Authentic Brands Group (ABG) has signed a deal with Shein Group for cross-selling merchandise in the Forever 21 stores. That is a big deal, and Authentic Brands believes that the partnership of the two companies can result in multiple billions of sales. Well, let’s see.
Authentic Brands Group is run by Jamie Salter and owns about 50 of the world’s best-known brands. Among those brands are such recognized names as Aeropostale, Arrow, Brooks Brothers. Geoffrey Beane, Hickey Freeman, Hart Schaffner & Marx, Hunter, Lucky Brands, Rockport, Van Heusen, Vince, Volcom and, of course, Forever 21.
In August 2023, Shein acquired a one-third interest in SPARC Group, which is a joint venture between ABG and Simon Property Group
SPG
Forever 21 operates a fleet of physical stores. It is estimated at about 540 units. It also has an on-line presence, but this deal will bring the company onto the Shein platform as well; that platform claims some 154 million users.
I met Forever 21 management in the 1980’s in Los Angeles. Back then, Forever 21 was a young company with a few stores. The merchandise was made in Los Angeles by Asian workers. It sparkled then and was scooped up by young people because of its low prices. I could never get enough factual figures to write a report. Nonetheless, in subsequent years I frequently saw Forever 21 in major malls at the best locations. It impressed me, since it was a hub for young customers.
The deal, as announced, is an offering just on-line for now. I think it will be a completely different deal when Shein merchandise is also sold in Forever 21 stores to young people. That will enable both brands to attract new customers and generate more business. Of course, mutual success requires that the merchandise is timely, cute, and well made. Most of Shein’s products are made in China where labor costs have risen substantially so that must be carefully managed.
There was a pop-up shop in Ontario Mills in Ontario, Calif. The store is 50,000 square feet in size, and 20% of the space was allocated to the Shein merchandise for four days. 7,000 people walked through the space. After the four days, management said that Shein did almost as much business as ABG did in the rest of the space. This test is a clear signal that Shein merchandise will appear in the stores, or at least some of the stores.
Salter confirmed that ABG will work on some other stores with pop-up offerings. Salter said that going forward, the companies are discussing how to further enhance the relationship. “We are going to open more pop-ups, and we’re also working on RTS, “return to store” Salter said. “Right now, the returns go to a warehouse, but Shein’s return rate is in the low double digits. The opportunity to convert those returns into new sales could be worth over $1 billion. (Shein sales are now already more than $12 billion in the U. S.)
POSTSCRIPT: While Shein’s merchandise is mostly sold on-line, there is no reason it cannot be sold in physical stores. The same customer will buy in both locations. Merchandise bought on-line must be taken back cheerfully at the physical stores. It will enable management of Forever 21 to train salespeople to convert returns into new sales by recommending another selection. It will be exciting to see Forever 21 revived.
Read the full article here