Opinion: 5 Fatal Missteps Leading to Forever 21 Bankruptcy

As I walk past another Forever 21 liquidation sale—the second in six years—I'm not struck by the company's demise but rather by the audacity to blame economic factors when a series of boardroom failures is to blame. I’ve watched this retailer’s 350 U.S. stores hemorrhage $1.58 billion in debt while clinging to mall-era tactics that rivals like Shein rendered obsolete before TikTok even existed.  What fascinates me isn’t the collapse itself, but how a brand clinging to its age-defiant '21' identity watched Millennials grow into their 30s (i.e. parenthood) without evolving—and then failed to dress Gen Z: a six-year e-commerce delay and a stubborn belief that “forever” meant ignoring change.

Brad Sell, Chief Financial Officer of F21 OpCo, LLC, operator of Forever 21 stores and licensee of the Forever 21 brand in the United States said in a statement:

“Following the conclusion of our strategic review and after careful deliberation, we made the decision to file for chapter 11 to implement a court-supervised marketing process to solicit a going concern transaction, and, in the absence of such an arrangement, an orderly wind down of operations. While we have evaluated all options to best position the Company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin, as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends.”

Having analyzed their strategy, I believe their most critical failure wasn't external market forces but their slow speed to market in e-commerce and lack of product offerings for their core customer (first, Millennials and later, Gen Z). A self-inflicted extinction, a playbook for how to lose generation after generation by refusing to meet them where they shop. While fast-fashion competitors were building a robust online platform, Forever 21 remained anchored to an outdated mall-centric strategy, and its failure to adapt its inventory to evolving customer preferences proved catastrophic.

1. The E-Commerce Gap That Swallowed Their Future

By the time e-commerce gained serious traction, Forever 21 hadn't even launched a globally accessible e-commerce website. This delay created opportunities for Shein and Temu to capture 80% of the fast-fashion digital market by 2023. The fast-fashion items they were known for in shopping malls took longer than expected to launch online, and by that time, the merchandise was dated.

When they finally prioritized their e-commerce platform, it was simply too late. The market was saturated with faster, cheaper options in their core segment – younger, trendy, low-cost fashion. In contrast, Shein’s app became the most downloaded U.S. shopping app by 2021. Their digital customer experience never matched competitors, with higher prices and shipping costs driving cart abandonment.

A simple comparison illustrates this perfectly: an oversized hoodie costs $25 at Forever 21 plus $6.99 shipping (to rural areas), while the same item costs just $9 on Shein with free shipping over a minimum purchase - anywhere. That's like getting three items for the price of one, which made the choice easy for price-sensitive customers to order elsewhere.

2. The Anchor That Dragged Them Down: Shopping Malls

Forever 21's physical retail strategy created extreme vulnerability. Unlike competitors who developed omnichannel approaches, it concentrated almost exclusively in malls with virtually no standalone locations. This made it entirely dependent on mall traffic, which was declining even before the pandemic.

When COVID hit, this strategy proved disastrous. With no robust online market to cushion the blow of closed stores, they still faced massive lease obligations with zero foot traffic. By the time stores reopened, their product offerings were already outmatched by fast fashion websites offering cheaper, faster, and more convenient options.

Their real estate decisions locked them into financial inflexibility precisely when they needed to pivot. Long-term leases trapped them in costly retail spaces while consumer behavior shifted dramatically online. Though they secured some rent reductions during their 2019 bankruptcy, these were merely temporary fixes.

By 2025, Forever 21 carried an estimated $1.58 billion in debt, primarily from rental costs. Even after closing 111 stores in 2019, the remaining locations continued underperforming, with 40% of revenue directed to rent and related expenses. This financial straightjacket prevented investments in operational overhauls needed to compete with asset-light models like Shein and Temu.

