The cheap-chic teen retailer is growing amid questions about just how original its clothes are
The Takashimaya store on Manhattan's Fifth Avenue was spare, exquisite, and often too quiet for its own good. It closed in June. Five months later, only the Japanese department store's marble floors and high ceilings remain. The six-floor, 30,000-square-foot space has been transformed into a glittery, dizzying showplace for Forever 21, the cheap chic teen retailer with sprawling ambitions, not the least of which is wanting the grown-up world to take it seriously.
On a late November morning the day before the store is to open for the first time, Linda Chang takes a moment to contemplate her family's ambitions. "It's pretty historic that we're on Fifth Avenue," she says. "We've tried hard not to make it feel like fast fashion." Chang has recently become the slightly more public face of the very private family that owns Forever 21, and she's still feeling her way into the role. Chang is 29 with an undergraduate business degree from the University of Pennsylvania, and she's been leading the marketing department for the past two years. One day she'll likely run the nearly $3 billion, 477-store, 35,000-employee chain. For now, Do Won and Jin Sook, or Mr. and Mrs. Chang, as everyone at Forever 21 calls them, are still very much in charge. Mrs. takes care of the merchandise; Mr. takes care of everything else.
He is here today, a youthful-looking man in his 50s wearing a dark blazer, jeans, and a wool scarf. No one dares approach him uninvited. Linda is far more outgoing. "This is our rock-and-roll section: sequins, black lace, leopard, some leather, a mix of the wild things, our faux fur, crochet," she says, sweeping her arm across just some of what's on the first floor. She's dressed modestly in a Forever 21 black T-shirt and jeans with a boyfriend blazer. Her necklace, of interlocking Cs, is Chanel.
A 20-foot chandelier dangles from the mezzanine above, and flecks of gold paint shimmer on the walls. On other floors, Linda points out plaid shirts, Nordic ski sweaters, sweaters with elbow pads, military-style jackets, capes, draped work dresses. On and on it goes: Forever 21's buyers—and shoppers—expect the stores to offer every trend. "Mrs. Chang oversees all the merchandise," says Linda of her mother. "But she doesn't travel to store openings. She says: 'I'll get you the product. You sell it.' "
I notice a pair of faux-leather lace-up ankle boots that look a lot like the Jeffrey Campbell ones I'm wearing: The style is the same, so are the combination of hooks and holes for the laces and the distinctively shaped heel. Forever 21 sells the boots for $35.80, less than one-quarter the price I paid. I mention them, and Linda says brightly: "You should buy another pair here." Fashion watchers will find a lot more that looks familiar in Forever 21.
On the sixth floor, we stop in front of a revolving rack suspended from the ceiling. "That's one of my sister's favorite things," Linda says. "The clothes rotate around, and you can stop it when you want. It's from the movie Clueless. My sister wishes she could have one in her room." Linda's sister is Esther, who graduated from Cornell University with a degree in fashion and merchandising and at 24 is the head of the company's visual display team. She's been up all night putting the finishing touches on the store. "Esther had one week to set it up. We're fast. Everything we do is fast. We found out we had this space six weeks ago," says Linda.
The store is the third the company has opened in just two weeks and the hundredth in the past year. Forever 21 has been quick to take advantage of the misfortunes of other retailers, moving into buildings abandoned by Saks (SKS), Sears (SHLD), Mervyns, Dillard's (DDS), Circuit City, Virgin Megastore, and HMV. It's staked out some of the most prestigious real estate in the world—on this stretch of Fifth Avenue, on London's Oxford Street, in Tokyo's Shibuya district. Its new Times Square store is 96,000 square feet; its store on the Las Vegas Strip is 127,000. In seven years, Forever 21 has grown from 1 million square feet of space to 10 million, from one brand of its own to six, offering clothes for kids, men, and plus-size and pregnant women. This year it plans to open at least 75 more stores in five countries. Forever 21 had a profit of $135 million in 2008, the last time it made figures public. And it did all this without selling any item for more than $60.
How did the Changs, Korean immigrants who opened their first store in a gritty section of Los Angeles in 1984, become such important players in fast fashion? The family credits its accomplishments to hard work, faith, and frugality, though Forever 21 has not prospered without controversy. The company has been accused many times of not just following the trends but selling copies of clothes created by trendy designers. Some of its suppliers, many of whom are part of a tight-knit Korean-American community of manufacturers and vendors that dominate the garment industry in Los Angeles, have been accused of underpaying their workers. Now Forever 21's expansion raises a question, both strategic and existential: When is more too much?
Forever 21's headquarters sit just beyond a dodgy patch of industrial Los Angeles, past storage facilities and auto supply stores, a taco joint, and the Score Gentlemen's Club. Headquarters is a two-story concrete building with a courtyard. The corporate offices are on the right, the merchandising nerve center on the left. They're two separate worlds. The merchandising side, Mrs. Chang's part of the building, has its own security; Forever 21 executives are rarely allowed in for fear they might distract her employees. The windows are covered with blinds. Requests from Bloomberg Businessweek to observe the goings-on were met with laughs by Forever 21's representatives.
