By Maëlle Alquezar

United Colors of BenettonThe famous fashion 1980s symbol is falling behind its competitors. In the past, the Italian group was known for its famous marketing campaigns encouraging diversity. Nowadays, the company lags behind its rivals and is suffering from a serious crisis.

The company is going to fire 450 employees, including 228 in the Castrette and Ponzano head offices in order to boost the company’s revenue. Indeed, in 10 years the company’s turnover has only grown by 2% (2 billion euros) despite opening thousands shops around the world. Let’s find out why Benetton is being overtaken by chains such as H&M and Zara which have experienced a growth between 5 and 10% each year.

Benetton has failed to keep up with its customers and chain rivals. Several factors have contributed to the decline of the company such as prices which are less competitive than other chains. Moreover, while its competitors have managed to quickly adapt their collections by launching copies of on trend clothes from fashion runways within two weeks, Benetton didn’t follow the mass fashion wave and kept creating its own designs, some of which were considered as rather dated.

United Colors of BenettonAnother factor contributes to the decrease in popularity of the Italian group: the company owns only 25% of the whole shops worldwide while companies such as Zara possess all their stores. As a result, the company cannot manage its shops properly and is not aware of what the clients are expecting. It’s then very difficult to track demand and adapt its products to the customer’s expectations.

Advertising is also one of the company’s recent weaknesses. In the past, Benetton’s ads were very famous and popular with clients. So the company keeps trying to create a new buzz, thinking of it as a winning formula. However, the company has gone too far. Take the example of the United States, when the company launched its campaign publishing pictures of American prisoners sentenced to death, it provoked outrage. As a consequence, American sales started to decrease (dropping to 4 percent of total revenues at the end of 2010 from about 12 percent in 2000) and the multinational store chain Sears cancelled their contract.

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