Will Forever 21 Drag Down Shein?

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On October 9, 2019, I wrote Forever 21: Cut Your Losses and Die Happily predicting Forever 21’s demise, and why. Predictably, they slipped into bankruptcy. However, they found a life-support team, a collective called Authentic Brands Group (ABG), Simon Properties and Brookfield Property Partners. The three companies acquired the brand for $81 million in February 2020. The plan was for Forever 21’s international business to be handled by licensing specialist ABG. So, Forever 21 was tossed onto ABG’s pile of other losing brands.
Jaimie Salter is fantasizing about Forever 21. Those Shein next-gen customers are unlikely to buy into the Forever 21 world (and forget JCP, an even crazier shared platform). My opinion is that Salter thinks if he can somehow copy Shein’s supply chain model and reach their 150 million users, Forever 21 will rise from the dead. And I guess Mr. Tang believes Shein will be able to scale fast into physical retail without building stores. Well, that’s a big if for each of them.

A Merry Band of Losers

Then, along with Simon Properties (still owning a bunch of losing malls and JC Penney, a losing anchor), they formed Simon Properties Authentic Brands Concepts (SPARC), which would house many of ABG’s brands. At the time, David Simon talked about putting many of ABG’s dying brands into the JC Penney stores. That was one whopper of an idea. Losers combined with losers in the hope of making winners. Are you confused or just awestruck? As I have said, that deal with ABG brands may indeed make JCP such an albatross that it will take the entire enterprise down. Now add fading Forever 21 to the mix. Forever 21 was once a hot brand until its young consumers drowned in its oversaturation, declared it uncool and walked out. So, with the new SPARC deal, here is what failure looks like: Acquire a bunch of once-cool brands on the cheap, license third parties to run them, further license them out to a mall developer, and what do you get? Failure with a capital “F”.

Maybe Shein Doesn’t Get It

Now it gets more convoluted. Shein, the hottest of hot fast fashion brands, is acquiring about a 30 percent share of SPARC (whose portfolio also includes Brooks Brothers and Eddie Bauer, among other stale brands) and SPARC will become a minority shareholder in Shein. This grand strategy created by Jamie Salter, CEO of Authentic Brands Group, and Donald Tang, Shein’s executive chairman (and likely David Simon and the CEO of SPARC, Daniel Kulle) instantly gives Shein’s roughly 150 million worldwide app users a place to shop for Shein in Forever 21’s 600+ stores, 403 of which are in 43 states. And no doubt, Forever 21 will somehow try to copy Shein’s faster than fast, and cheaper than cheap fashion supply chains that produce products their young loyalists race to get every couple weeks. But why miss another race to the bottom opportunity? Since Simon Properties owns JC Penney, I can imagine Shein being lured into stuffing JCP with their brand. Are you getting the picture yet? It goes something like “If you lie down with dogs, you get up with fleas.”

This Is the Distribution Century

I have been saying in so many ways and on so many different communications platforms over the past decade (industry keynotes, my co-authored book, The Robin Report, and our podcasts) that the distribution of goods and services is taking on a multitude of new strategic models. We no longer have a linear supply chain from creation to consumption. It is becoming shorter, quicker, and more fluid. And that makes accessibility for consumers faster, easier, more convenient, and at the right price — when they want it, where they want it, and as often as they want it. And just like that, brands are sharing platforms (Sephora and Ulta on Kohl’s and Target’s platforms, respectively); technology-driven personalization moves the goods closer to the consumer (small store strategies, a reverse long tail nameplated with Macy’s, Target, Walmart, and others); bot-driven delivery devices; inventory optimization (RFID technology that drives precise tracking), and on and on. As I said, it’s the distribution century.

Where Shein and Forever 21 Got It Wrong

While this deal would like to be described as sharing synergistic platforms, what these two brands apparently do not understand is that a shared supply chain only works when the two parties are aligned in pursuing the same consumers. I think Jaimie Salter is fantasizing about Forever 21. First, it isn’t what it used to be, and those Shein next gen customers are unlikely to buy into the Forever 21 world (and forget JCP, an even crazier shared platform). My opinion is that Salter thinks if he can somehow copy Shein’s supply chain model and reach their 150 million users, Forever 21 will rise from the dead. And I guess Mr. Tang believes Shein will be able to scale fast into physical retail without building stores. Well, that’s a big if for each of them.

Adios Amigos

I don’t mean to be so harsh about it, but I think Salter’s eloquent salesmanship may have worked overtime on Tang. However, Salter and Forever 21 may end up on the shorter end of the stick. Both of them may think this wild strategic move is positively synergistic. However, in my opinion, it will not revive Forever 21 (which is still dead in the eyes of young consumers), and it will be worse for Shein. Young consumers may perceive Shein as …well, lying down with a flea-infested dog.

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