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Retail Competition: In-Store Strategies of Primark and Forever 21 - Essay Example

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This essay "Retail Competition: In-Store Strategies of Primark and Forever 21" presents Primark and Forever 21 that have successfully used in-store atmosphere/ambiance to distinguish its goods from their competitors and to communicate with their consumers…
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Retail Competition: In-Store Strategies of Primark and Forever 21
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?Retail Competition: A Comparative Study of In-Store Strategies of Primark and Forever 21 Introduction Fierce competition in the market for consumer goods is fuelled by consumers with different preferences and “heightened expectations” together with technology that enables the more effective distribution of goods and services (Fox & Sethuraman, 2010, p. 239). Retailers are also confronting competition from both local and international distributers, more frequent acquisitions and mergers, and increasingly more sophisticated consumer demands informed by diversity in the market place. As a result retailers are under increasing pressure to distinguish their products and services from their competitors (Dabholkar, Thorpe, & Rentz, 1996, p. 3). Complicating matters, retailers are not only confronting the changing dynamics of the modern retail market, but are also confronting the economic challenges effecting consumer spending practices since the global financial crisis of 2009. Consumers have demonstrated a habit of unpredictable and frugal spending habits. Retailers are also affected in that they are increasingly confronting the challenges posed by increased fuel prices as well as inflation so that retailers are now concerned about reducing costs. In the meantime, retailers have to find innovative ways of remaining competitive (Mansoor & Jalal, 2011, p. 104). A review of the literature informs that in-store strategies continue to be a method by which retailers seek to differentiate their products and services from the competition. An emerging trend is a propensity to ensure that customers have an exciting and entertaining experience and consumers also expect convenience, options in merchandise at the right place, the right time and “at the right price” (Carpenter, Moore, & Fairhurst, 2005, p. 43). This report conducts a comparative analysis of the in-store strategies employed Primark and Forever 21in the UK. In order to conduct this comparative analysis, a review of the literature is conducted for identifying the challenges and solutions retailers confront in competing with one another. In addition to providing background information on Primark and Forever 21, the researcher visits each store and formulates a general profile of each company and observes their in-store strategies. A SWOT analysis is conducted on each store with a view to identifying and analysing the weaknesses and strengths of the in-store strategies used. A Review of the Literature The forces of globalisation together with the ease with which new entrants can join the apparels’ industry have rendered apparels’ retailing a highly competitive market. Research studies indicate that the popular pricing strategy of the 1970s is no longer suitable for ensuring retailer’s competitive edge. More and more, consumers are committed to quality and competing in terms of sales lowers profit margins, compromises consumer loyalty, and increases “product imitation” (Bruer, Cassil, & Jones, 2005, p.1). The changing dynamics of the retail market is such that consumers are more informed and have far more choices than previously. As a result, retailers have experienced a shift in bargaining controls toward consumers. Facilitated by information technology, lowered barriers to trade, consumers are increasingly aware of competitive products and will exhibit loyalty toward retailers that have the ability to excite and entertain them. In the meantime, consumers’ preferences and needs have “become more fragmented,” and more “difficult to understand and predict” (Kilduff, 2001, p. 2). A study conducted by Carre, Tilly and Holgate (2010) in two fiercely competitive retail markets in the US (food and electronics) demonstrate that a number of factors influence in-store strategies in the retail market. The study involved 16 case studies (8 in food and 8 in electronics) and involved 195 interviews with managers in human resources and operations. Research findings indicate that competitive strategies include increasing service, improving both product variety and quality and cost cutting (Carre, Tilly, & Holgate, 2010, p. 3). A review of the literature informs that retail businesses today are confronting significant challenges brought about as a result of competition. In order to achieve a competitive edge, retailers are required to distinguish themselves from the competition by offering the new enlightened consumer a unique shopping experience and at the same time, cut operational costs. This report analyses how two UK retailers are employing competitive strategies at the in-store level and whether or not these strategies are realistic given the evolving complexities of the retail sector as a result of globalization and the competition it