STEAL THIS LOOK -- Will a wave of piracy lawsuits bring down Forever 21?
(the original article is no longer online; full text below)

 

NOT TOO LONG AGO, a down-market clothier could sell cheap runway knockoffs for pennies on the dollar and no one cried foul. After all, major fashion designers didn't exactly lose customers when suburban day-trippers picked up "Channel" clutches on Canal Street. But in the late '90s, cheap-chic mega-retailers like H&M, Zara, Mexx, and Topshop figured out that with breakneck turnaround and passable construction standards, they could offer affordable pieces haute enough for even the trendiest Condé Nast assistant. Best of all, aspiring Carrie Bradshaws didn't seem to care if their garments disintegrated within weeks.

At first glance, Forever 21, a clothing chain run by a devoutly religious husband-and-wife team, seems strangely out of place in this clique of cheap-chic powerhouses. Stockholm-based H&M employs 60,000 people and is run by a 12-member board of directors. Zara is the giant flagship brand for Spain's Inditex. Mexx, based in the Netherlands, is owned by Liz Claiborne. And the UK's Topshop is a division of retail giant Arcadia. Forever 21, in contrast, operates in relative obscurity from a shabby corner of Los Angeles. The company has no famous designers or ad budget, nor a single public relations flack. Yet its revenue topped $1 billion in 2006, catapulting Forever 21 into the ranks of the top 500 privately held companies in the United States. In just five years, it has quadrupled in size, crushing competitors like Rampage and Gadzooks—and is putting the squeeze on mighty retailers like the Gap. In 2001, the house that khakis built posted a $7.7 million loss, while Forever 21 boasted 64 percent growth in revenue thanks to 36 new stores sprinkled across the country.

How did an operation founded by poor Korean immigrants and headquartered in L.A.'s sweatshop district so rapidly become a player in an industry dominated by huge European conglomerates? Its founders chalk it all up to hard work and a frugal corporate culture. Others allege outright design theft. In the past year, the company has faced more than two dozen federal lawsuits for piracy, brought by labels including Anna Sui, Diane von Furstenberg, and Gwen Stefani's Harajuku Lovers, along with a raft of fabric manufacturers.

 

AT THE CENTER of the storm are Do Won "Don" Chang and his wife, Jin Sook, the ferociously private, deeply Christian couple who founded the store 24 years ago. "In L.A.'s Korean community they're a constant topic of gossip and speculation. Everyone has a story about being screwed by them," says a local fashion player. "But you have to admire their success. People join their church just to get close to them," he adds.

The Changs, now in their fifties, emigrated from South Korea to California in 1981. According to company lore, it was while working at a gas station that year (one of his three jobs) that Don noticed the nicest cars were driven by people in the fashion industry. Shortly thereafter, the Changs put their native tongue to use making deals at local garment factories, and in 1984, they opened Fashion 21 in a low-rent area near Pasadena.

From the start, the store featured the bright lights, loud music, and friendly staff that quickly became its trademark. It peddled a wide array of cheaply made skimpy clothing, carefully chosen by Mrs. Chang herself. A former hairdresser with a keen eye for salable new trends, she acted as the chief merchandiser, personally selecting fabrics and designs for the company's tailors to knock off. A hard-charging, fastidious woman, she remains obsessively hands-on with all aspects of the business, while her more retiring husband, Don, mainly attends to the company's finances.

By 1995, as growing numbers of teenagers flocked to the L.A. store in search of bargains, the Changs had changed the name of their company to Forever 21 and opened their first store outside California, in Miami's Mall of the Americas. Six years later, their empire had grown to 100 locations. In a daring but ultimately prudent move, the Changs chose not to advertise, instead putting their money toward premium real estate that attracted heavy foot traffic. Then, in 2004, around the same time they opened their first Manhattan store, Forever 21's inventory began to evolve from miniskirts and tights for teenage girls to include fashionable coordinates for respectable adults. The gamble paid off. Today, more than 400 stores—in the U.S., Canada, Singapore, Malaysia, Jordan, and the United Arab Emirates—operate under the Forever 21 umbrella, including Forever XXI (the large urban flagship), For Love 21 (accessories), Heritage 1981 (an attempt to penetrate the midmarket), and Twelve By Twelve (an attempt to penetrate couture), with more on the way.

A faded Fashion 21 sign still hangs outside their first L.A. store, which has changed surprisingly little since it opened. Inside, it remains a garish, disorganized explosion of semidisposable apparel. But even in this modest 900-square-foot corner space, Mrs. Chang's vision is very much evident: She has always believed that shopping should be "a little bit of a treasure hunt." Fresh merchandise arrives every day—a typical store will roll over 20 percent of its stock in a given week. The constant turnover is key to the chain's appeal: If you like something, you must buy it right now, as you may never see another one like it again.

Typically, midmarket competitors like the Gap, Old Navy, and Urban Outfitters need three months to take an item from design to rack. For Forever 21, the cycle is reduced to a matter of weeks. To produce on such a tight schedule, the company depends on flexible, eager manufacturers, and doesn't waste time on original designs. Instead, immediately after the season's latest styles hit the runways or trade shows, they are duplicated by the company's journeyman designers around the world, and often arrive on shelves before the originals do. Stroll through a store, as I did recently in New York, and the knockoffs are easy to spot. On the ground floor, a black shift dress descended from a Gucci design is priced to sell at $24.80. Upstairs, a Marc by Marc Jacobs–inspired checkered peacoat goes for $59.80, and a $22.80 white button-down smacks of Theory.

