Blockbuster, Forever 21 and Vine: three very different companies.
Yet, they all have one thing in common: they went bankrupt.
These businesses have grown rapidly across the United States and have become popular with teens and adults around the world. Brands were making millions of dollars every year. So what happened?
A combination of factors ultimately led to the demise of these companies, as they struggled to adapt to the wants and needs of consumers.
âBusinesses need to be able to adapt to changes in the society around them and to listen to what customers want and don’t want; otherwise, it is really difficult for them to survive, âsaid Anjali Jindal, co-founder of the Cartken company.
The history of the blockbuster
Blockbuster was the place to be to rent physical movies before Netflix.
At its peak in the late 1990s, Blockbuster had more than 65 million customers and owned more than 9,000 video rental stores in the United States, according to Business intern. In fact, Blockbuster made over $ 800 million just in late fees. A decade later, Blockbuster only has one store in the United States. What changed ?
Netflix was a DVD-by-mail rental service company founded in 1997 that offered convenience and flexibility. Blockbuster could not provide these services to its customers. With Netflix, customers could make a list of movies they wanted to see and, in one business day, get three DVDs, all without queuing. They could keep them for as long as they wanted, with no late fees, and then return them for free. If they returned one, Netflix would send them another movie on their list for $ 20 a month, as reported. Business intern.
âNetflix had a flexibility that was not present with Blockbuster. You have the option to select movies at home, the movies were never out of stock and you can keep them for as long as you want, âJindal said.
Blockbuster was overconfident in its first-mover advantage, meaning it was the first to enter its market. It took nearly five years for the store to introduce their own DVD by mail service and even more to get rid of late fees. Even when they finally tried to compete, they did so with outdated technology.
In the meantime, Netflix had a whole different take on the future of video rental and continued to innovate, ending up streaming movies online. This model has enabled the company to grow in 190 countries and accumulate more than 130 million subscribers, according to harvard business review. Blockbuster made the mistake of not adapting to the changing expectations of its customers.
The story of Forever 21
Forever 21 opened its doors in 1984, in the hope of attracting a young clientele by offering the latest trends at the lowest cost. Their store model worked and the brand became popular across the United States.
Their global sales peaked in 2015 at $ 4.4 billion, with 480 stores, according to Business intern. But four years later, in September 2019, Forever 21 filed for bankruptcy.
The franchise grew too quickly. Even though other once popular retailers like Payless, Sears, JCPenney, and Macy’s began filing for bankruptcy in 2016 and 2017, Forever 21 continued to open new stores. And the new stores were large, with an average size of 38,000 square feet, with a maximum of 127,000 square feet, as reported CNBC.
However, with competition from brands like Zara and H&M, sales plummeted and the company struggled to pay rent, especially in more expensive and more prominent cities.
The company also missed the transition to e-commerce. Their younger clientele was drawn to online shopping. In recent years, consumers have become more comfortable shopping for clothes online; especially during the pandemic, it was much safer and more convenient for shoppers to be able to shop for clothes from the comfort of their own homes.
Forever 21 missed the opportunity to provide this service to its customers.
People’s habits change, and what they want changes, so companies need to be able to adapt.
– John Rowe
âForever 21 has failed for a variety of reasons. It’s all about listening to your customer and figuring out what they want. People’s habits change, and what they want changes, so businesses need to be able to do that. fit, âsaid John Rowe, business professor at Carlmont.
Plus, Forever 21 hasn’t seen the trend move away from fast fashion.
According to United Nations Economic Commission for Europe, the fashion industry, with its fast production times and the use of synthetic fabrics, produces 10% of global carbon emissions and 20% of global wastewater.
Customers who previously didn’t care about the âdisposableâ fast fashion clothes are now willing to pay more for clothes that last longer and are made more sustainably.
“I try not to support [fast fashion] because it’s bad for the environment, and I don’t believe what they are doing. If Forever 21 had moved away from fleeting fashion, they might have survived longer, âsaid Bridget Matthews, senior at Carlmont High School.
According to Vogue, fashion companies like Zara have been able to adapt to this trend by offering sustainable fibers in clothing and adopting uniquely eco-friendly packaging, but Forever 21 has been at a great disadvantage for not adapting quickly to a new attitude. sustainable.
The history of the vine
You may remember Vine, the video hosting social media app where users could create and share 6 second videos, which was popular before Tiktok.
Vine was a “microvlogging” platform because it facilitated videos that were shorter than those found on YouTube, in the same way that Twitter is a “microblogging” platform, because it involves a small amount of text compared to traditional blogs.
Vine had hundreds of millions of users at its peak, according to VentureBeat. So why is the company no longer in business, even though it entered the market earlier than Tiktok, an app with similar functionality?
Vine made some fatal mistakes.
One of the biggest mistakes is that they misunderstood their customers. Vine initially envisioned its platform as a way for users to share their 6-second vlogs with friends. But it has become more of an entertainment platform, with most of its users acting as passive viewers of content for a small group of influencers. Vine depended on these content creators and had to keep them happy.
But, when content creators wanted more flexibility with video length, Vine resisted and stuck with the hard 6-second limit too long. This opened the door for competitors like TikTok to enter the market. Content creators can now create videos of different lengths and offer features like live streaming to their audience.
âI feel like people want more content to consume, especially content longer than six seconds. Scrolling through videos that are only six seconds long makes it harder to find longer content that keeps you entertained. I also think platforms like YouTube reposted Vine compilations and people could watch videos there, âMatthews said.
They also didn’t allow content creators, who often spent days creating content, to monetize their work. Other apps like YouTube and Instagram have allowed content creators to profit from their work. Many have grown rich and famous as a result, attracting more content creators and viewers to these platforms.
âHaving the ability to recognize when market trends have changed and use that information makes businesses much more successful,â Jindal said.