Forever 21 founder and CEO Don Chang has an ambitious growth plan for the chain: to double in size over the next three years, bringing the total store count to 1,200.
The fast-fashion retailer is betting on its newest format, F21, to help reach this goal. The
new concept debuted last month with an 18,000-square-foot store in South Gate, California and targets value-oriented shoppers with basic items at very low price points.
There are bargain-priced basics, such as $1.80 camisoles and $7.80 denim for women and girls and T-shirts and tank tops for men priced at $3.80. Select merchandise from Forever 21 will also be available at the store, including looks from the company's other private-label clothing brands and Love & Beauty, the company's cosmetic line.
Chang told Women's Wear Daily that the price points at F21 Red are actually the same as those at Forever 21, but the chain is taking a page from Walmart's playbook by leveraging its economy of scale.
More stores equal a higher volume of orders from suppliers and Forever 21 is then able to cut margin and pass those savings on to shoppers. F21 Red is merely a response to shopper demand.
"We are able to buy a deep volume of product, increasing our economies of scale while cutting our margins, so that we can pass the savings on to our customers," Chang said. "We noticed that many of our customers were asking for a wider selection of our basics and staple items, and felt that the time was right to offer deeper inventory of options," he said.
Forever 21's plans are in stark contrast to those of many juniors retailers, including Abercrombie & Fitch (NYSE:ANF), that are struggling to connect to their younger shoppers. But the value focus of Forever 21 may be more important in reaching millennials today.
"We're in an environment that's very challenging to apparel and certainly for junior and contemporary," Jeff Van Sinderen, senior analyst at B. Riley & Co. told WWD. "Frankly, there is a consumer that is getting squeezed right now by a higher cost of living, a higher cost of food…and arguably, a higher cost of health care. They need merchandise that's accessible, especially when it comes to basics."
Forever 21 currently operates 469 stores in the U.S. and another 131 internationally.
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