This brazen pilfering of high-end fashion has left the injured parties in something of a bind. The variations and permutations that define fashion—hemlines, stitches, sleeves—sit outside of U.S. copyright law; only logos and brand names are protected. "Just about every other area of creativity gets some kind of protection. Fashion design gets next to none." says Susan Scafidi, a professor of copyright law at Fordham Law School who runs counterfeitchic.com. "And Forever 21's rip-offs are, in many cases, extremely blatant."

But while the designs aren't protected, the original fabric prints may be. Which is why, when Forever 21 produced a rose-patterned dress clearly "inspired" by a Betsey Johnson original in 2007, Betsey Johnson, Inc., didn't sue. Instead, Carole Hochman Design Group, the Johnson vendor that actually created the pattern, took Forever 21 to court.

In a bid to curtail copycats, Representative William Delahunt introduced the Design Piracy Prohibition Act in 2007. As president of the Council of Fashion Designers of America, Diane von Furstenberg is a key proponent of the legislation. Oddly enough, though, she's also one of the few claimants to have settled with Forever 21, under undisclosed terms in September.

 

ON A WARM SPRING DAY, I visit the Forever 21 nerve center, located on a sketchy stretch of Alameda Street. It's a taco-joint neighborhood, with an adult bookshop and a scrap-iron buyer just down the road; on several lampposts, flyers advertise "transitional housing." Through an open garage door, I spy the packing lines, where thousands of plastic-wrapped garments float overhead and hundreds of mostly Latino workers shuttle items to a small fleet of unmarked panel trucks. In a bare conference room, Forever 21's senior vice president, Larry Meyer, a youthful fiftysomething with an active BlackBerry, gets down to business. Asked about the copyright infringement suits, Meyer passes the buck to the company's fabric vendors. "We pay them a licensing fee, or the manufacturer does. We rely on them," he explains, "but the problems happen, and we deal with it."

Unlike most of its competitors, the majority of Forever 21's manufacturing is U.S.-based. They use American labor, which is not to say they're pro-labor. In September 2001, with the help of the Garment Workers Center (GWC), 19 employees filed suit complaining about a variety of issues, including unpaid wages, mandatory unpaid overtime, 12- to 15-hour days, and compulsory weekend shifts—without, of course, any benefits. The GWC initiated a nationwide boycott, which led to protests at several stores and a demonstration at the Changs' $9.8 million Beverly Hills home. Then, according to GWC director Kimi Lee, "things got ugly." Forever 21 filed defamation suits against the workers, GWC employees, and the GWC itself for connecting Forever 21 with sweatshops, and maintained that they were not responsible for conditions at a supplier's factory. In March 2004, the Los Angeles Ninth Circuit Court of Appeals disagreed, ruling that retailers could be held accountable for sweatshop abuses. An undisclosed settlement was announced later that year.

The garment industry isn't exactly known for its humanity. From the infamous Kathie Lee Gifford case in Honduras to the mid-'90s controversy over Nike's practices overseas, it's a business built on moral relativism. Or as one anonymous fashion buyer tells me, "Everyone in this business is a scumbag to some degree." But the irony is that Don and Jin Sook Chang also happen to be hardcore evangelical Christians.

Every Forever 21 shopping bag bears the words John 3:16, pointing customers to the Bible-thumpers' mantra: "For God so loved the world, that he gave his only begotten Son...." The verse, according to Meyer, is simply "an exhibition of their faith." The Changs are charitable people who give to their church, he tells me. "They travel on mission trips, and that's part of their being." In May 2006, the Fuller Theological Seminary dedicated its new housing commons to the Changs, who had reportedly ponied up $3 million. The Pasadena-based seminary seeks to "best equip leaders who are ready to serve the Church and the world." According to a business insider who spoke anonymously, Mrs. Chang, who attends predawn services every day and strongly encourages her vendors to do the same, makes it a point to give Christians in the industry a leg up, too. "She plucks young designers out of the companies she's working with," he says. "And if they're Christian and religious, she puts them in business."

Rowena Rodriguez, a 33-year-old fashion consultant and onetime "unbeliever" who was born again with Mrs. Chang's help, may be one of those lucky designers. "In the short time I worked with Mrs. Chang, my life was transformed, and I accepted Jesus Christ as my lord and savior," she recalls in an e-mail interview. "Mrs. Chang prayed me into the kingdom!" Rodriguez says she has been approached by executives looking for the secret to Forever 21's phenomenal success. "I usually say, 'If you really want to know, I'll tell you. But you won't believe me. ... The Changs love Jesus!'"

If the religious fervor fazes Meyer, he doesn't show it. "They're proud of being Christian," he says. "We are who we are because of the inspiration they give." He attributes the company's growth not to divine intervention but thrift. "We share rooms when we travel," he says. "We don't spend money the way other people spend money."

Compared to their attention-addicted fashion-world colleagues, the Changs are careful to maintain a low profile. There is exactly one photograph of them available online. Last year, after consenting to an in-person interview with the New York Times, they unexpectedly sent a proxy instead. (The surprised reporter described the substitute interviewee as having "a born-again zeal.") Still, despite their best efforts, the intensely private pair have become a hotly discussed topic in L.A.'s close-knit apparel industry.

Not that anyone at Forever 21 worries about what the fashion world thinks. "We're not garmentos," says Meyer, with a dash of satisfaction. "We're vertical retailers. We don't need panache. It's not about that. It's about the customer seeing it and feeling it. That's what wins." And winning, he says, "is walking through the malls and seeing your store is the most crowded. That's really all that matters."