Well Played: Forever21 Seizes the Day as Saks in Charleston Closes

Last Updated May 18, 2010 3:14 PM EDT

Saks Fifth Avenue Majestic Square One door closes and another door opens, literally, on the Charleston, South Carolina retail scene. Soon after Saks (SKS) vacates its store on swanky King Street the luxury goods will be replaced by acres of fast fashion courtesy of Forever21. Though hyperlocal, the move holds two distinct lessons in global retail management in the recession era.

Charleston, like many cities dependent on tourist dollars as well as local industry, was hard hit by the economic downturn. Unemployment went from a low 3.6 percent just before the crash in 2007 and crested just north of 10 percent earlier this year. With so many out of work and tourism in the toilet, chi-chi downtown shops were shuttering unable to make the rent without well-heeled customers shelling out big bucks for luxury "impulse" buys.

So while the Charleston Saks, a 33,000 square foot anchor in a prized corner development dubbed Majestic Square, was once heavily trafficked, Saks execs were keeping close tabs on the performance of what they considered to be a "small" store. And it didn't measure up.

Combined with Saks overall fiscal strategy of keeping inventory low, cutting promotions, and appealing to designers to lower prices, Saks execs moved to cut the King Street store along with two Portland locations and another in San Diego. The results are already positive. First quarter revenue rose 7 percent and comps climbed 6 percent.

What was a loser for Saks is poised to become a major winner for Forever 21. The LA-based discount fashion chain's been on an expansion run since before the recession hit -- and shows no signs of slowing. In Charleston, swooping in for the (retail) kill before the year's out means Forever 21 will be ready to sell five of its brands, including Twelve by Twelve (its "couture-like" collection), 21Men, and HTG81 for kids, all in time for the holidays.

And in time for both residents and tourists alike to open their wallets long enough to let the moths fly out. Indeed, with recent announcements of a new Boeing manufacturing facility (slated to create 3,800 jobs) and a new Gildan Activewear distribution center (250 jobs) as well as the promise that Southwest Airlines (LUV) would be offering its discount flights into Charleston International Airport, Charleston's looking like a mighty fine place to do business in the coming months. In fact, the only place Forever 21 might stumble is failing to offer its plus-size line of women's apparel. But maybe the marketing-savvy Chang sisters (daughters of owners Don and Jin Sook Chang) have that up their quick-chic sleeves too.

Image via Beach Company