Most teen retailers struggle to hold onto their customer base as shoppers start making their own salaries and maturing into business attire. A slew of bankruptcies over the past several years by teen rivals Charlotte Russe, Wet Seal, American Apparel and Aeropostale illustrate just how challenging it is to get it right.

Before the fight with Ariana Grande, before spreading to seemingly every mall in America, before today’s crop of Instagram influencers were even born, Forever 21 Inc. thrived by helping teen girls dress like pop stars on the cheap. As it faces an uncertain financial future, it’s going to need help from a very different type of shopper: one with disposable income.

The retailer filed for bankruptcy protection on Sunday, and its turnaround plan relies on luring in shoppers who are actually willing to buy clothes at full price—one of the most elusive clientele in the industry.

These “high spender” customers, as it calls them, would be an attractive antidote to its reliance on deep discounts to attract teen shoppers paying with allowances. But it’s no easy feat for a retailer to change its core business model, especially when even the company’s name suggests it’s not a brand built for mature patrons ages 22 and up.

An Internet Retailer analysis of demographic data from marketing firm Hitwise reveals 44.3% of Forever 21’s online shoppers are millennials, the second-highest share of 22 apparel/accessories retailers ranked in the Internet Retailer 2019 Top 1000 that cater to teens and young adults. The largest share of visitors to Forever21.com⁠—⁠30.0%—have an annual income of less than $30,000, according to Hitwise. So, a pivot would be challenging.

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“It’s going to be hard to all of a sudden cast a wider net and appeal to a more sophisticated customer overnight,” said Stacey Widlitz, president of SW Retail Advisors. “That’s going to be a long process that I don’t know they have time to take on.”

If Forever 21 can pull off a resurgence with older shoppers—and the odds, analysts say, are long—the shift would mark nothing less than a revolution for a brand built on the cheap-chic appeal of so-called fast fashion.

Fast fashion

Forever 21, No. 288 in the Top 1000, isn’t the first teen retailer to find itself in this situation. Most younger-leaning retailers struggle to hold onto their customer base as shoppers start making their own salaries and maturing into business attire and better fits, two categories teen retailers aren’t necessarily known for. A slew of bankruptcies over the past several years by teen rivals Charlotte Russe, Wet Seal, American Apparel (No. 631) and Aeropostale (No. 257) illustrate just how challenging it is to get it right.

Teen retail is the “toughest market out there,” Widlitz said. “That’s why we’ve seen so many store closings in that space. That customer is a very difficult one to walk back up to full price.”

At a time when digital sales are boosting slow or declining store revenue for many retail chains, Forever 21 also has managed to grow its online segment while total sales continue to shrink, Internet Retailer estimates. But that time may be coming to an end. According to bankruptcy filings, ecommerce accounts for 16.0% of overall revenue, which puts 2018 web sales at $528.0 million. This would mean online sales essentially remained flat last year with just a 0.8% uptick from $523.6 million in 2017.

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Comparatively, Forever 21’s total sales declined nearly 3.0% to $3.3 billion in 2018, down from $3.4 billion the previous year and significantly less than the company’s peak of $4.1 billion in 2014.

Although Internet Retailer estimates Forever 21’s ecommerce penetration has grown each year, web sales haven’t been able to stave off declining store sales.

Los Angeles-based Forever 21, founded 35 years ago by husband-and-wife duo Jin Sook Chang and Do Won Chang, rose to prominence by being the go-to place for teenagers to buy in-vogue, disposable outfits that wouldn’t break the bank. It was America’s answer to the wave of European fast-fashion companies like H&M (No. 29) and Inditex’s Zara (No. 25) that quickly respond to trends and get merchandise from warehouse to racks far faster than traditional retailers.

Part of the reason why Forever 21’s online segment hasn’t been able to save the company may be its low average ticket. The chain comes in with a $50 online spend on average. This is significantly less than the $130 median AOV for all Top 1000 apparel/accessories retailers, nearly half of the $93 median spend for the group of teen retailers and quite a bit less than the $80 median AOV for even the 15 ranked fast fashion retailers—a niche known for low pricing.