"Their design is swathed in mystery," says Susan Scafidi, a professor of copyright law at Fordham University Law School and director of the Fashion Law Institute. "But it probably looks a bit like a crime scene, with the chalk outline of the garments they're copying." The Changs, for the record, have never been found liable for copyright infringement.
The warehouses are also off limits, though driving by the block-long buildings one can see stacks and stacks of boxes and racks of plastic-wrapped clothing. Forever 21 would not discuss what might be inside.
Instead, visitors get to see the inside of a bare conference room, where today Larry Meyer, the executive vice-president and the other public voice of the company, comes in wearing a Santa Claus suit. It's a week before Christmas, and the company has just had a holiday party. Meyer is too pressed for time to change back into his clothes, so there he sits for the next hour, stuffed and hot.
Meyer joined the company as chief financial officer in 2001 after a career that took him from PepsiCo (PEP) to Gymboree (GYMB) to Toys 'R' Us. Mr. Chang hired him to get the company's financial records in order in anticipation of going public. It seems improbable now: a company that doesn't let anyone into its corporate offices opening itself up to a complete inspection. The timing of an initial public offering never came together, though, and today Meyer says the company's independence is more valuable. "We get to do what we want when we want," he says.
Now Meyer is in charge of the company's real estate. "We're looking for bigger spaces and better malls," he says. "We're not built for small stand-alone stores, the million-dollar stores. Our stores are higher volume. We're about energy and turnover." He continues: "Having really big stores has always been Mr. Chang's dream. He's always wanted to be a fashion department store, with clothes for all kinds of people. Now the real estate is available, and we're confident that we have the merchandise to fill it."
Big dreams have ruined plenty of retailers. "Forever 21 has excelled at doing what people didn't think possible—selling clothes as fast and cheaply as they do. But these big stores come back to haunt a lot of retailers," says Liz Pierce, a senior research analyst at Roth Capital Partners in Newport Beach, Calif. "Trying to be too many things to too many people doesn't always work." Howard Davidowitz, a retail consultant and investor, is even more concerned by Forever 21's strategy. "What they're doing is quite dangerous," he says. "Stores that size are hard to control, hard to merchandise. They're breaking all the rules. Trouble can come very quickly in this business."
Do Won and Jin Sook Chang arrived in Los Angeles in 1981 in the midst of a shift in the garment industry, as Korean and Persian immigrants began to work their way into the business. Soon an entire Korean-American ecosystem had developed, from manufacturing to wholesale to retail. It was punishingly competitive: Speed, flexibility, and hardheadedness were required at every turn. The Changs thrived.
In Seoul, Mr. Chang had started the first coffee and natural juice delivery service. Mrs. Chang had been a hairdresser. They wanted to run their own business in Los Angeles, and while subsisting on wages from menial labor (he pumped gas and worked as a janitor), they managed to open a 900-square-foot clothing store. It was on a low-rent street close to the garment district, and they called it Fashion 21. The Changs filled the store with cheaply made, skimpy clothes for teens, all produced by Korean-American manufacturers and all selected by Mrs. Chang. She proved to have a sharp eye for easy-to-copy trends and an even sharper instinct for negotiation. "My mother is an incredible buyer," says Linda. "We have long relationships with our vendors. We work hard with them, going back and forth. She's really smart about what the cost should be." Within the first year, the company says, its sales had reached $700,000.
The Changs, who are born-again Christians, think they had some other help, too. Mrs. Chang tells people that when they were starting out, she went to the top of a mountain in Los Angeles to pray. God told her she should open a store and that she would be successful. "Every decision that they made has been with thoughtful prayer," says Linda. Mr. and Mrs. Chang attend a daily 5:30 a.m. prayer meeting at the Ttokamsa Mission Church when they're in town; he also leads Bible study, and she's a deacon. "I think they get a lot of business ideas and insight during early morning prayer time," Pastor Ken Choe says in an e-mail. According to him, they've contributed millions of dollars to missions around the world and regularly go on missions themselves, including to Afghanistan, India, and Pakistan. They've told their daughters that when they retire, they want to devote themselves fully to the church. "Mr. Chang said he would have been a missionary if this hadn't worked out," says Linda. "This supports that. This is part of their missionary vision."
The Changs' faith is often on display at Forever 21. In black letters on the bottom of every bright yellow Forever 21 shopping bag is "John 3:16," a reference to one of the best-known verses of the Bible: "For God so loved the world that he gave his one and only Son, that whoever believes in him shall not perish but have eternal life." There are Bibles at the company's headquarters. And when Mr. Chang accepted an award from the Los Angeles County Economic Development Corp. in November and gave a rare public speech, he said: "I live by the Bible verse, 'He who is full hates honey, but to the hungry even what is bitter tastes sweet.' " Then he added: "That is why I work so hard—because I'm still hungry."
