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Forever 21 offers juniors high fashion at low prices

By Kimberly Pfaff

Forever 21 has more than 120 locations, predominantly in malls. Its new concept, Forever XXI, is a larger-format store that also offers accessories.

Forever 21 isn’t only for 21-year-olds. But if you’re young, with an eye for the newest fashions and a small wallet, it’s just the place. After all, the chain specializes in offering the latest looks for teens and 20-somethings, at prices that allow them to splurge.

“It’s fun, it’s affordable, and it’s always changing,” said Chris LeTourneur, a senior consultant with Thomas Consultants, Vancouver, B.C. “Because of that, it almost takes on a cult following.”

“Always changing” is a key to the firm’s strategy.

“Every week you’ll see something new and different,” said Forever 21 CFO Larry Meyer. “We keep our inventory extremely fresh, keep attuned to what’s in the market and see what the fashion people are wearing. And we make sure that it’s appropriately priced to meet the pocketbook of an average teen-ager or 21-year-old.”

Founded in 1984 with one store in Los Angeles by company president Do Won Chang and his wife, Jin Sook, Forever 21 now has 120 locations in 25 states. The privately held chain, which remains based in Los Angeles, says its store sales average $475 a square foot; top locations generate up to $1,000 a square foot.

The original store, called Fashion 21, was a street location, but the chain is now almost entirely mall-based. Plans are to add about 30 stores a year, virtually all in malls. “Our goal is consistently finding great real estate, great locations within the best malls of America,” said Meyer.

The store’s relentless pursuit of the latest fashions makes it a major player alongside other teen concepts such as Reference, Silhouette, Wet Seal and Rave, as well as the trendy European chain, H&M. What sets Forever 21 apart from other junior retailers, however, is its emphasis on “disposable” clothing at absolutely irresistible prices. With the average price for a top at less than $12, it’s entirely possible for a girl to outfit herself for a party one week, then come back the following week to find something completely new and hip to wear for dancing — and still have enough cash left over to treat herself to lunch or the latest CD.

“It’s real simple — they have a terrific ability to stay on the cutting edge of fashion for young girls, and at a very appealing price point,” said William Y. Hecht, vice president and national leasing director for The Rouse Co., Columbia, Md., which has more than a dozen Forever 21 stores, and commitments for several more. “That marriage of those two has bred a tremendous amount of success for them.”

“It’s a real phenomenon,” agreed Robert A. Michaels, president of Chicago-based General Growth Properties. “Many times I’ll walk through a mall, either early or late in the evening, when it’s not as crowded as midday, and almost without exception the store with the most traffic is Forever 21. They turn and change their merchandise much quicker than most U.S. apparel retailers.”

Three years ago, the chain initiated a major redesign, enlarging its stores from 5,000 square feet to 7,000 square feet, and transforming them into trendy, loft-like environments. “We wanted to create a white canvas for the clothes to decorate,” said Sayuri Takeda, director of store planning. “And we wanted to create high drama, so we made the dressing rooms fun, with high ceilings, long, luxurious drapes and huge mirrors, for a real boudoir feel.”

You don’t have to be 21 — Forever XXI stores appeal to older women as well.

Now the company has unveiled an even larger store: Forever XXI. There are five of these, offering the same high-fashion, high-value approach, but the locations average 20,000 square feet. The five are: Dolphin Mall, Miami; West Edmonton (Alberta) Mall; International Mall, Tampa, Fla.; The Mall at Wellington Green, West Palm Beach, Fla.; and The Shops at Willow Bend, Plano, Texas.

The new, larger concept is being positioned for better malls and might also serve as a flagship store at street locations in major metropolitan areas, said Meyer. “It will primarily be at stronger A-and-above malls, as opposed to B malls,” he said. “We see tremendous opportunity for it, but we will grow it a little slower.”

Though the overall concept is the same, Forever XXI’s larger footprint affords more room for greater assortments and for such items as shoes and accessories. “It’s allowed us to add many more layers in the store,” noted Meyer. “There’s room to add incremental categories.”

The Forever XXI stores have proved appealing not just to teens and 20-somethings, but to 35- and 45-year-olds as well. “It has a little more panache that you don’t see in Forever 21, and it’s broadened our demographics to a whole new customer,” said Takeda.

An expanded customer base could be imperative as the firm goes forward, according to Thomas Consultants’ LeTourneur. “If they’re going to do a larger format, they need to target a broader audience, and that, in fact, is the opportunity to grow the business,” he said. “The opportunity may lie in targeting that group between 35 and 49 that relies on their youth.”

Some industry observers, however, note that making the transition to larger stores is no easy task. “The big issue is, it’s easy to make 4,000 square feet hip and intense with the quality of merchandise,” said Stanley L. Eichelbaum, SCMD, president of Cincinnati-based Marketing Developments. “But when you start going to 10,000, 15,000, 20,000 square feet, retailers have had a very hard time keeping things at the high energy level necessary to appeal to that customer. It requires high capitalization continuously and high sourcing ability — high rejuvenation on a regular basis.”

Still, Forever 21 executives remain confident that their approach is sound, especially in a time of economic uncertainty. Said Meyer: “The good news is, we’re in a value-driven economy, so the overall retail situation probably has less of an effect on us. Our biggest single issue now is ensuring we have the appropriate human resources and don’t overtax our infrastructure.”

LeTourneur applauds that approach.

“Their value-pricing strategy is bang-on, given the economy,” LeTourneur said. “In the short term, they’re quite well positioned.”

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