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The fast fashion model has its appeal, especially with young shoppers who want to dress like their favorite influencers without a wait. And the brand hasn’t fallen out of favor with those core customers. Despite teens’ ever-changing tastes, they consistently rank the apparel brand as a favorite, according to Piper Jaffray’s semiannual survey.

Even so, Forever 21 registered the lowest 2018 ecommerce growth rate by far of all fast fashion retailers. Web-only merchants RomWe.com (No. 189), Boohoo.com Plc (No. 71) and LuLus (No. 128) took the top three spots on the leader board with robust growth, and all other retailers saw double-digit gains last year.

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The “high spender” shopper profile would be an uphill climb for Forever 21, but if the chain can acquire this segment, the company may be able to inch closer to the 22.0% median ecommerce growth for the fast fashion group.

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“Forever 21’s repositioning will enable the company to continue to be the leader in fast-fashion, a fashion movement which Mr. Chang and Ms. Chang started in 1984, and continue delivering the curated assortment of fast fashion trends and merchandise that our customers expect from Forever 21,” a company spokeswoman said in a statement. “We have an incredibly strong and loyal customer base and social following that has continued to champion for Forever 21.”

‘Someone’s closet’

Global sales hit $3.1 billion for the 12 months trailing July as the company prepared to file for bankruptcy. Store checks on Monday around Manhattan showed long checkout lines and a diverse crowd of shoppers, primarily teenagers—or adults with kids in tow.

Largely missing, however, were young adult shoppers in their late 20s and 30s. For that demographic, “it hurts your brain to go in there. It’s like being in someone’s closet,” said Gabriella Santaniello, founder of retail consulting firm A Line Partners. “The older customer used to shop there, but then it became un-shoppable. But they cannot only rely on the teenagers.”

Frederick Forby, 27, was one such millennial shopper—the demographic Forever 21 is desperate to attract back—browsing the racks at the Times Square location on Monday afternoon. The Baltimore resident, visiting New York City as a tourist, said it’s really the price point and convenience that draws him in.

“I shop at Forever 21 about twice a month. It’s not really my go-to store; I normally come here when I want to find a cute outfit quickly,” he said. “The clothes usually last for a couple of washes, they fit well, I have no problem with it.”

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But he’d rather shop at second-hand stores, he said, where the quality is better and the merchandise is more unique. And he’s not alone: Younger shoppers, just coming into their spending power, are turning to reused clothing at the quickest pace, according to Thredup’s 2019 Resale Report.

New messaging

As part of its turnaround, Forever 21 has already said it plans to shut down some 178 domestic outlets of its approximately 800 total stores, after having expanded dramatically outside the U.S. and into large retail spaces. Its quick response to fashion trends often led to massive volumes of inventory and unorganized stores, which has brought on headaches for those potential higher-spending customers.

But to appeal more to the young professional, Forever 21 will also have to hone its advertising, Santaniello said. “Their messaging is we’re Forever 21 and we’re a fast fashion retailer,” she said. They “have to reach out to their customer and find out why their customer was not coming back.”

Part of its plan to reel in high-spending customers is to invest in targeted advertising on social media platforms, align its marketing and merchandising approach and reach out to customers who used to shop at the store but don’t anymore, court papers show. It already has a sizable social media following with 16 million Instagram followers, which is more than Gap (No. 28), J. Crew (No. 62) and Abercrombie & Fitch (No. 72) combined.

Teen rivals doing better, like American Eagle Outfitters Inc. (No. 70), have stayed relevant by expanding into lingerie, offering higher quality jeans and finding creative ways to encourage shoppers into stores, like installing washing machines and adding customization stations. Forever 21 says it will consider launching customer loyalty and credit cards as well.

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But for Piers Fawkes, founder of PSFK, a retail research company, it may be too little, too late.

“That’s what people were talking about five years ago,” he said. “That doesn’t even allow you to be competitive. That just allows you to be a retailer.”

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