This post has been updated.
Forever 21 is filing for bankruptcy, according to The New York Times.
F21 will join the ranks of other retailers from Sears (SHLDQ) to Toys ‘R’ Us that have experienced a similar fate.
“There are some principles to success in retail and in marketing in general, and … if you fall out a line on those principles, you end up paying a big price,” Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest University, told Yahoo Finance. “And I think in this case, Forever 21 failed in some respects.”
Beahm highlighted that there were a few key things a retailer needed to get right: maintain a unique type of product, keep evolving, and remain forward-thinking.
“Let's face it, retail is especially dynamic right now,” he added. “You have to be willing to take some risks.”
Survival of the fittest
The decline of traditional brick-and-mortar shops is not a new phenomenon. It’s generally believed to be a result of consumers shifting online, stimulated by the rise of e-commerce giant Amazon (AMZN). But what’s less obvious is why some retailers have managed to survive the retail apocalypse, while others haven’t.
While 75,000 retail stores are expected to close shop by 2026 according to UBS, a separate report from research and advisory firm IHL Group found that more chains are opening new locations than closing them.
These include companies like Ulta Beauty (ULTA), Dollar Tree (DLTR) and 7-Eleven, which are seeing healthy expansion.
The two key reasons why some retailers are able to weather the headwinds were that they didn’t hold too much debt and didn’t expand too quickly in the past decade, the IHL Group stated.
“Retailers without these characteristics have continued to thrive in this market,” the report noted, adding that when a retailer closes a lot of stores, “it is more of an indictment on the individual retailer rather than an overall retail industry problem as has often been reported.”
Beahm disagreed.
“I don't know that the number of stores counts so much as let's say the number of square feet per store,” said Beahm. “What you're seeing is, as consumers are changing their buying habits — from shopping purely in brick-and-mortar to buying more online — there's less need to carry the merchandise.”
And so it becomes “a matter of how much space do you allocate for those walk in customers, or those customers who still prefer to shop in brick-and-mortar versus those shoppers who prefer to buy online,” he added.
Forever 21 is not alone
Several retailers haven’t exactly had a crystal ball in the Amazon age and have ended up filing for bankruptcy in recent years. Here are a few: