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TALK ASIA

High: Interview with CEO and Founder of Forever 21, Do Won Chang

Aired September 21, 2012 - 05:30:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Congratulations.

KRISTIE LU STOUT, CNN INTERNATIONAL ANCHOR (voiceover): This is the first Forever 21 store in Beijing.

UNIDENTIFIED FEMALE (text translation): I'm so excited that this is the first Forever 21 store in Beijing.

UNIDENTIFIED FEMALE (text translation): I think the clothes here have a lot more diversity and are more fashionable than other brands.

STOUT (voiceover): And it's one of the latest additions to the fashion empire run by this man, founder and CEO, Do Won Chang. With more than 500 stores around the world, the clothing giant runs on the philosophy of "Fast Fashion". Capitalizing on the latest trends by fast tracking designs from the catwalk to their stores and making them affordable.

STOUT: How long does it take to go from the sketchpad to the store in Hong Kong? How long does that take?

DO WON CHANG, FOUNDER AND CEO, FOREVER 21: Probably, I don't know, actually, probably three months.

STOUT: Three months?

STOUT (voiceover): A business drive that has seen Forever 21 grow into an international multi-billion dollar brand. And it started here, with this store in West Los Angeles. After opening for business in 1984, in their first year, Do Won and his wife, Jin Sook, rung up sales of $700,000. A huge success for the Korean-born Chang, who had traveled to the U.S. just three years earlier, with the hope of finding the American dream.

This week, on "Talk Asia", we're in the heart of Hong Kong with Do Won Chang as he takes us on a personal shopping session in the city's first Forever 21 store.

STOUT: And you are not allowed in here.

STOUT (voiceover): And we meet his daughter and marketing manager, Linda, in Los Angeles. That gives us her take on the family-owned business.

LINDA CHANG, SENIOR MARKETING MANAGER, FOREVER 21: Obviously, we have your quarrels here and there and we butt heads. But overall, it's great.

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STOUT: Do Won Chang, welcome to "Talk Asia". Now, you have an incredible story. It's a rags-to-riches story. Thanks to the rag trade, the fashion business. Can you take us back to Los Angeles in the early 1980s when you decided to move from South Korea to America. What did you have? And what were you out to do?

D. CHANG (though translator): When I first immigrated to the United States, there were not many jobs that stood out. So I worked at a gas station, cleaning. Whenever drivers drove nice cars, I'd ask them what job they had. They all said it was in the garment business. At the time, I didn't even know what "garment" meant. I later learned that it was the clothing business. And that is how I went on to start my clothing store.

STOUT: So, you had no interest in fashion, no interest in retail. You just got into the business because you wanted to make money?

D. CHANG: Yes.

(LAUGHTER)

STOUT: So, how did you first get into the garment business, as it were?

D. CHANG (though translator): Because I didn't have much money, I bought a small shop that fit my budget. The previous six owners had closed their business in three years. The store had no people traffic and, because of that, I was able to focus on figuring out how to provide a better service to each and every one of the customers that did come through. So I became like a private buyer and I learned and provided what they wanted immediately. Like their desired price.

STOUT: Who were your first customers at your first store, Fashion 21, in LA's Highland Park?

D. CHANG (though translator): Highland Park was a low-income area. People didn't have much money, so, even though customers wanted to go shopping, they couldn't. So, in the process of adjusting to price- sensitive customers, I think it became my motto to always have affordable pricing.

STOUT: When did you realize that that shop was a hit? That you were going to make a lot of money in this business?

D. CHANG (though translator): In the beginning of our first year, the shop had sold only $100 worth of products per day. Predicted to make $30,000 a year. But, by the end of the year, we had total sales worth $700,000. So that's when I realized, if I kept going like this, I would have a good business.

STOUT: Now, I read that you still have the Highland Park store. The carpets are still the same. Do you still have your very first store, the Fashion 21 store, because you're a sentimental person?

D. CHANG (though translator): I still feel a close bond to that store. First of all, it was actually my own building. Second, it's the place where I had my first success. And that's why I want to keep it.

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D. CHANG: This is first store I open in 1984. When we started, the business name was "Fashion 21". And change it to "Forever 21" later. But, for this store, the name is still "Fashion 21" to keep the original memory. This is where Forever 21 started.

