Forever 21 has taken over malls across the world with its inventory of trendy clothes at rock-bottom prices.
The stores brought in $135 million in profits in 2008, the last time the private company made its financials public. And as many retailers announce store closures, Forever 21 continues to expand. This month alone, the chain has announced plans to open two new locations: one in Rochester, Minnesota, and one in Santa Cruz, California.
Much of the company’s success has stemmed from its appeal to budget-conscious women in their teens and 20s.
So how are they able to make and sell their clothing so cheaply?
1. Cheap labour
A recent class-action lawsuit claims that many of the chain’s in-store employees are minimum-wage high-school workers, who don’t understand their employee rights. The suit alleges that the company “systematically failed to pay them for hours worked,” making them work off the clock and denying meal breaks, according to a Huffington Post report.
As for the manufacturers, Forever 21 moved most of its production to Asia following the settlement of a 2001 lawsuit in which American workers complained of sweatshop conditions.
Forever 21’s factories attract an unusual number of labour complaints, labour expert Robert Ross of Clark University told Business Insider. Moreover, the company is unique in that allegations have stemmed from factories near its corporate headquarters, whereas most retail industry labour allegations stem from subcontractor factories overseas.
“Nobody in the world is making a living if a retailer is selling $10 jeans,” Ross said.
This fall, the International labour Rights Forum called out Forever 21 for not joining retailers like Gap Inc., Levi Strauss, American Eagle Outfitters and other companies in making a commitment not to buy cotton from Uzbekistan factories, where alleged forced child labour takes place.
Up to 30 per cent of the store’s offerings are still made in Southern California. One Los Angeles factory worker told Bloomberg BusinessWeek she was paid 12 cents a piece to sew vests that sell for $13.80. It would take 67 vests an hour to earn $8 minimum wage.
We called Forever 21 last week for comment and haven’t heard back.
2. Cheap designs
Forever 21 has faced more than 50 copyright lawsuits for allegedly stealing the work of designers, ranging from Anna Sui to smaller independent designers like Trovata, most of which have been settled out of court, according to a Jezebel report.
The company’s vice president for merchandising told The NY Times in 2007 that the chain does not employ designers, “just very savvy designer merchants.“
Legal expert Susan Scafidi told Jezebel that lawsuits are an expected part of the business model: “I realised that they’ve been caught so many times, they’ve been publicly exposed so many times, they’ve even been sued — although many fewer times, because all they do is settle — and the light bulb went off: This is just part of their business strategy. They go ahead and they take what they want, and when they get caught, they pay up. It’s probably cheaper than licensing it in the first place.”
Forever 21’s product may not hold up as well as premium designer brands, but it looks good enough for young women around the world.
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