Online Platforms Toppling Giant Traditional Retailers: A case Of Forever 21

Forever 21,Chapter 11 Bankruptcy Protection

The advent of online retails has been eating the bigger piece of the pie in businesses. Offline buyers have cut their number of visits to physical retail stores and at the comfort of their homes take advantage of the convenience and reliability that comes with shopping online, the latest case being Forever 21.

Stable businesses that have enjoyed a strong customer base over decades are losing it to online retails. Forever 21, a global fashion retailer, popular with inexpensive, trendy clothes and accessories just joined the list latest retailers to run into trouble courtesy of online shopping that has cut foot traffic to their brick-and-mortar stores. High debt levels and rent costs have also burdened traditional retailers trying to navigate the shift towards online shopping.

Founded in 1984, the chain expanded quickly in suburban malls and catering to young girls and women with a mix of inexpensive basics. The company perfected the fast-fashion model, drawing in customers with its frequently updated mix of clothes than what was offered at department stores or single brands. But the past five years have been rocky for the fashion retailer as it started losing preference in the eyes of young US shoppers looking for relatively cheap clothing.

Forever 21 has filed for Chapter 11 bankruptcy joining more than 20 other renown US retailers as more customers switch to online retails such as Amazon. Ideally, Chapter 11 protection postpones a US company’s obligations to its creditors, giving it time to reorganize its debts or sell parts of the business. The company lists both assets and liabilities in the range of $1bn to $10bn, according to the filing in the US bankruptcy court.

“Decisions as to which international locations will be closing are ongoing. We do not expect to exit any major markets in the US. This does not mean that we are going out of business – on the contrary, filing for bankruptcy protection is a deliberate and decisive step to put us on a successful track for the future,” a spokesperson from Forever 21.

The Fashion retailer said it would exit Japan and close all 14 stores at the end of October, as it plans to close most of its locations in Asia and Europe, but will continue to operate in Mexico and Latin America. Out of the 815 stores in 57 countries, 350 stores will be shut down worldwide.

According to statistics, retailers have closed more than 8,200 store in the US, already exceeding last year’s total of 5,589, according to Coresight Research. Further retail shutdowns are expected to pile up and may reach 12,000 by the end of 2019, Coresight predicts. The labor market, suppliers and manufacturers will definitely be on the receiving end of this inevitable decision.
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