Originally, it was half-size, I think less than half-size. Yes. Cashier was here. Dressing room right there. It's that much. We don't have a drawer (ph), we have open window. I display, I was merchandiser, and I was cashier and janitor and I did everything. No one knows, but we do our best and we focus on customers. So, I believe we keep going very well.

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STOUT: Now, you eventually changed your name from "Fashion 21" to "Forever 21" what's the thinking behind your brand?

D. CHANG (though translator): Our target customers are people in their 20s. Old people wanted to be 21 again, and young people wanted to be 21 forever.

STOUT: Do you have any rules that apply to your designs? For example, they have to be under a certain price point or meet a certain level of quality?

D. CHANG (though translator): What we want to provide is the best quality with the best price to customers.

STOUT: And you have staying power. You've been in the business of Fast Fashion for over three decades. How did you do it?

D. CHANG (though translator): You could look at it as a secret, but in fact, it's quite ordinary. Because the garment business was very tough and difficult, there weren't many people who carried on with the business. However, the one thing that kept me going in the industry was the turning point when I met God. Many people look for an easy life after success. But, what I wanted, was a life that helped the lives of others. And that pushed me to work harder.

After going on numerous mission trips, I realized how happy I was to be able to help others. So, my logic was that. I would be able to help more people if I worked harder. Maybe that's why I am where I am. Money was not my objective and I just kept going forward. And, without my knowing, the company has grown this big. All in all, it's something to be grateful for.

(BEGIN VIDEO CLIP)

STOUT(voiceover): Coming up, we find out if you really can be 21 forever.

STOUT: And you are not allowed in here.

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(COMMERCIAL BREAK)

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STOUT: Are we on? Ready to go?

OK, this is your Hong Kong store. It opened earlier this year. It is massive. Six floors.

D. CHANG: Yes.

STOUT: Can you give me the tour?

How long does it take to go from the sketchpad to the store in Hong Kong? How long does that take?

D. CHANG: Probably, I don't know, actually, probably three months.

STOUT: Three months?

D. CHANG: Yes.

STOUT: And then how long would something that's a really trendy, selling item be in your store?

D. CHANG: Some times, we going to do three weeks.

STOUT: Three weeks?

D. CHANG: Believe it or not.

STOUT: So, it just has a shelf life of three weeks and then it's gone?

D. CHANG: Right.

STOUT: Tell me just how much money you're making, Forever 21?

D. CHANG: This year, we are probably close to $4 billion.

STOUT: Oh. $4 billon revenue?

D. CHANG: Right.

STOUT: That's incredible.

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STOUT: In the business of Fast Fashion, there are a lot of big names out there. There's Zara, there's H&M, and there's Forever 21. And many call it the fastest in the Fast Fashion business. So, how are you able to create such fast turnover?

D. CHANG (though translator): I think our company, being a private company, has worked to our advantage. Decisions can be made very quickly. If need be, a decision can be made today. In an English term, our company is "flexible". Because we are flexible, we are not one-sided. Take the size of our stores, for example. In Japan, we have recently opened a shop that is 2,300 square feet. However, we also have a shop that is 150,000 square feet. Generally, people in the retail business don't have that kind of flexibility.

If there's another side to our success, it would be that we're not afraid of taking risks. For example, even though the economy in Europe is declining, we were still able to expand more by opening a shop in Manchester just last week and expanded our store in Oxford Street.

STOUT: You're fast, but you also keep it cheap and you keep it chic. So, how do you strike that balance?

D. CHANG (though translator): I think all three are important. Price is important, but fashion is also important. Balance in all three is quite difficult. But even this process is a joy to me.

STOUT: Now, success doesn't come easy. And your company has been accused of stealing designs from other labels. But, for the record, you have never been found liable of copyright infringement, right?

D. CHANG (though translator): Yes. We've never been found liable for copyright infringement. But I will tell you how difficult this work is. There is no way of knowing which designs have been registered. We design our own clothes and start selling them. And then, one day, someone calls it a copyright infringement. But we've designed the clothes ourselves. I think it's a problem that we have no way of finding out which designs have been registered.

