The Competition Should Be Terrified Of Forever 21

Business Insider

Forever 21 is  growing like crazy, and the fast fashion retailer is becoming a major threat to the rest of the industry.

Analysts Lorraine Hutchinson, Paul Alexander, and Jessica A. Lebo at Bank of America warned that competitors need to start paying attention to the p rivately-held retailer  right now.

They declared Forever 21 "the most transformative retail concept" in a note to clients.

"Forever 21 is becoming too big for the specialty  retailers to ignore," the analysts wrote. "At this size, rapid growth could have ripple effects  on the other retailers as Forever 21 takes more share."

Back in 2008, Forever 21 SVP Christopher Lee told the Los Angeles Times that the company's goal is to become a "global retail conglomerate."

And it's well on its way.

Forever 21 has expanded to more than 450 stores in the U.S. and nearly 100 locations internationally. It charged into Europeput its foot into China, and now has its sights on Latin America.  Bank of America estimates the company's sales at upwards of $3.5 billion — in line with many big teen retailers.

The big players in teen retail, like Abercrombie & Fitch, Aeropostale, and American Eagle, will feel the pressure.  Gap has also been squeezed by Forever 21, as it sees revenues and margins getting eaten away,  according to ACM Partners' Margaret Bogenrief .

Why should they be worried?

Forever 21 is faster and cheaper  —  It uses the fast fashion model, getting new fashion trends to stores as quickly as it possibly can, then selling at a low price.  Traditional retailers try to establish a brand with a signature look, so  it's very unlikely that others will try to copy Forever 21 after spending so much time and effort building their own brands.

And it simply sells clothing for less than its rivals do.  "Forever 21 sells jeans for as low as $15, where teen retailers  generally start at $30 for this important category," noted the Bank of America analysts.

Forever 21 is expanding its customer base   Forever 21 is becoming a fashion department store that caters to all members of the family — not just teens. 

That means a broader set of customers are being gobbled up by the retailer as it releases new lines targeting men and older demographics.  Yet, at its core, Forever 21 still has a similar target as the big teen retailers – 18- to 24-year-olds.

Forever 21 is fighting its competitors head-on — The retailer used to settle for second-tier malls and mediocre space in the big malls.  But now, Forever 21 is done being timid. 

"We have seen Forever 21 take on much better located spaces and often  larger sized stores," wrote the analysts.  It even has a Times Square flagship directly across the street from both Aeropostale and American Eagle.  



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