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12/23/2019

Forever 21 Bankruptcy: How Fellow Retailers Can Avoid the Same Fate

This past October – in stark contrast to its mid-2000’s fame - Forever 21 filed for bankruptcy. The retailer is in good company as other well-known brands like Sears, Payless Shoe Source and Gymboree also have also felt the sting of bankruptcy this past year. In fact, in 2019 alone, publicly traded U.S. retailers have announced they will close 8,558 stores, with an estimated 12,000 store closures by the end of the year. The numbers illustrate the crisis facing traditional retailers.

Some argue the news is the result of changing buyer behavior and the shift towards a more digital buyer experience. While this is undoubtedly a factor at play, the aggressive shift towards a “digital only” strategy could eventually do more harm than good.

Understanding buyer behavior

It’s a known fact that buyer behavior is constantly evolving and changing. We went from a completely in-store or wholesale experience, to a massively disruptive digital boom that created the e-commerce world we know today. After the initial digital boom and the rise of Amazon Prime, consumers wanted everything online as fast as possible.

As a result of increased demand, retailers have scrambled to perfect their online strategy. But, with that comes complications like buyer indecisiveness, product dissatisfaction and excess returns, leaving retailers with a massive bottleneck of supply and demand. What we’re seeing now is a shift back towards the desire for physical and online options for consumers - the Amazon bookstore is a perfect example of this phenomenon.  

How can retailers avoid Forever 21’s daunting fate?

What we’re seeing now is an era of a split buyer demographic. Some consumers prefer online, others see more value in the in-store experience. In order to keep up with demand, brands will need to adapt and evolve in near real time to accommodate both customer experiences. Forever 21 made the most common mistake a retailer can make in this day and age - it was so focused on perfecting its online experience, it neglected to pay attention to the overabundance of in-store locations and lack of balance between the two.

We’re seeing a dire need for a superior omnichannel approach and a meticulous balance between in-store and online options in order to avoid similar miscalculations. Given the undeniable fact of industry disruption, and the uncertainty of the unforeseen, the number one defense companies can leverage to guard themselves in a global economy is having agility built into their supply chains. In fact, Deloitte’s recent supply chain survey found that 79% of companies with high-performing supply chains achieve revenue growth superior to the average within their industries.

The Forever 21 news is something we’re seeing all too often, but is also something that can be avoided if approached with an omnichannel mindset. By better integrating critical touch points within the end-to-end supply chain, retailers can have a real-time, 30,000-foot view of their entire retail channel ecosystem, empowering them with the agility they need to keep up with ever-evolving consumer behavior. As innovation in e-commerce continues to increase at rapid pace, it’ll be integral for brands to stay ahead of the curve to assure their strategy is aligned accordingly.


-Tammy Moyer, Senior Product Portfolio Manager for Cleo