We don't do it intentionally. We design the clothes on our own, and others on their own. But, because they register it first, they voice their complaints. But, like I said, you can't know what's registered and what's not. If there's a way to find out, why would we do something that would cause such trouble?

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TEXT: Forever 21 has been the target of more than 50 copyright infringement lawsuits.

To date the company has not been found liable.

The label has settled all but one of its cases out of court.

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STOUT: But you've had some pretty high profile designers come after you with lawsuits. I mean, Diane von Furstenberg, Gwen Stefani, Anna Sui. How did that make you feel?

D. CHANG (though translator): I first feel apologetic. There are clothes that we design and there are also clothes that certain manufacturers provide. Because we do not know whether any of them have been copied, we keep asking them, even on contracts. But there have been cases where we find out later that the designs have been copied regardless of our effort. So I send out my apology to those companies who have experienced any negative consequences.

STOUT: And your wife works as a buyer, so she's looking at all the products very carefully, right?

D. CHANG (though translator): Yes. She's looking at the items carefully. But because there's no way of knowing which is copyrighted, that is the problem. I feel like there should be a way to find out.

STOUT: The Company has also been under fire for working conditions. In 2001, there was a store boycott by workers. There was a class action lawsuit that was launched earlier this year. You have to manage some 40,000 employees worldwide. Is it a challenge for you to look after their working conditions?

D. CHANG (though translator): Regarding that problem, those are actually not my employees. Those are people who work at a company that sells products to us. With companies that we just buy and trade with, we try to check up on their working conditions and try to prevent any problems. That incident happened almost 10 years ago. And, even though it was not our fault, we have tried to fix it. And now we don't have any problems.

(BEGIN VIDEO CLIP)

STOUT: Can you find something for me - you think that would work for me? I'll try it on. Anything in your store, I'll try it on.

Oh, this is really cute.

D. CHANG: Yes.

STOUT: Here's the blouse. I'd have to get the matching glasses and then maybe a funky skirt.

D. CHANG: This with that.

STOUT: OK, now we need to get some sunglasses. Because this has sunglasses on it. I want to get some sunglasses. We're going to have to find it in the store. Come on, let's go find it.

D. CHANG: OK.

STOUT: Yes. That's what I'm talking about. OK. Should I do this? Matchy-matchy or kind of clash a little bit?

D. CHANG: Yes. I think this one.

STOUT: The pink? OK. We're going to do the pink. And lastly, a pair of shoes. Now I have really - oh, hot pink, hot pink.

D. CHANG: This one? Yes.

STOUT: Oh, just my size. And I have big feet.

D. CHANG: OK.

STOUT: All right. Should I try?

D. CHANG: Yes, sure.

STOUT: OK, let's go to the fitting room.

OK. Let's see how I'm going to work it. And you are not allowed in here. OK.

And the big reveal. Oh my goodness, I have to be careful in these shoes.

Do Won -

D. CHANG: Wow.

STOUT: This is the outfit you chose for me.

D. CHANG: You look 21, right?

STOUT: I'm going to stand behind this row of clothes, because this is the shortest skirt I've ever worn in my life.

D. CHANG: Oh really?

STOUT: Yes. I don't know about the skirt. I do love the pattern of the shirt. The shoes are amazing. What do you think?

D. CHANG: It's nice.

(LAUGHTER)

STOUT: You're too kind.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

STOUT (voiceover): Coming up, Linda Chang gives us a glimpse into the family behind the multi-billion dollar business.

L. CHANG: Obviously, we have our quarrels here and there and be butt heads. But overall, it's great.

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(COMMERCIAL BREAK)

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L. CHANG: Hi, my name is Linda Chang. I'm Do Won Chang's daughter, and I'm the Head of Marketing for Forever 21.

This is our Cerritos store in California. And it's over 85,000 square feet, making it one of our largest stores in our portfolio.

We have men's in this store as well as "Love 21" which is our contemporary. We have kids. Not a lot of people know, but we have a girls' line for ages six to 14. And then we also have a plus-size line.

Forever 21 differentiates itself from other Fast Fashion retailers because we offer not only a wide assortment of the most current trends, but we don't carry too heavy a stock in any style. As well as we have new arrivals coming in every single day.

