Benetton Marketing Plan: Strategy, SWOT, and Global Mix

Introduction and Company Overview

Benetton is a textile and apparel manufacturer established in Italy in 1965. In less than 50 years, the group evolved into a globally recognized fashion brand, famous above all for its unconventional and controversial advertising focused on raising awareness of social issues characterizing modern society, such as racism, homosexuality, and anorexia.

The group manages more than 300 shops in 120 countries, employing almost 9,000 employees as of year-end 2007 (Annual Report, 2008). Benetton manages four important brands: United Colors of Benetton for casual fashion; Sisley and Playlife for glamour fashion; and Killer Loop streetwear for college style. Yearly production extends to 160 million garments distributed through its own shops and those of independent partners, which together form a network of over 5,500 contemporary stores generating revenues in excess of €2 billion. The group registered an average 7% year-on-year growth over the preceding three years, reaching a worldwide record high of 9% in 2007. European operations grew above the three-year average at 8% over the same period.

Europe is by far the company's largest market. The textile and apparel industry is regulated at the European Union level across most of these countries. Following the clothing and textile trade liberalization in 2005, European manufacturers' exposure to low-cost Asian imports increased cost and price pressure exponentially. The need for cost efficiency forced both manufacturers and retailers to rethink their operational activities. An accurate analysis of the legal framework of the EU economic bloc suggested that none of the manufacturing member countries provided ad hoc laws governing the terms and conditions of manufacturer–retailer relationships in the textile and apparel industry (Bocconi et al., 2007). The consolidation of China's position as the world's leading clothing and textile manufacturer increased pressure on U.S. markets as well, forcing many manufacturing firms to either close or relocate to low-cost Asian production locations.

PEST Analysis

Unlike Asian markets, the European and American markets are strictly regulated in terms of labor law. Retailers and manufacturers in these regions are therefore likely to incur substantially higher costs related to overtime and workload.

Clothing prices have shown stability across Europe despite the steady increase in overall price levels in the region. Consumption patterns began to shift as families allocated a lower proportion of income to clothing, driven by the growing popularity of outlet stores and seasonal sales. During the same period, hypermarkets such as Tesco and specialty chains such as Zara and H&M grew at the expense of department stores and small traditional shops, and competition among them intensified.

As cost efficiency became a major concern in the clothing and textile industry, two separate trends emerged in manufacturer–retailer relationships. The first reflects increased retailer involvement in upstream activities along the value chain, including textile procurement, design, and logistics. The second comes as a reaction to the first, reflecting manufacturers' increased interest in offering a wider range of services to downstream customers, extending as far as branding and retailing.

In recent years, the U.S. clothing market showed a relative decline in prices. Clothing prices fell 9.6% across the country between 1993 and 2003, while the Consumer Price Index increased 27.3% over the same period (U.S. Bureau of Labor Statistics, accessed January 2009).

Europe and the U.S. are modern societies in which the role of women in the workplace increased substantially over the last 30 years. Women work alongside men in almost all professions, and their public image has adapted accordingly. Women are now more concerned with their professional image than with their domestic one. Contemporary women's clothing reflects the working-woman lifestyle — incorporating casual and sports elements to suit a dynamic attitude alongside elegant and chic elements that reflect women's emancipation.

Rising education levels in the U.S. and Europe, combined with stricter labor legislation protecting workers' rights, prompted many manufacturers with factories in these regions to relocate production to locations with lower costs and more flexible labor market conditions. For the same reasons, the dominant professional trend in these regions has gradually migrated toward highly skilled service-sector occupations rather than manufacturing.

The textile and clothing industries evolved considerably over the last decade in terms of technology. Intensified global competition forced both manufacturers and retailers to pursue efficiency-generating innovations. The application of modern management techniques such as lean manufacturing and lean retailing became essential for these companies.

Lean manufacturing, or lean production, is a manufacturing philosophy that aims to optimize resource use so that products are made with minimum waste. Lean retailing is a logistics tool that enables retailers to track products via barcodes and generate reports used to manage stock, place orders in real time, and distribute products from storage to individual store locations.

Increased internet penetration and cable television created greater opportunities for online purchasing and teleshopping. Although European consumers still prefer to buy clothes from a physical location, American consumers increasingly favor online shopping. The costs associated with an online shopping infrastructure are significantly lower than those of a traditional retail setup, and many retailers are therefore working to establish or improve their online presence.

The following demographic trends were observed in recent years: (a) mature markets are characterized by ageing populations with higher income levels; (b) single-person households have increased at the expense of family households in mature markets; (c) the standard of living in developing countries has risen; (d) concern for ethical consumption in urban areas has grown; and (e) awareness of environmental, social, and health issues has increased, driven largely by media coverage.

Benetton covers a wide range of age segments, from children to adults. The Italian manufacturer focuses on design, layout, and color rather than product quality alone. Its collections are addressed to a diverse public: simple consumers — children and teenagers — through the United Colors of Benetton range; more sophisticated consumers, mainly adults, through the Sisley range; and street-oriented, unconventional consumers, mostly young people, through the Killer Loop range.

Consumer Profile and Market Segmentation

Consumers buy clothes to fulfill a basic need — that of getting dressed — and a social one: building a certain image of themselves within society.

Benetton manufactures and retails clothes, accessories, shoes, and fragrances to fashion-oriented customers across different age segments — children, women, and men — mostly under the age of 40.

Buying clothes is a basic human need; Benetton's potential market is therefore quite large. However, the company's products are addressed to specific market segments representing between 30% and 50% of the general population. The European Union alone is home to almost 500 million people, and the Americas add roughly another 300 million. Assuming only 30% of this combined population constitutes Benetton's target market, and that only 10% of that segment would consider buying from this Italian designer rather than from a competitor, the company could still count on roughly 25 million individuals as potential customers.

Benetton is looking to expand or strengthen its operations in both emerging and mature markets. Expenses related to transport and distribution, on one hand, and advertising and promotions, on the other, represent a significant portion of general operating expenses — the former accounted for 6.6% of gross operating profit in 2007 and the latter for 11.7% of operational expenses in the same year.

For 2008, the company planned to open 50 additional stores dedicated to young children and new mothers, and 35 stores in Europe dedicated to beachwear, underwear, and nightwear under the Gloss concept. Asian markets are also considered strategic, with the company opening its 100th store in Russia and managing 150 stores in India in the same year.