At inception, designs in like with those seen in the South Korean fashion market were sold to attract majorly the Los Angeles Korean American community by the company. The company then expanded into only selling clothes for women, but later expanded to sell men’s clothings. Most Forever 21 stores now sell clothes for girls, men and women, including plus size clothing for women fulfilling a key part of the company’s mission which as stated by Linda Chang, Forever 21 Vice President of Merchandising is to “empower our customers, to be confident with the bodies they have and for their fashion to be an extension of this.” On brand’s official website, they also have now added home/lifestyle products as an extension of their brand. Forever 21 began operations in a store (Fashion 21) with 900 square feet in Highland Park, Los Angeles, California, and has grown into the different brand clothing lines Forever 21, XXI Forever, Love 21, and Heritage throughout over 600 stores in the Americas, Asia, the Middle East, and the UK. In its first year of roll out, revenue from sales totaled just $700,000, and as of 2011 total net income was $124 million and total assets $1.4 billion, by 2013, the company’s stores had increased to about 480 stores with the average size of 38,000 square feet and revenue of $3.7 billion. As of February 2014, the company generated a revenue of $3.8 billion, in 2016, revenue was up to $4 billion.
Forever 21 is known for its very trendy offerings at low pricing. More than 60% of its apparels are made in China and they involve in outsourcing to local manufacturing factories in Los Angeles to put finishing touches on the apparels. The company is not new to making various controversial headlines ranging from labor practice violations, copyrights infringement accusations, to religion bias.
Major competitors( “the top 10”) in the apparel industry include UBRN, H&M, American Apparel, Zara, Gap Inc, etc with Forever21 having the first highest number of employees(30000) and third highest revenue at $4 billion.
Human Resource Management Issues with Forever 21
On average, the employee ratings of Forever 21 is a 2.5 out of 5 which is tied for the lowest rating of any company based in the U.S.A. The company has been faced with several human resources management related lawsuits in the past years ranging from exploiting cheap labor, depriving them of benefits to the unfair treatment of employees in the workplace. We are going to highlight three of these major issues with a few examples and how they have affected and still affecting the overall company’s performance and bottom line over time.
Strict Company Policies: The “loss-prevention” policy or the employee bag check policy the company had in place at some point required all the company’s store manager to hold back employees during their lunch breaks and shift end so they can search their bags to prevent stealing of store merchandises.
In 2012, five Forever 21 employees(Jessica Ramos, Shanelle Thompson, Alyssa Elias, Tiffinee Linthicum and Jazzreeal Jones ) filed a class action lawsuit against the company. The plaintiffs claimed that they and their co-workers were routinely detained in the store during lunch breaks and after their shifts without overtime pay so managers could search their bags for stolen merchandise. This type of policy does not sit well with employees and making them less motivated to put out their best at work ultimately affecting the overall company’s performance. Also, high employee turnover ratio will be experienced with these policies in place because they count toward a hostile work environment.
Discrimination Against Certain Employees: The company’s San Francisco store recently adopted and enforced an unlawful “English only” policy that prohibits its employees from speaking any language other than English language during work hours and rest breaks. This was enforced primarily to target its Spanish speaking employees.
The company was ultimately slapped with a lawsuit filed by the Department of Fair Employment and Housing (USA) on the grounds of violating the civil rights of its employees and discriminating against them based on their national origin. The employees at issue, Francisco Leon, Ignacio Martinez, and Freddy Tovar, were allegedly subject to “hostility and verbal abuse” from the store’s assistant manager of merchandising and also a reduction in their work hours.
Huge employee turnover will be experienced by the company sighting a hostile work environment as a reason for quitting. Also, for a company that is trying to appeal to different demographics, race, and nationalities such a policy can lead to loss of customers and potential employees ultimately affecting the overall success of the company.
Inadequate Benefits: This is a common accusation against the company where several former and current employees lament the lack of over-time hours payment and certain benefits. Many employees on Glassdoor (a popular job review website) complain of not getting to leave the store until 2:00 a.m. or later, hours after the stores close, often receiving no overtime pay for the extra hours. In response to the new Affordable Care Act in the USA, the company decided to demote numerous full-time non-management employees to part-time positions meaning they will no longer receive benefits and also their work hours were reduced drastically.
Employees will be less motivated to work, affecting the overall performance of the company in the process and also large employee turnover can result as employees will start searching for better jobs that offer full benefits.
These problems lead to some serious issues which can affect the future performance of the company but these issues can be solved with the clarification. Some solutions to these problems are given below:-
Cameras and Asset protection security: – It is true that the companies hurt their employees by checking their bags during lunch break and even after the work is over. This is a problem which can be mostly seen in big brand stores. To conquer this problem the firm have two options, first of which is using cameras at the spots where it is necessary. Firms can use different type of cameras including the 360 degree cameras to regularly keep a track of actions of both the employees and the customers. The second option is to keep some undercover employees dressed in the civil clothes so that they can look like customers and keep a check on the customers as well as employees. These employees will give daily report to management.
Freedom of employees: – The Company should not force its employees to speak only one particular language or follow a culture as it is against the law. This affects the outcomes of the employees more and makes the working environment worse. To tackle the situation the firm should set the standards of operation by keeping in mind about the rights of the employees as well as they should not discriminate on the basis of the cast, colour as well as gender.
Giving adequate benefits:- The achievement of trained and committed employees will help craft a tough establishment for the company. Partially contributing the bare minimum, give your workforce paybacks like paid vacations, holidays, health plans as well as retirement schemes. McKinsey Quarterly shows that attracting and retaining ability was the major cause that companies presented employee benefits. It’s hard for a company to make sombre growth when workers are continuously approaching and leaving. By investing in your workforce, it shows that you have their best interests in wits and give importance to their job show. This can help you make a tight-knit squad of professionals that will live for years . A supplementary benefit of offering reimbursement is the boosting of member of staff’s self-confidence. By providing plenty payback, you can help keep your workforce in high spirits.
Possible Limitations to The Study
There was a limitation on the amount of information given online to the public. An overall better structure given by Forever 21 would have been helpful, such as providing more information on their website about their culture or their management systems. There was also a lack of information on how to deal with specific problems in organizations which made it more difficult to find solutions to their issues.
Due to a lack of information from the Forever 21 website that was required for this report, it will only be used in the introductory portion. Therefore, we were unable to note the specific structures it had in organization to help provide more specific solutions within the organization. Additionally, only external or indirect sources that were not from the Forever 21 website was used, which was portrayed in a negative way, whereas if the information was directly from the Forever 21 website, the information would have been presented either in an unbiased or biased way.
Some constraints we might encounter in our solutions is Forever 21’s denial of their problems, or an unwillingness to change their current way of operating. For example, in the case of the Spanish employees accusing Forever 21 of not allowing them to speak their native language at all while at work, Forever 21 denied such policies. Some alternatives that could be used to address these constraints is an internal investigation to ensure their stores are complying with corporate rules and the law in general, in order to ensure no misconducts and happy employees.