generates. Background/Overview Primark Primark operates out of 190 stores and 5.7 million square feet of sales’ space in stores in the UK, Spain and Ireland. Goods are imported from 36 countries (House of Lords, 2010, p. 326). Primark began with its first Penneys stores in 1969 in Dublin. Four stores followed in Greater Dublin within a year. By 1971, 12 more stores were introduced in Ireland. By 1973, Primark had 18 stores in Ireland and branched off into Great Britain with four more stores, the first of which opened Bristol and Derby. By the 1980s, Primark had 18 additional stores in the UK and nine more in Ireland with a total of 22 stores in the UK and 22 in Ireland (Primark, 2012). From 1984 to 2011, Primark began and continued to expand in terms of store locations and acquisitions. For example in 1984, Primark acquired five Woolwich stores. Moreover, between 1984 and 1994 an additional 13 stores were added in the UK and another 12 were added in Ireland. In 1992, Primark purchased BHS and by 1995 16 stores were opened in the UK. In 1999, Primark purchased 11 Co-Op stores. In 2000, Primark purchased 11 of the C & A stores bringing its total stores to 108 with 75 in the UK and 33 in Ireland (Primark, 2012). With continued expansion, Primark opened its first store in Spain in 2006. By 2008, Primark had 9 stores in Spain. By year end, 2008, Primark opened stores in the Netherlands and by 2010, Primark had stores in Portugal, Germany and Belgium. As of 2012, the total numbers of stores operated by Primark are as follows: Ireland - 38 Spain - 35 UK - 161 The Netherlands - 4 Portugal - 6 Germany - 9 Belgium - 1 Austria – 2 (Source: Primark (2012). “Penneys Operated by Primark.” http://www.primark.co.uk/page.aspx?pointerid=eb44df4565934edca627dac6ec12145a (Retrieved 2 January, 2013). Primark is noted for its “fast fashion” trends (MacCarthy & Jayarathne, 2011, p. 56). Primark is among the UK’s most successful apparels’ retailers winning the 2008 Global RLI retailer of the year award. What distinguishes Primark is its ability to “take a catwalk idea and run with it at very affordable prices” (MacCarthy & Jayarathne, 2011, p. 56). Primark employs a mixed marketing strategy which includes unique fashion, quantity and affordable prices. Primark offers simplicity with classic overtures which can be accomplished at low prices without diminishing the quality of the goods. Primark focuses on continuously offering new designs at its stores with a view to ensuring the consumers are perpetually enjoying a “changing retail experience” (MacCarthy & Jayarathne, 2011, p. 56). Product mix is the highlight of Primark’s marketing strategy. Product mix is combined with product mix width and product line depth. Product mix width refers to the various product lines offered by a firm and product line depth refers to the number of products within a product line (Lamb, Hair, & McDaniel, 2012, p. 338). In this regard, Primark offers a variety of styles and clothing items for men, women and children as well as accessories of the home demonstrating product mix width and product line depth. A visit to Primark on Oxford Street in London revealed why customers may have a reason to linger, shop or just browse. The ambience in-store is appealing and atmospheric. The brickwork is exposed and accentuated with video walls. Window displays are vibrant and inviting. In addition, the store itself is large and spacious and laid out in a way that speaks to an adventure. At the same time, the lay out is simple to follow, allowing for lingering interest and intrigue along the way. A number of sections in the store are committed to trends allowing customers to direct attention and energy to trends that interest them. If customers are simply browsing and exploring an animated map can help them find their way around the store. The overall inviting and tempting ambience is consistent with concepts that atmospherics is very important in in-store marketing strategies. Atmospherics create “in-store cues” that “affect the customer’s experience by influencing browsing, purchase intentions and shopping time” (Hunter & Mukerji, 2011, p. 118). Mohanty and Sikaria (2001) identify three factors that distinguish one retailer from the others: 1. Availability and appeal of merchandise 2. Customer service and support 3. In-store ambience ( p. 2). Store ambience which is also referred to as store atmosphere plays a significant role in enhancing the shopping satisfaction and experience of consumers. Store ambience also complements customer support/service and the availability and appeal of merchandise. In general consumers like appealing atmospheres in the stores they visit. Store atmosphere or ambience creates an environment via “visual communications” which includes lightings and colours together with music calculated to “generate a stimulus” for consumer “perceptions and emotions that will affect their purchasing behaviour” (Mohanty & Sikaria, 2011, p. 1). Although it is generally thought that consumers are influenced by advertisement campaigns, there is support for the contention that consumers do not ultimately make a purchasing decision unless and until they have an opportunity to view and compare merchandise (Mossinkoff & Smit, 2001, p. 1). In fact Missinkoff and Smit (2001) inform that consumers are becoming increasingly “media wary” and are “delaying purchasing