Why Business Fail?

1. Failure to create the proper business systems.

a. Sales funnels aren't the only automation required to run a successful business
that's built for the long term. Other proper business systems need to be put in
place. CRMs need to be implemented and customized. Policies need to be
enacted. Financial audits and tracking procedures need to be created. And so on.
Without a good deal of systems and automation, the amount of work becomes
overwhelming and the details can easily be overlooked.
2. Lack of planning – Businesses fail because of the lack of short-term and long-term
planning. Your plan should include where your business will be in the next few months
to the next few years. Include measurable goals and results. The right plan will include
specific to-do lists with dates and deadlines. Failure to plan will damage your business.
3. No differentiation – It is not enough to have a great product. You also have to develop
a unique value proposition, without you will get lost among the competition. What sets
your business apart from the competition? What makes your business unique? It is
important that you understand what your competitors do better than you. If fail to
differentiate, you will fail to build a brand.
4. Inability to learn from failure – We all know that failure is usually bad, yet it is rare
that businesses learn from failure. Realistically, businesses that fail, fail for multiple
reasons. Often entrepreneurs are oblivious about their mistakes. Learning from failures
is difficult.
5. Lack of capital – It can lead to the inability to attract investors. Lack of capital is an
alarming sign. It shows that a business might not be able to pay its bills, loan, and other
financial commitments. Lack of capital makes it difficult to grow the business and it may
jeopardize day-to-day operations.
6. Premature scaling – Scaling is a good thing if it is done at the right time. To put it simply,
if you scale your business prematurely, you will destroy it. For example, you could be
hiring too many people too quickly, or spend too much on marketing. Don’t scale your
business unless you are ready. Pets.com failed because it tried to grow too fast. They
opened nationwide warehouses too soon, and it broke them. Even the great brand
equity that they have built couldn’t save them. Within a few months, their stock went
from $11 to $0.19.
7. Poor location – Poor location is a disadvantage that might be too much to overcome. If
your business relies on foot traffic, location is a strategic necessity. A poor location
might make your customer acquisition costs too high.
8. Lack of profit – Revenue is not the same as profit. As an entrepreneur, you must keep
your eyes on profitability at all times. Profit allows for growth. According to Small
Business Trends, only 40% of small businesses are profitable, 30% break even, and 30%
are losing money.
9. Inadequate inventory management – Too little inventory will hurt your sales. Too much
inventory will hurt your profitability.
10. Poor financial management – Use a professional accounting software like Freshbooks.
Keep records of all financial records and always make decisions based on the
information you get from real data. Know where you stand all the time. If numbers are
not your thing, hire a financial professional to explain and train you to understand, at
least the basics.
11. Lack of focus – Without focus, your business will lose it the competitive edge. It is
impossible to have a broad strategy on a startup budget. What makes startups succeed
is their ability to quickly pivot, and the lack of focus leads to the inability to make the
necessary adjustments.
12. Personal use of business funds – Your business is not your personal bank account.
13. Overexpansion – It is easy to make the mistake of expanding your business into too
many verticals. Before you enter new markets make sure you maximize your existing
market.
14. Macroeconomic factors – Entrepreneurs can’t control macroeconomic factors. Common
macroeconomic factors are business cycles, recessions, wars, natural disasters,
government debt, inflation, and business cycles. Your business can still succeed in bad
times. Hyatt, Burger King, FedEx, Microsoft, CNN, MTV, Trader Joe’s, GE, HP are only a
few examples of wildly successful companies started during a tough economy.
15. No succession plan – Future leaders should be identified in advance. Without an
effective succession plan, your business is unprepared to fill openings in created by
retirements, unexpected departures, or death.
16. Wrong partner – It’s no secret that it is easier to succeed in business with the right
partners. The wrong business partner will, at the very least hurt, or, at worst, destroy
your company.
17. Core values – Your core values are the fundamental beliefs that drive your business.
They are your guiding principles that should remain constant. Even as your company
grows your core values should remain the same. Core values can also serve as a moral
compass. Some of the more common core values are integrity, trust, excellence,
respect, responsibility, and teamwork. Don’t allow your core values to become empty
words, make them part of your culture.
18. Mission statement – A brief statement that defines why your company exists. Your
corporate reason for being. It describes your target market and the services/products
you offer. If you have done it right, your mission statement, in just a few sentences, will
communicate the essence of your business to your business and to the world.
19. What is your product/service – It’s key to have a clear definition of the services you
offer. Without a clear definition, you will be unable to effectively develop, market, and
sell your services.
20. Involve your customers in product development – Most businesses that fail create
products/services without involving their customers. If you are serious about success,
 you will build your products with your customers. Businesses that fail build products
based on assumptions.
21. How will you sell and market your product/service – Marketing and selling your service
could be one of your biggest business challenges. A sales and marketing plan is a must.
Set measurable goals. Create systems to manage the process.
22. Failure to deliver real value - At the heart of any business is value. The world's most
successful businesses deliver the most value. Plain and simple. Find a way that you can
under-promise but over-deliver. Always over-deliver. No matter what the situation. If
you're looking for a fast buck or to get rich quick, you'll quickly find yourself at a dead
end. Instead, focus on the real value proposition. If you're not adding as much (if not
more) value as your competitors, then you need to rethink your approach. Why add
value? For starters, it creates buzz. Just think about it. You receive a service that simply
blows your mind. Don't you want to tell all your friends about it? And if you didn't have
to pay an arm and a leg for it, you're definitely going to be singing that company's
praises from the mountain tops. Why? Because, then you become the value-deliverer.
Again, it's all about value. It might cost you more at the outset, but it will pay off in
spades.