Fashion 21 caught on quickly because its founders caught on quickly. "We have a lot of startups looking like their first store—whatever's hot, whatever's available, just thrown in," says Ilse Metchek, founder of the California Fashion Assn. "What's remarkable is what the Changs learned. They learned that what's new has to be up front, and it has to change daily. Most retailers stay with dead inventory too long. Forever 21 is all about movement in the store." According to Roth Capital's Pierce, a typical Forever 21 store might turn over 20 percent of its merchandise in a week, which could be twice as much as most apparel retailers.
The Changs also figured out that if they order small enough batches of each style, shoppers will learn to buy what they like when they first see it. Next week it might be gone. "Most retailers put out tons of their hot items," says Metchek. "At Forever 21 they went the reverse way—they built in obsolescence."
The Changs' first store remains open on North Figueroa Street in Highland Park, next to the Heart of Gold thrift shop and Sunny Discount Mall. It looks remarkably unchanged. It's by far the smallest and dingiest outlet in the chain: The carpet is beige and worn, the ceilings are low, the lights fluorescent. Even here a truck arrives six days a week with new clothes, and as soon as the doors open at 9 a.m., shoppers are inside.
Twenty-five miles away is one of Forever 21's biggest stores, an 86,000-square-foot, two-floor emporium in Los Cerritos Center, on the edge of Orange County. It used to be a Mervyns. The space is divided into 22 mini-shops; it's a department store selling only Forever 21 brands. It has 130 fitting rooms and 24 cash registers. In the year it's been open, about 2 million people have come through its doors.
The Changs have been able to accomplish this with no advertising, virtually no marketing, and only infrequent attempts to introduce themselves to their customers. For years, their headquarters didn't bear the company name. Phone calls and e-mails from strangers were ignored. Even a local representative with the U.S. Commerce Dept. couldn't get in touch, and he wanted to talk about business opportunities overseas. "I pursued them for five years and then gave up," says Bobby Hines, an international trade specialist at the Commerce Dept., who has worked with the Korean apparel industry in Los Angeles since the late 1990s. At the suggestion of a Forever 21 store manager he knew, Hines even went to services at their church one Sunday hoping for an introduction. No luck. And he's not the only one who's had that idea. "People do come trying to talk to them," says Pastor Choe. "But after attending church services, they soon realize the church is not a place to make business contacts."
The Changs' reluctance to open themselves and their company to more scrutiny may stem from the many lawsuits they've faced. In September 2001, the Asian Pacific American Legal Center and the newly created Garment Worker Center filed suit against Forever 21 on behalf of 19 workers, alleging unfair business practices and wage violations. The workers were sewing at seven different small factories—they called them sweatshops—that had all been contracted to produce garments for Forever 21. This was just a few years after some 70 Thai garment workers had been freed from near-slave conditions in El Monte, Calif. Julie Su, the lawyer who won the women a $4 million settlement and legal status (and later a MacArthur "genius" award for herself), was the lead attorney in the case against Forever 21.
The company, like many caught up in similar allegations, said it didn't know about and wasn't responsible for the working conditions in these factories. "It's impossible to claim ignorance when the problem is so rampant," says Su. "Forever 21 is not a victim of the industry. They create and demand these conditions. They squeeze their suppliers and make it necessary for them to get things done as quickly and cheaply as possible, no matter what the cost to the workers." Meyer responds: "We have developed a comprehensive vendor compliance program requiring manufacturing facilities with which we do business comply with all applicable labor laws....If we are notified of any violation by our suppliers, we investigate and resolve immediately."
The workers also launched a national boycott of Forever 21 in October 2001. They protested at stores around the country and outside the Changs' Beverly Hills home. The first time they gathered there was on a Sunday morning; the Changs drove off in an SUV with tinted windows. Linda was away at college, but Esther was in high school, at the prestigious Harvard-Westlake School. "It was a difficult time for them," she says by phone. "I'm sure it was hanging over my parents, but they didn't want it hanging over me."
The garment workers kept up the boycott for three years, during which time Forever 21 sued them for defamation and several of the manufacturers settled (in one instance, paying seven of the women a total of $175,400). When a judge finally ruled that the case could proceed in 2004, Forever 21 settled. The terms of the agreement are confidential. Forever 21 and the workers issued a statement that read in part: "The parties have agreed to take steps to promote greater worker protection in the local garment industry....The parties share a belief that garment workers should labor in lawful conditions and should be treated fairly and with dignity." Three years later, a documentary about the lawsuit and boycott, Made in LA, was shown on public television. It won an Emmy in 2008.
By then, Forever 21 was facing a new and altogether different wave of litigation. Starting in about 2004, the Changs decided to create different brands to appeal to slightly more sophisticated and older shoppers. Over the next couple of years, labels ranging from Diane von Furstenberg to Anna Sui to Anthropologie, about 50 in all, separately sued Forever 21 for copying their clothes. The company said that its buyers had to trust its vendors and couldn't possibly know how those vendors came up with all t