decisions until they get into the store” (p.1). It is therefore hardly surprising that retailers, and manufacturers alike are: Rethinking ways to reach consumers directly and permitting them to make a clear brand and price statement at the time of the purchase (Mossinkoff & Smit, 2001, p. 1). Primark has certainly focused on direct communication with consumers as evidenced by its in-store presentation and layout which create an inviting and tempting ambience. In this regard, consumers are encouraged to explore, browse and search which means that the shopping experience is prolonged and purchasing decisions are likely influenced by these experiences. This kind of in-store strategy is calculated to cash in on theories of impulse buying. Impulse buying theory takes the position that ambience in in-store settings plays an important role in motivating impulsive or un-planned spending (Xu, 2007, p. 40). In this regard, impulse buying is defined as a phenomenon that: ...Occurs when an individual feels a sudden, often powerful and persistent desire to make an unintended, unreflective, and immediate purchase after being exposed to certain stimuli (Xu, 2007, p. 42). Xu (2007) conducted a study in which 324 shoppers between the ages of 18 and 30 with shopping bags in in four shopping malls in two US states participated in a survey. The survey consisted of a 10 minute questionnaire. The participants were asked to identify the store from which they purchased the majority of items or the store in which they remained the longest. The respondents were asked to identify the items that they purchased impulsively. In the meantime the researchers assessed store environments based on the results of the surveys. Ambience factors assessed were design, employee assistance, setting and crowding/lay out (Xu, 2007, p. 45). The survey results indicated that more than 70% of the respondents went shopping to have fun as opposed to accomplishing chores. 65% of the respondents purchased items on impulse. 50% of the impulse shoppers indicated that they purchased on impulse because when they “saw the item” they “just lived it and desired to own it” (Xu, 2007, p. 46). Having identified the stores in which the impulse items were purchased, the researchers found that environmental cues plays an important role in influencing the “emotional states of” shoppers between the ages of 18 and 30 while in a store. In particular, the study found that: Pleasure experienced in the store is influenced by employee and ambient cues, while arousal is affected only by crowding...A positively employee cue contributes to the consumer’s pleasure experienced in the store. Similarly, positively perceived ambient cues also contribute to pleasure (Xu, 2007, p. 47). The results of Xu’s (2007) study indicate that when consumers experience pleasure in-store, they are more likely to purchase on impulse. Pleasure is generated by virtue of ambience and customer service. While Primark is certainly high on ambience, it was observed during an in-store visit that customer service can be improved. The store is obviously popular among shoppers as there were long lines at cash-out points, although they moved quickly and the cashiers appeared to be particularly friendly and accommodating. However, long lines are a concern as Xu (2007) noted that crowding can influence consumers’ pleasure in a negative way (p. 48). It was also observed during the in-store visit that while there are several signs directing consumers to customer service, once customer service was located it was labelled “refunds only”. Thus all indications are that customer service is limited to refunds only. It is unlikely that customer service that deals only with refunds and friendly cashiers will be sufficient to supplement ambience in gaining a competitive edge in the retail business. While ambience can go a long way in influencing the shoppers’ experience, the experience is not over until such time as the customer takes the items to the checkout counter and purchases the goods. Along the way, customer service is important for connectivity and enhancing the customer’s shopping experience (Xu, 2007, p. 48). While a new customer might overlook a lack of interpersonal customer service, this will not be enough for customer retention (Best Practices in Customer Service and Store Performance Management, 2005, p. 2). Primark uses technology and ambience in ways that suggest that it is intended to compensate for a lack of customer service. Forever 21 Forever 21 is characterized as fast fashion and is modelled after the Gap practice of transferring fashion designs from sketches to store shelves within two weeks (Rainer & Ceglielski, 2011, p. 336). Forever 21 was not formerly named until 1989 although it was founded in Los Angeles California in 1984 by a couple from South Korea: Dong-Won Chang and Jin Sook. By 1989, Sook and Chang were operating 11 stores with their 11th store operating from a mall. By 1995 Forever 21 opened a store in Miami, Florida representing the first store away from California. Within 2 years, Forever 21 had 40 stores and now Forever 21 has 450 stores (Wells, 2011, p. 33). Fast fashion at Forever 21 refers to more than just the speed with which its items are designed and produced. Fast fashion also refers to how quickly Forever 21’s apparel leaves the store racks. The speed with