FOREVER 21

What is Forever 21?

Forever 21 is a fast-fashion retailer, offering trendy and inexpensively mass-produced clothing

to mostly young shoppers who wanted the latest fashion but didn’t have much money to
spend.

The business went well until 2017 when the retail apocalypse hit the industry, the term coined
by Knowledge@Wharton to define “legacy retailers’ ongoing struggle to stay relevant in a
landscape increasingly dominated by Amazon and online upstarts”.

Reasons why fashion retailer Forever 21 went bust

1. Failed to see the trends

The Changs didn’t see the retail apocalypse. Or they did but didn’t believe they would be
affected by it.

Too big to fail is the mantra of some big corporations. Nokia believed in it, Kodak believed in it
and they are now the subject of business failure cases students learn in business schools.
Microsoft would have had the same fate had it not been for Satya Nadela’s leadership – he
transformed the tech giant’s corporate culture from the ground up.
Failure stories: Nokia and Kodak
If Forever 21 has seen the digital trend, going for more physical space was a business
mistake. When other fast-fashion retailers were cutting down on the number of physical stores,
Forever 21 was renting more space, in big shopping malls. In 2018, sales dropped by 25% which
meant the company was struggling to pay rent on very large therefore very expensive space.
2. Failed to redesign their stores around digital
Going digital doesn’t mean retailers should exclude in-store experience from their shoppers’
experience overall.
Brands still need to provide their customers with a positive in-store experience and digital is the
perfect tool to blend online with offline.

For retail chain stores, it’s not enough to display great products at discounted prices. During the
2018 holiday shopping season, Walmart provided its shoppers with in-aisle fun and
entertainment powered by Augmented Reality tech.
Ray-ban, IKEA and Sephora built their own AR-based apps to ease the decision making of their
customers.
In January last year, Amazon opened Amazon Go, the first automated in-store system where
there are no checkout lines or cashiers.
Forever 21 opened an eCommerce site but still remained stuck in a mall mindset. Much
like ToysRUs, another retailer giant whose failure story made the headlines, Forever 21 refused
to update its store experience in a changing, digital-first landscape.
Each store looked mostly the same, and the retailer did not offer BOPUS (buy online, pickup in-
store) services like many of its competitors. The result was an in-store experience that felt
stagnant and outdated.
3. Delivered uninspired collections

H&M and Zara, long-time competitors of Forever 21 have felt the same pressure to adapt to
online and digital as the family-owned brand.
H&M closed many of its physical stores around the world and still plans to close more in 2019.
But at the same time, the Swedish fashion retailer has updated its story and brand purpose,
increased its clothing quality and brand relevance and created various benefits for its online
customers.