3. Growing Away From Their Core Customer

Perhaps most telling was how Forever 21 lost touch with its evolving customer base. The brand became highly popular with millennials, but rather than growing with this demographic, they doubled down on teen and tween apparel. The 21-year-old millennial who loved the brand a decade ago wasn't looking for the same clothing in their 30s.

The "Forever" in Forever 21 proved ironically short-sighted. Brand loyalty evaporated as product offerings failed to match the aging demographic's evolving needs. Meanwhile, Gen Z – raised on social media, online shopping, and mobile commerce – never developed the same connection to the brand.

Contrast this with Aritzia, which started with TNA hoodies popular with millennials but successfully evolved into office wear and tailored clothing as their customer base matured.

The lesson is clear: To maintain market share, you must grow with your customers.

4. Supply Chain Inflexibility in a Rapid-Response Market

Forever 21's inventory management practices reveal another critical vulnerability. They maintained large inventories across oversized stores, with 40% of revenue consumed by operating costs. Compare this to Shein's remarkable 98% sell-through rate with just 2% unsold inventory.

Their supply chain moved at a glacial pace compared to nimble competitors. Forever 21's production lead times ranged from 6-9 months for Asian imports, while Shein required only 5-7 days. Additionally, Forever 21 relied on approximately 300 global suppliers for bulk orders, while Shein maintained relationships with 4,000 suppliers, allowing for greater flexibility and faster market response.

Forever 21 lacked the technological infrastructure for rapid trend response, whereas Shein analyzed social media trends to launch 6,000 new styles daily. This fundamental difference in operational agility made it impossible for Forever 21 to compete in a market increasingly defined by speed.

5. Shein Partnership: A Brand Identity Failure

In a desperate attempt to revitalize their business, Forever 21 partnered with Shein to sell inventory through their website and allow customers to return Shein products at Forever 21 locations. This strategy backfired.

Rather than capturing Shein's customer base, the partnership cemented Forever 21's image as just another fast-fashion retailer—precisely when Gen Z consumers became increasingly critical of fast fashion's environmental and ethical implications.

Instead of leveraging their American heritage as a differentiator, they leaned further into an increasingly problematic business model.

How Forever 21 Could Have Survived

Looking back at 2018, before their first bankruptcy filing, several strategic changes might have saved the business:

First, aggressively renegotiating their $1.1 billion in lease liabilities would have been essential, pivoting to an e-commerce-first approach while maintaining only their most profitable physical locations. Second, investing in micro-fulfillment centers could have enabled 48-hour order turnarounds, making them competitive online where they desperately needed to establish presence.

Third, adopting a test-and-learn approach with capsule collections and short production runs would have allowed them to launch 500 new SKUs weekly, mimicking the rapid product iteration but at a sustainable scale. Fourth, implementing a loyalty program with redeemable tokens or rewards would have encouraged repeat purchases and built rapport with online customers.

Finally, pivoting their merchandise toward growing categories like activewear, athleisure, and office-appropriate comfort wear would have aligned with evolving millennial spending patterns while attracting Gen Z customers.

Lessons for Retailers Fighting to Avoid Forever 21's Fate

The Forever 21 story offers crucial warnings for other retailers. Success requires monitoring socioeconomic factors affecting customers, including household income, age demographics, career progression, family size, and evolving values.

Continuously acquiring new customers proves vastly more expensive than growing with existing ones. US-based retailers simply cannot compete in the ultra-low-cost arena dominated by international fast-fashion giants. Instead, understanding customer life stages and evolving with them creates a sustainable advantage.

Rihanna's Savage Fenty perfectly illustrates this, expanding from core lingerie into maternity bras as its customer base matured. The key is anticipating your customer's next life phase and positioning yourself as the solution provider before they even recognize the need.

Forever 21's bankruptcy isn't just another retail apocalypse statistic – it's a case study in what happens when a company fails to adapt to changing technology, consumer preferences, and market realities. Their collapse was avoidable, making it all the more instructive for retail executives navigating today's challenging landscape.