The Forever 21 Hong Kong flagship was opened in 2011 when the US-headquartered brand was new to the market. At around 50,000 sqft the store carried an extensive range and positioned the brand as a leader in the fast-fashion category, alongside the likes of H&M, Uniqlo and Zara.
But now the retailer will focus on smaller stores, like the 19,000 sqft location opened earlier this year in Mong Kok.
Jack Chuang, partner, Greater China, with OC&C Strategy Consultants, says when the Causeway Bay store opened, Hong Kong was experiencing “the golden period of mainland travellers”, with 30 million mainland visitors in 2011 and 20 to 30 per cent growth annually.
Back then, Causeway Bay was one of the top locations for mainland tourists here for shopping.
“Therefore, the high rent Forever 21 paid for that location is partially based on the significant growth potential of mainland tourists. However, given the decrease in mainland tourists in recent years, the traffic is much worse than expected, therefore their revenue may not justify the rental cost,” he says.
“In addition, the cooling down of the ‘fast fashion’ trend may also explain why the brand isn’t performing well. Since quality is perceived to be increasingly important by consumers with regards to apparel, fast fashion brands may start to face challenges. We have seen this with brands such as H&M and Uniqlo who have also seen decreasing profitability recently.”
While the current space now seems much bigger than is necessary, the size is understandable for a company building its brand, Chuang says.
“But now that the brand is already established, the investment could be shifting from maintaining that flagship to opening smaller stores.”