US fashion retailer Forever 21 will close its Chinese e-commerce website amid indications of possible physical store closures to come.
While an April 25 notice on the brand’s home page confirmed the e-commerce shutdown, the retailer has declined to issue any official comments, despite the confirmed shuttering of one physical outlet and major discount sales reportedly underway in other stores.
It has been operating in the territory since 2011 and Tmall and JD have released statements indicating that the fashion retailer will cease trading on their platforms from today onward.
The brand’s last remaining store in Taiwan closed last month, while stores in other markets have reportedly been closing down as well, including France and its flagship in Amsterdam, which is now occupied by Uniqlo. Forever 21’s multi-storey flagship in Hong Kong closed in 2016, with the space being taken over by Victoria’s Secret. It opened a smaller store on Mong Kok in its place.
The possible withdrawal accords with a slowing retail environment within China for international goods, indicated by the withdrawal of Amazon from the territory after investing in the market for 15 years.
“Overall this is a big and tough market to compete for non-Chinese brands, given strong domestic competition and unique consumer demands,” said China practice lead at global public policy consultancy Access Partnership Xiaomeng Lu. “Domestic e-commerce giants such as Alibaba, JD.com, and Pinduoduo compete fiercely against each other as well as edge out smaller brands. Chinese customers are used to shopping on apps, expect low-cost same-day shipping, and tend to have little brand loyalty.”
Euromonitor International analyst Arianna Zhai said: “Alibaba and JD alone have taken about 70% market share. The strong presence and different strategic positions of both e-commerce retailers leave limited room for others.”
RPA Perspective While international stores have proven difficult for Forver21, it remains strong in its domestic market and for the first time it has invested in a start-up - aong with local venture capital fund Upfront, Forever 21 is leading an $8-million investment in DailyLook, a fashion subscription service in downtown LA.
As part of the deal, Alex Ok, Forever 21’s president, will join DailyLook’s board.
Forever 21 has built its business on rock-bottom prices, while DailyLook relies on more up-market retail. But both have something to gain from the deal, said Michael Carney, the lead partner on the deal at Upfront.
“This is a two-way street,” said Carney, whose firm also invested in DailyLook’s 2013 seed round. “DailyLook now has a chance to accelerate its growth, and Forever 21 is a behemoth who can help with scaling its supply chain and fulfilment process. And for traditional retailers looking to build data-driven relationships with their customers, partnering with proven start-ups who live and breathe this model can clearly help.”
Founded by husband and wife Do Won and Jin Sook Chang as a single storefront on Figueroa Avenue in Highland Park in 1984, Forever 21 has grown to one of the largest private companies in Los Angeles.
DailyLook founder Brian Ree, who grew up in La Cañada Flintridge, started the business in 2011 as an e-commerce operation where customers could buy entire daily looks (hence the name) presented by the company’s styling team. In response to flagging sales and a poor financial outlook in 2013, however, the company changed its business model to a subscription box service.
To date, DailyLook has raised $10.5 million in venture funding.