Forever 21 Cheetos collection

While Forever 21 printed tacky slogans on its tops and launched a Cheetos inspired collection,
H&M collaborated with high-fashion designers like Giambattista Valli, Pringle of Scotland,
Moschino, Karl Lagerfeld, Balmain, Versace and Roberto Cavalli.
Forever 21 sold clothes that were unappealing and generic. Gen Z and Millennial shoppers are
looking for clothes that help them express themselves and provide them with a sense of
individuality which Forever 21 clothing lines failed to provide.
4. Failed to move toward sustainability
In 2011, Greenpeace launched its Detox My Fashion campaign which asked the textile and
fashion industry to urgently take responsibility for their contribution to toxic pollution.
In 2015, fashion was the second most polluting industry in the world, next to oil. The fashion
industry had a serious impact on our society and the planet: sweatshops in third-world
countries, increased levels of pollution, high carbon footprint, use of great amount of natural
resources, toxic dyes waste etc.

Fast fashion is bad for the environment and our society. Gen Zers and Millennials, who are
targeted by clothing manufacturers like Forever 21 are environmentally conscious and
actively support sustainable brands.
The 2018 State of Fashion found that 66% of global Millennials are willing to spend more on
brands that are sustainable and that an ethical and sustainable business model is a powerful
differentiator.
Spanish fashion company ECOALF created the Sea Yarn, a new 100% recycled filament made of
the plastic bottle waste found on the bottom of the Mediterranean Sea.
H&M pledged to use 100% recycled or sustainable materials by 2030. The company also took
on another ambitious goal: becoming 100% climate positive by 2040 by using renewable energy
and increasing energy efficiency in all its operations.
Although there is a web page dedicated to highlighting Forever 21’s efforts towards
sustainability on its website, the information appears to have been updated in 2011. A few
hundred words on a web page doesn’t count as being ethical and sustainable.
The 2019 Ethical Fashion Report – The truth behind the barcode grades 130 companies from A+
to F, based on the strength of their systems to mitigate against the risks of forced labour, child
labour, exploitation in their supply chains and environmental management. Forever 21
received -D while H&M was graded B+ and Zara – A.
5. Too Many Stores, Too Much Space
Forever 21 expanded rapidly in a short period of time, going from outlets in seven countries to
47 in just six years. Even as other chains were downsizing amid the retail apocalypse, Forever
21 was opening new stores as late as 2016.

“It’s kind of like The Gap, where they overbuilt the stores, too,” said Kahn, who also hosts
“Marketing Matters” on Sirius XM. “They weren’t seeing the trends, and instead of slowing
down on physical space, they were building up physical space. That was a tactical mistake.”

It isn’t just the number of stores that is problematic, it’s also their size. Forever 21 stores are
huge, with the average size at 38,000 square feet, according to the company’s website. The
largest store is multiple stories and takes up 162,000 square feet. The Times Square store in
New York City is 91,000 square feet, and a mall store in Las Vegas spans 127,000 square feet.

All that space is expensive, the experts said. Sales reportedly dropped by 20% to 25% last year,
which means the company likely struggled to pay the high rents demanded by premier spots
while facing increased competition from Zara and H&M, the other big players in the fast-
fashion segment.

“A lot of [Forever 21] stores were big footprints – almost as big as department stores in some of
the malls,” Kahn said. “When they close down, it’s kind of like an anchor closing down. It
doesn’t bode well for those malls, either.”

The company’s rapid expansion in recent years is opposite to the business strategy currently
being deployed by retailers trying to save themselves from extinction. Many chains are closing
their big stores and moving to smaller footprints and mini-shops as a way to shrink costs while
maintaining consumer access to their brands. Even big box retailers like Target are opening
smaller stores in metropolitan areas, where big retail space is hard to find.