which items leave the store racks and shelves speaks to exclusivity and customer demands. There is a feeling that if you want a Forever 21 item, you better hurry or it will not be there long. This technique, according to Wells panders to the youth culture of today. Young people today love feeling exclusive and that they have access to items that are limited (Wells, 2011, p. 33). Although Forever 21 has three target consumers, men, women and teens, its primary target consumers are young women between the ages of 18 and 34 who are “highly fashionable” but on a “lower budget” (Provoke Advertising, n.d.). Forever 21’s primary target consumer wants trendy, but “frequently changing clothing styles” (Provoke Advertising, n.d.). They want the “runway looks” but at a reduced price. They want to be able to find a party dress this week and a hipper article of clothing the next week and “still have enough cash left over to treat herself to lunch or the latest CD” (Provoke Advertising, n.d.). One of the ways that Forever 21 accomplishes its goals of reaching and satisfying the fashion hunger of its main target consumer is copying. For example, the one-shoulder “chiffon gown adorned with Swarovski crystals” and worn by First Lady Michelle Obama at the Presidential Inauguration Ball was copied and sold by fast-fashion retailers days later (Tan, 2010, p. 893). Forever 21 has a reputation for replicating “original designs at alarming speed, on a large scale, and at low cost” (Wong, 2012, p. 1141). Forever 21 has always been about “built-in obsolescence” (Kaputa, 2012, p. 16). In other words, unlike its competitors, Forever 21 does not offer volume to its consumers. Instead, Forever 21 offers a limited number of current styles with the latest article of clothing situated in the front of the store and these articles of clothing are changed each day. The shopping experience is like a “treasure hunt” in which young shoppers are able to search for the most current trends and a majority of the items are marked between US$5 and US$40 (Kaputa, 2012, p. 16). An in-store visit at Forever 21 the Trafford Centre revealed a different kind of ambience than that experienced at Primark. Primark was a lot larger, and more like a mini mall in terms of size. Forever 21 was much smaller, but larger than your typical department store. Floor to ceiling mirrors made the store look larger than it actually was. While Primark was big on visual stimulation via bright lights and colours and a wall video, Forever 21 focused more on an “at home”, classy look with chandeliers lighting up the environment. White pillars also gave a feeling of uniqueness, organization, and purity. There was more of feeling of exclusivity and being let into a special inner circle. At Primark there was a feeling that there was something for everyone. Forever 21 does not offer as many products as Primark and focuses on fashion only. Fashion in this regard targets, women and men including teens. Plus sizes are also offered. Like Primark, Forever 21 provides an easy to follow lay out. For example, a trendy corner is visible for consumers looking for the “Rock” look in terms of leather jackets, studded collars and tainted denim jeans. There was a section set aside especially for formal female wear. Another section was set aside for feminine looks such as blouses, laced kimonos, and dresses. The lingerie and nightwear sections were illuminated with pink lights. Kaputa (2012) informs that Forever 21 stores are quite different from other retail stores offering similar goods (p. 16). According to Kaputa (2012): The interiors are designed to “pop” with large-scale mannequins and graphics. Some stores have an electronically revolving rack that girls can stop when they want to look at a particular piece... (p. 16). In-store ambience at Forever 21 is therefore as influential as it is at Primark. The customer service at Forever 21 does not appear to be much different although the customer service desk is not limited to refunds. It appears from the poster positioned at Forever 21’s customer service desk, that refunds are not given at Forever 21. Instead, consumers returning a product must do so within 21 days of purchase and only then can they expect credit as opposed to a refund. Moreover, when an article has been worn at least once, it cannot be returned at all. Therefore if an article of clothing is worn and a manufacturer’s defect is discovered subsequently, the consumer will have no recourse within the store. The lines at Forever 21 were quite long and did not appear to be moving as quickly as they did at Primark. Store clerks could be observed but there were far too many customers browsing and shopping and hardly enough store clerks to go around. A similar observation was made at Primark and as revealed in the literature, store crowding could have a negative impact on customer impulse shopping and customer retention (Xu, 2007). Moreover, customer service is pivotal for encouraging positive shopping decisions by consumers and while ambience can have the same outcome, a purchase is not made until such time as the consumer reaches the cash-out desk. Thus long lines and a lack of in-store help can discourage some customers. Although long lines may be unavoidable and it is not possible to provide a respectable ratio of store clerks to customers all the time, it may be