It's really hard to say where we're going to be in 10 years, because I think if we look back 10 years ago, I don't think we would have thought this is where we would be today. I think it's amazing that my parents were able to, with pure drive, ambition, hard work, and faith - fulfill the American dream, really. Their story is still amazing and a little bit unbelievable, sometimes, to me and my sister, but we're so proud of what they've accomplished.

Obviously, we have our quarrels here and there and we butt heads. But overall, it's great.

(END VIDEO CLIP)

STOUT: I want to ask you about your family. As you said earlier, you know, just what fuels you is your religion and also your family. You started Forever 21 with your wife, Jin Sook, and also your two daughters work for the company. What do they do?

D. CHANG (though translator): Our elder daughter is in Marketing and our younger daughter is taking care of the visual and buying side. Although they both studied business at an Ivy League school, we have educated them in the garment business since a young age.

STOUT: So, it was easy to get them to work for the family business?

D. CHANG (though translator): If you look at Jewish people, there are many cases where families work in a company together. And boost its growth. I would like to follow that example and become a better company.

STOUT: You are a deeply religious person. Is it true that you wake up every morning at 5 am to pray?

D. CHANG (though translator): Yes. When I was in LA, I used to always go to church at 5 am to pray and start my day.

STOUT: What do you pray for and what do you pray about?

D. CHANG (though translator): Many people would expect I would be praying for something big. But that's not the case. I pray for my personal life, my business. And I just talk to God like a friend.

STOUT: Now, on every Forever 21 shopping bag, there is a citation for a bible verse - John 3:16. What was the thinking behind that? Is it a display of your devotion? Or are you trying to make a connection with your customers?

D. CHANG (though translator): I want to ask you whether you have read that verse? It shows us how much God loves us. The love he gave us, by giving us his only son, Jesus, was so unbelievable to me. I hoped others would learn of God's love. So that's why I put it there.

STOUT: It's one of the most famous verses in the bible. How have the customers reacted to seeing that printed on their shopping bags? Have you heard any reactions?

D. CHANG (though translator): There were various reactions, due to religious diversity. There were some who liked it, and those with different religions didn't like it much. I don't think there is much to say about it, as I just wanted to portray my personal religious belief.

STOUT: Do you ever feel that your religious beliefs don't quite mesh with the ethics of the business of Fast Fashion?

D. CHANG (though translator): I don't think it has anything to do with religion. Everyone, including women, want to be beautiful. And they have the right to decorate their God-given bodies beautifully. I'm actually happy and grateful to be contributing to that cause.

STOUT: You've been able to spin your incredible success into charity work. Can you tell me about your charity work and your foundation?

D. CHANG (though translator): I like to help poor countries. Right now, North Korea seems to be suffering a lot. So I'm putting my focus on that. I also helped out when Japan was hit with earthquakes. As well as the Philippines and Pakistan with floods.

STOUT: How do you help North Korea?

D. CHANG (though translator): I personally bring in corn and hand it out to villagers.

STOUT: As a Korean-American businessman who made it big in Los Angeles, why do you feel a duty to give to the people of North Korea?

D. CHANG (though translator): Because they are suffering the most at the moment. Even if it wasn't North Korea and it was some other country, I'd still help out. Sending in corn is very important. But I think going there and visiting in person, spending time with them, is even more important.

STOUT: Now, Do Won, you're a billionaire. You don't need to work. Your wife doesn't need to work. Your two daughters, they don't need to work. So, why do you still care? Why are all of you still working in the family business?

D. CHANG (though translator): I have never once thought of myself as a billionaire. Even today, I got here on a bus. I think it's better for me to challenge myself and work harder instead of going for a comfortable life.

STOUT: But do you ever think about buying a private island, retiring, getting away from it all? You can do that.

D. CHANG (though translator): I don't think of myself as a billionaire. Once I chose a comfortable life, I may look for more comfortable things. I think a happy life is better than a comfortable life. As for money, as long as I have enough to spend, that's OK. I really don't feel a need to look for something more comfortable.

STOUT: Well, Do Won Chang, it's incredible. You're the embodiment of the American dream. Thank you for joining us here, on "Talk Asia".

D. CHANG: Thank you.

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