em” move. But then to read about the behavior of the store employees just left me with my head shaking is disbelief. No amount of smart moves at the corporate level can offset poor to outright disastrous execution in the field. Ego and arrogance have no role on the selling floor, or in the corporate office for that matter. This was a smart move that could have been a win/win. It could still be a lifeline for Forever 21, but the stores organization needs a whole new understanding of what’s at stake.
F21 is already dead, and the thought that the Shien partnership could bail it out is absurd. F21 has so many fundamental problems; not the least is their PE owners that have already targeted it for the dust pile.
SHEIN has always had a plan of making a beachhead with discount apparel as a prelude to building a global ecosystem that will include B&M, logistics, video, and major partnerships. This is just one more move toward that goal.
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At the outset of the partnership, it was always obvious that Shein had the upper hand. It is dealing from a position of strength and is using Forever 21 to help round out its online ranges and to develop more of a physical retail presence via pop-up stores. By contrast, Forever 21 came at things from a position of weakness. It wanted Shein to help boost flagging foot traffic and drive desperately needed sales. The problem is that a weak brand cannot be saved by teaming up with a strong one – see JCPenney and Kohl’s and their respective Sephora deals. Forever 21 needs to do the work to improve its proposition and to right size its real estate (many of its stores are way too big, for example). Until it does this, Shein may take the edge of issues, but it will not save it. The only thing that may make a material difference is if Shein decides to acquire F21.
This is an interesting case because often when a retailer struggles as much as F21 has, it’s easy to point the blame at the assortment strategy. F21 does actually have clothing that is extremely on-trend. I really think that if they revamped their digital business and relied less on stores, they could succeed again. They need to focus on their technology so that their consumer can shop them the way they want to and can with other brands.
No one knows how long Shein will last, but it’s tough to bet against a retailer that offers $6 shoes. Shein’s partnership with Forever 21 has the potential to boost both brands.
If the claims in the video (employees mocked her and displayed unprofessional behavior throughout the return process) are true – and I’ll make this a bigger “if” that might seem normally warranted – then they have issues beyond, and apart from, their partnership with Shein.(We’re entering into the “that should never, ever happen” territory.) But beyond that, what exactly are their strengths? They sell cheap – in every sense of the word – duds to people who just a few years ago were in diapers; so its not like they’re some kind of aspirational retailer (nor can they even appeal to rebels who “want to shop where my Mom wouldn’t” since it didn’t exist in Mom’s time). Their entire strength is being the first and/or cheapest to market whatever the whims of fashion dictate are hot. That’s a foundation of quicksand to build a lasting brand upon.
Prime real estate, large store footprints, product returns and intense rivalry all add up and threaten margins. Viral complaints from dissatisfied customers threaten loyalty. Rightsizing stores, ensuring fewer and smoother returns, and delivering a pleasant customer experience are a good place to start for Forever 21 to get unstuck.
A partnership with SHEIN, or any other brand, is not going to be Forever 21’s savior. The focus on simplifying the in-store return process, which clearly isn’t optimized around the customer experience, seems more than a bit misguided. Forever 21 is competing for the same customers as too many other brands, who are frankly more interesting to that demographic. – hence why sales have continued their rapid decline. The company needs to reinvent itself while reducing burdensome rents, among other significant issues. SPARC group is simply overwhelmed in attempting to operationally integrate disparate brands – signally lack of a clear and achievable vision.
This article points out two separate issues. Will the partnership with Shein work? Who knows? Two competing sellers of cheap clothing will either help or cancel each other out.
The rudeness of the Forever 21 employees is the real story. If they were rude to the woman on TikTok then they are likely rude to other customers as well. The comments on her TikTok back her up. Forever 21 can’t afford to alienate shoppers.
Retailers today live or die based on customer perceptions. Even when you sell $5 shirts, you can’t afford to lower your service levels.
Shein will help to slow down any demise of Forever 21, but unless Shein decides to outright purchase Forever 21, the impact will be only temporary. Forever 21 needs to address many of its real problems. Db
SHEIN can’t be a savior for F21. Margins on super low-cost items won’t generate enough to bail out F21.
F21 is hampered by its physical retail estate, and a partnership with SHEIN isn’t going to do enough to fix the fundamental issues at the heart of the business. With so many fast fashion competitors, many offering an overall better customer experience, with seamless omnichannel operations, acquisition would be the best solution overall.
I was slightly optimistic when I first read about Forever 21 and Shein becoming partners. But not because I am a fan of fast fashion. Quite the opposite, actually. What I thought was intriguing was the possibility of a mall retailer learning how to operate on a highly condensed Time/Action calendar from one of the masters of that game. I’m not optimistic about cheap, disposable fashion going away any time soon, but if it can become more data driven, then maybe the unsold inventory and waste issue can be mitigated over time. So to me, it was a smart move for Forever 21 to make a “if you can’t beat ’em, join ’em” move. But then to read about the behavior of the store employees just left me with my head shaking is disbelief. No amount of smart moves at the corporate level can offset poor to outright disastrous execution in the field. Ego and arrogance have no role on the selling floor, or in the corporate office for that matter. This was a smart move that could have been a win/win. It could still be a lifeline for Forever 21, but the stores organization needs a whole new understanding of what’s at stake.
F21 is already dead, and the thought that the Shien partnership could bail it out is absurd. F21 has so many fundamental problems; not the least is their PE owners that have already targeted it for the dust pile.
SHEIN has always had a plan of making a beachhead with discount apparel as a prelude to building a global ecosystem that will include B&M, logistics, video, and major partnerships. This is just one more move toward that goal.