necessary for cash-out tills to work more efficiently to reduce cash-out line as quickly as possible. Although, Forever 21 has made a success of knock-offs at lower prices, there is some concern about whether or not Forever 21 is actually making disposable clothing on purpose or whether or not the clothing falls apart as a result of cheap quality. Chau observes, that regardless of whether or not a customer wants to discard an article of clothing from Forever 21, the customer has no choice but to discard the article clothing after two or more uses. This is because, after wearing an article of clothing from Forever 21 twice, the article typically falls apart (Chau, 2012)/ The disposable products do not appear to be consistent with the preferences and emotional dynamics of the targeted consumer group of women between the ages of 18 and 34. Rence (2006) informs that consumers between the ages of 18 and 34 are referred to as the “bling generation” (Rence, 2006, p. 1). This group of consumers are mixed since one portion grew up watching MTV and the other portion grew up exposed to media representations of the Vietnam War. What this group has in common however, is the fact they were all exposed to the terrorist attacks of September 11, 2001. As a result there is significant uncertainty relative to security and thus this market segment is determined to acquire “lasting value in both relationships and products” (Rence, 2006, p. 1). If consumers are looking to forge lasting relationships with products, they are not likely going to accomplish this feeling via products purchased at Forever 21. Even so, Forever 21’s history of success and expansion and the fact that female consumers between the ages of 18 and 34 represent its primary target consumer group, informs that Forever 21 is successfully tapping this market segment. Forever 21’s appeal to the need for exclusivity and high fashion at affordable prices must appeal to this target group. This particular target group however is fickle and cannot be relied on in the long term. This is because it has been determined that consumers generally prefer genuinely valuable brands and would prefer to have those brands. The only barrier is access, availability and affordability. Thus in the event, these consumers can afford more authentic unique brands with higher value, they will likely discontinue shopping at Forever 21 (Crayson, 9996, p. 390). At the same time it can be assumed that many of the target customer usually never graduate to the economic stage where they can afford genuine high value brands. Moreover, it can also be assumed that Forever 21 is constantly attracting new customers. SWOT Analyses Primark Strengths: Primark has shown a remarkable ingenuity with respect to identifying opportunities for growth and expansion in the global market place. Primark has always demonstrated a willingness and ability to take advantage of opportunities to expand its distribution channels and therefore to increase its economies of scale, range and scope. Its growing reputation for providing value at reasonable prices has enabled it to expand and infiltrate domestic and foreign markets with relative ease and remarkable success. One way that Primark has been able to maximise growth and expansion is in its in-store appeal. The in-store appeal reflects a firm that is committed to and connected to the needs of its customers particularly during the global financial crisis. Primark was a place where consumers could escape the pressures of the global financial crisis, shop for apparel, accessories and household accessories at affordable prices and at the same time enjoy the shopping experience. Primark’s in-store appeal is a major strength for the business. Its in-store shopping experience is visually stimulating and encourages impulse buying. Thus, consumers walk into Primark and not only are they aesthetically entertained, but they are teased and tempted by sight, sound and ambience generally. Research reports inform, that entertained and engaged consumers are more likely to purchase goods that they did not plan to purchase in the first place (Xu, 2007). Moreover, consumers generally shop to have fun (Xu, 2007). Primark meets these preferences by the entirely entertaining atmosphere it creates in-store and this may or may not separate Primark from its competitors. However, when put together with affordable prices, value, quantity, choices and store spacing, consumers might find Primark a more convenient and more enjoyable place to shop than its competitors. The fact is, consumers can shop for the entire family and the home at Primark and do not have to make additional stops elsewhere to meet the shopping needs of its family. For example, if a consumer shopped for women’s wear at Next, the consumer would have to go elsewhere to purchase running shoes. At Primark, the consumer has the convenience of purchasing any desirable article of clothing and footwear for the entire family. Weaknesses: In-store ambience has been established as a major strength in Primark’s marketing strategies. However, the on-going success of in-store ambience relies on the degree to which customer service is appealing to the consumer (Xu, 2007). While in-store ambience has thus far served to separate Primark from its competition, customer service can only give Primark further separation. As it now