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Forever 21 offers harsh lessons to retailers

In its heyday, fashion retailer Forever 21 earned a whopping $4.4 billion and made its founders rich beyond their wildest dreams. However, poor expansion decisions and a declining retail climate have resulted in the store filing for bankruptcy. Business Insider explains the factors that led to its decline and what this says to other brick and mortar retailers. 

At the outset, Forever 21's aggressive expansion strategies seemed to work well. With just $11,000 in savings, founders Jin Sook and Do Won Chang opened the flagship Forever 21 store, then called Fashion 21. In the first year, the store made $700,000 in revenue. Every 6 months a new store was opened, which greatly increased the retailer's reach. At one point, Forever 21 had 480 locations in malls throughout America. That same year, the Changs' net worth expanded to $5.9 billion, ranking them among the wealthiest couples in America. 

Much of Forever 21's appeal had to do with its fashion-forward approach. The store featured new shipments all the time, and lines only remained for a short period of time, which increased appeal among consumers. Additionally, items were priced low, making it easy for consumers to find the latest fashion for affordable approaches. At its inception, this model was not widely used. However, the emergence of similar stores affected Forever 21's sales. Online shopping also had an impact on sales, since Forever 21's key demographic preferred buying clothing online. 

Despite this downturn, the retailer continued to open new locations. This led to the company being $500 million in debt and the Changs losing over $4 billion personally. Along with filing for bankruptcy, Forever 21 has shuttered numerous locations to focus on those that are the most lucrative. While it's possible for the company to rebrand, the current economic climate may no longer be favorable for the retailer. 

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