Meanwhile, “digital native brands — think of the Warby Parkers or the Caspers of the world –
they’re opening stores,” said Cesareo, whose research specialty includes consumer behavior.
“You would say it almost wouldn’t make sense, but they are opening these small pop-up shops
and flagship stores where consumers can actually experience the brands firsthand. There’s
more of a shakeout in retail than a full apocalypse right now. Retail is just repositioning itself.”

6. A growing number of Gen Z and millennials buying secondhand or vintage clothing to lessen
the carbon footprint.

7. The increasing preference for online shopping allowing consumers to buy clothing and
accessories right in the comfort of their homes.

8. Although Forever 21 has an online store, it’s website is not set up for optimal conversions.

9. Cheap chic no longer in fashion

Forever 21, so named by founder Do Won Chang so shoppers can feel forever youthful, also fell
out of style as younger shoppers increasingly demanded higher-quality goods even at low
prices. Fast-fashion retailers have also faced criticism for the fashion industry's toll on the
environment. Apparel and footwear production accounts for 8 percent of global greenhouse
gas emissions, according to a 2018 report from Quantis.
Conclusion

Forever 21 failed because they didn’t keep up with the times.

The family-owned retailer went bust because it didn’t show up for their shoppers.

While their customers’ buying behaviours were changing, they sold clothes like it was still the
1990s.

Their target customers wanted to buy ethical and sustainable clothes, but Forever 21 offered
them cheap clothes that were bad for the planet.

The company failed to cater to the needs of their shoppers – clothes valuable enough that they
can repurpose, upcycle or re-sale.

Forever 21 sold clothes that had no value. The company went bust because no one wants to
look cheap.

What brands can learn from the Forever 21 tragedy?

There are important lessons that brands, particularly in the fashion niche can take from Forever
21’s experience and these include:

· Analyzing the trend and competitors.

Brands should assess where the trend is going, what are the consumers’ preferences, and what
the competitors are doing. Flexibility and adaptability are essential for a brand’s survival.

Forever 21 did not evolve with the changes in the market and its inability to cope with
competitors to meet consumers’ demand has caused its downfall.

Online sales are increasing continuously with 64% of consumers preferring shopping online than
going into a brick and mortar store. Online shopping, after all, offers them the ability to shop at a
lower price anytime they want without leaving their homes.

· Reducing operational costs.

Forever 21 persisted on opening stores in shopping malls despite the dwindling foot traffic. It
even opened big-box format stores with high rental rates making it the 7th most expensive real
estate tenant in New York City. A brand that is keeping an eye on the market direction should
reduce overhead costs when profits are not coming in as they used to be. This way they’ll be
able to prevent further loss as they strategize on how to get back on track and stay in the
competition.

· Staying up with the times.

Younger shoppers nowadays are looking for high-quality products with low price tags. As
consumers are more aware of the impact of producing clothes and footwear and throwing away
synthetic materials on the environment, more and more are shifting to sustainable brands. Fast
fashion retailers have been criticized for their contribution to harming the environment, the
reason why Forever 21 fashion rivals Zara and H&M, as well as other brands, are striving to
become ethical players by integrating sustainability into their businesses.
Mintel reported that 56% of US consumers stop purchasing goods from companies they thought
to be unethical. Ethical issues have become important to the consumers of today as shown by
a Statista survey in which 87% of respondents would purchase from a company that supports an
issue that they cared about. To stay competitive, brands should consider the beliefs and values
of the consumers not just their lifestyles to meet their expectations.

Key Takeaway

Forever 21 failed because it did not consider the sustainability of its business. It did not analyze
thoroughly market trends, competitor strategies, and consumer expectations. As a result, it was
unable to adapt and innovate and perished in the end. Whether Forever 21 can recover from the
severe loss or not…only time will tell. If you have an ecommerce business, make sure you stay
with the trends, use a professional product research agency, to know what is selling right now,
don’t leave the future of your business to chance.