stands, customer service is lacking in that the customer service available to consumers is only available for refunds. However, customers usually require other forms of service such as replacements, assistance finding products, questions about return policies, warranties, operational hours, and any number of inquiries that would make the shopping experience more convenient and would minimize the stress associated with shopping in particularly crowded conditions. It would appear that Primark relies on technology to communicate these queries to consumers and that is assuming they take the time to search for information check points. Leaving these customer service queries to information technology alone can be cold and may reflect a lack of genuine customer care. Thus, Primark may benefit from a more connected and interpersonal approach to customer service. Opportunities: The most important opportunities for Primark are the opportunities associated with frugal spending in these tough economic times. The fact that consumers can purchase quality goods at affordable prices encourages consumers to shop at Primark over other competitors who offer similar quality goods at higher prices. In this regard, Primark has a unique opportunity to establish consumer bonds and to retain these customers so that once the effects of the global financial crisis fade away, it will have a firmly established consumer market. Threats: The only observable threats are associated with Primark’s customer services. Unless customer services are expanded to make it more interpersonal and to include facilities for responding to a wider range of customer needs and desires, Primark will not be able to maintain its relative large share of the consumer market. Moreover, it will find that competition with rival firms will be tighter if they offer both in-store ambience and customer services of a more sophisticated type. Forever 21 Strengths: Forever 21, like Primark obtains its strength in its mass appeal and market segmentation. While Primark targets the entire family, Forever 21 targets men, women and teens with an emphasis on females between the ages of 18 and 34. By taking this approach, Forever 21 is able to identify just what the preferences and needs of these consumers are and what emotions to stir in order to influence purchasing behaviour. In this regard, Forever 21 focuses on its primary target consumer group’s need for exclusivity and uniqueness. In this regard, the in-store ambience at Forever 21 is aimed at making its consumers feel as though they are part of something special and unique. In addition, merchandise are set up and displayed in a way that is not only appealing, but is also convenient and enjoyable and therefore enhances the shopping experience of its consumers. In addition, Forever 21 distinguishes itself from the competition by offering fast fashion in the sense that the time frame from design to exhibition is very short. Moreover, consumers feel compelled to shop at the first convenient opportunity to avoid the risk that Forever 21 will run out of products. This not only conveys the message that Forever 21 goods are in high demand, but also informs that those who have purchased a Forever 21 product have a product that is in high demand, but not in circulation in mass quantities. Forever 21 has also penetrated foreign markets indicating that it has found a niche in the global market for fast fashion. This expansion indicates that there is a global market for fast fashion and Forever 21 has recognized this and has taken advantage of this information. Weaknesses: The weaknesses in Forever 21’s in-store design are the long lines and customer services and support. If Forever 21 does not find a way to reduce lines and to offer more reasonable customer support services, shoppers may soon tire of these barriers to convenient and thoroughly enjoyable shopping experiences. Another weakness is the tendency of Forever 21 to offer relatively low quality goods to consumers. Although these goods are aesthetically similar to high value brands, they are in principle cheap knock-offs. Thus consumer retention appears to be a mammoth task for Forever 21. Opportunities: Forever 21 have taken advantage of the opportunity for expansion and growth. This is manifested by its exponential growth globally since inception. In addition, Forever 21 has taken advantage of the need for consumers to have access to branded goods, but do not have the means to acquire them. Thus Forever 21 seized the opportunity to offer knockoffs and therefore to satisfy consumers’ desire for feeling connected to exclusive goods without having to pay the high prices that exclusive goods are available for. Threats: While fast fashion has been entirely successful for Forever 21, it is a particularly risky business. Forever 21 in particular has been the defendant in a number of intellectual property lawsuits in which complainants alleged that Forever 21 has knocked off its designs and as a result has negatively influenced their sales (Wong, 2012). These lawsuits have been unsuccessful since intellectual property protection laws do not extend to fashion designs. Even so, there is a Bill now being considered. If the bill is passed, Forever 21 may no longer be able to rely on knocking off high value brands. 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