Forever 21 gets its act together

The US apparel retailer is turning its inventory 10-11 times a year and scaling up fast in its second innings

The second innings of the US fashion brand, Forever 21, could see it become a competitor of Spanish brand Zara and the soon-to-be-launched Swedish brand H&M in the country.

Zara and H&M are known for their fast fashion, with the former becoming one of the fastest international apparel brands to turn profitable in the country.

While Zara has a mix of casualwear and formalwear and targets shoppers across age groups, Forever 21 is mostly a youth brand, focusing on casualwear.

The brand starts at as low as Rs 200, while its average selling price is between Rs 700 and Rs 800. While Zara's prices are much higher, Forever 21 seems to be making up for the lower prices with sheer volumes.

With a per-square-foot sales of around Rs 43,000, Forever 21 is closing in on Zara, which is believed to be doing per-square-feet sales of around Rs 50,000. And, this within a year.

When Forever 21 had entered in 2010, it had a franchisee agreement with West Asia-based Sharaf group but was unable to scale up. In 2013, it switched partners and announced a joint venture with DLF Brands and opened the first store under the JV in May, last year.

The JV, which now runs five stores, is expected to break-even in the second or third year of operations and the brand is expected to see a like-to-like growth of 25 per cent, says DLF Brands CEO Deepak Agarwal. Zara, on the other had, had become profitable in the second year of its operations.

During is earlier stint, the one store of Forever 21 had drawn teeny-boppers and fashion bloggers who were aware of the brand from their shopping sprees in the US. However, a common refrain with all of them had been that the merchandise available in the stores in the US or even displayed on its online store was nowhere to be found in the Indian outlet.

The collection then seemed unenviable. But the brand seems to have learnt from its past mistakes.

The brand's USP in India is "the best of fashion at affordable prices" Agarwal says, adding that whatever is launched in its home market will be launched in India simultaneously.

The brand knows that India is price-sensitive, so much so that its prices are as competitive as its home market, if not always lower, despite it paying 30 per cent import duties on merchandise. It has reportedly cut its entry price-points by over 20 per cent of the tags that it used to sport earlier. The erstwhile higher pricing than its home market had also been a recurring consumer complaint in its earlier foray.

"We are ready to live with lower margins and the idea is not to make money initially but to build an agile and competitive fashion business," Agarwal says. He says the plan is to open five to six stores every year in major cities and then tier-II cities.

Known for its designs that bear similarities with the season's international runway hits, Forever 21 is also banking on the fast-fashion plank. "Everyday, we bring new products into our stores and turn the inventory 10 to 11 times a year," says Agarwal.

In contrast, Zara is believed to bring in a fresh collection once every fortnight in India, relegating older products to sale-time - either at marked-down prices or for end-of-season.

"It has created a new market. Without advertising much, it has been able to generate good traction. Unlike other brands, they put unsold inventory on discount and would not send it back," says Nirzar Jain, vice president, Oberoi Mall in Goregaon, Mumbai which houses a Forever 21 store. Forever 21 has also rejigged its visual merchandising.

Some like Prashant Agarwal, deputy managing director at Wazir Advisors, a retail consultancy, believes that Zara has stolen a march on it. "Though Zara is a direct competition to Forever 21, it has a much wider range of styles than Forever 21. Zara generates more footfalls and better sales per sq ft," Agarwal says.

With more international brands slated to enter India in the fast fashion segment, Forever 21's quick stock churn might get easily replicated.

With more competition, it will have to be seen how well it balances consistency in quality across its merchandise with the need to refresh its stocks to keep up with the fickleness of the youth.