Why Forever 21’s deal with Shein wasn’t enough to save itself from bankruptcy 

“We’ve been unable to find a sustainable path forward, given competition from foreign fast-fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin,” Brad Sell, the company’s CFO, said in a statement. China-linked e-tailers Shein and Temu have popularized the use of the de minimis exemption, a trade rule that allows them to ship goods directly to U.S. consumers without paying duties.

But Forever 21 and Shein actually formed a much-hyped alliance in 2023 when Shein acquired a one-third stake in Forever 21’s operating company, Sparc Group. Sparc also became a minority shareholder in Shein. Sparc, which has since reorganized to form a new company called Catalyst Brands, included Authentic Brands, which buys and resuscitates dying brands, as well as big mall operators Simon Property Group and Brookfield Property Partners. 

The collaboration brought Shein pop-ups to select Forever 21 stores and listed Forever 21 merchandise on Shein’s marketplace. And, as part of a partnership that also included Happy Returns, Shein customers could return online orders at Forever 21 retail locations.

But the partnership failed to deliver a meaningful turnaround. Shein didn’t just outperform Forever 21. The struggling retailer tried to team up with the fast-fashion giant and still lost. The failed partnership highlights the pitfalls that can arise when traditional retailers attempt to ride the coattails of fast-growing industry disruptors instead of addressing their structural problems or adapting to meet new consumer behaviors. In the end, Forever 21’s tie-up with Shein was too shallow, too reactive and too late to reverse its decline.

A partnership that didn’t deliver

Forever 21’s partnership included selling its wares on Shein’s marketplace. But Shein didn’t prominently display Forever 21 products, so shoppers had to search for them directly, according to Sky Canaves, a retail analyst at eMarketer.

“If Shein isn’t pushing the Forever 21 products to users, then it’s hard to see how they would get much traffic from Shein, as a result,” Canaves said. 

As part of the tie-up between the two retailers, customers could also return Shein products in Forever 21 stores. Bryan Gildenberg, the founder and CEO of Confluencer Commerce, compared this strategy to another recent retail experiment: Kohl’s accepting Amazon returns in-store. 

“If you’re hoping to drive traffic by people buying stuff on your competitor’s website and bringing it back to your store, that’s not the way they draw it up in business school,” Gildenberg said. 

Kohl’s agreed to partner with Amazon in 2017 as a way to drive more foot traffic into Kohl’s stores. But last week Kohl’s confirmed to Modern Retail that it was phasing out Amazon returns at a handful of stores as part of a temporary test, signaling that the strategy wasn’t enough of a revenue driver. 

Forever 21’s Shein deal followed a similar arc: initial buzz, but ultimately no material improvement in revenue or brand positioning.

In the background, Forever 21’s financial health was deteriorating. A significant portion of the company’s bills were severely past due in 2024. More than 11% of invoices were over 91 days late by November, according to Creditsafe. Forever 21 lists its assets between $100 million and $500 million, and its liabilities between $1 billion and $10 billion, according to the bankruptcy filing.

Forever 21’s financial woes coincided with falling consumer interest. Data from Earnest Analytics, which measures card transactions, shows that Forever 21 had significant customer overlap with emerging competitors. Forty-three percent of its shoppers also shopped at Shein. Over a 12-month period ending in March, spending by Shein customers at Forever 21 dropped to $76, down more than 12% from $87 the previous year. Meanwhile, Forever 21 shoppers spent an average of $253 at Shein over the same period, a 17% uptick from $216 a year earlier. 

When forever isn’t forever

It wasn’t always this way. Founded in 1984, Forever 21 pioneered mall-based fast fashion in the U.S. By the early 2010s, it grew to nearly 800 global locations. But the 2019 bankruptcy was a turning point. The brand struggled to redefine itself as digital-native competitors gobbled up market share. While Forever 21 may live on in the U.S. as a digital-only operation per Bloomberg, analysts remain skeptical.

“It hasn’t revived any retailers’ fortunes to reappear as a zombie shell of a fortune of its former self in an online-only form,” Canaves said, citing Bed Bath & Beyond as an example. “Unless they are going to launch a huge marketing push or innovate with new products that can appeal to their target demographics, I don’t know how they would manage to turn the brand’s fortunes around.”

Shein, on the other hand, is poised to benefit directly from Forever 21’s demise. Earnest Analytics data shows Shein is positioned to absorb much of the brand’s former customer base, particularly budget-conscious younger shoppers​.

And while Shein’s U.S. future may be complicated by trade regulation crackdowns, its retail power and cultural relevancy remain massive. Shein had the biggest global apparel market share gain in 2024, according to a report from GlobalData.

“Forever 21 thought standing next to Shein would make them relevant again,” Gildenberg said. “But partnerships don’t matter if the core product, strategy and execution aren’t there.”