Marketing and Operational Strategies of

BENETTON

FLOW OF THE PRESENTATION

Companys Inception

The Problem

The Options

Knitwear Industry

Marketing Aspects (Products, Price, Place and Promotion)

Pros and Cons of Alternatives

Garment Manufacturing Process

Operational Aspects (Manufacturing, Supply Chain & Logistics)

Evaluation and Suggestions

THE UNITED JOURNEY OF THE BENETTONS

The Four Pillars of Benetton Empire

Carlo Gilberto Giuliana Luciano

Giulianas Designs Lucianos Business Acumen First shop in Belluno in 1968 By 1975, over 200 shops in Italy Current Scenario : Turnover in 2008 is Euro 11.8 Billion

THE NOT SO UNITED INDUSTRY OF KNITWEAR

UNDERWEAR
Needs high productivity High investment Huge manufacturing set up with hundreds of employees Vertical Integration Developed in US Used synthetic yarns

HOSIERY
Highly Capital Intensive Almost all processes can be mechanized with minimum human intervention Huge manufacturing set up Developed in US Used Synthetic Fibres

OVERWEAR
More Steps More Labour Less Expensive Equipment Lower Levels of Technology Italy became the largest producer in Europe Used natural wool and cotton

1980s onwards More sophisticated Manufacturing set ups

Subcontractors (1970s) with greater production capacities

Groupers (1950s) or Intermediaries

THE BASIC PROCESSES OF GARMENT MANUFACTURING

Purchase and warehousing of RM

Knitting

Dyeing

Assembly

Finishing

TAKING FASHION TO THE INDUSTRY LEVEL

While most of the other Italian fashion was still on artisan level, Benetton took fashion to an industrial level How ?
Mechanically making the hard & rough wool soft and smooth, even before machinery for this was developed.

Manufacturing womens stockings seamlessly using the same machines which made seamed stockings.
Dyeing critical for quality, but a bottleneck due to time taken. Benetton started dyeing assembled garments, instead of dyeing the yarn. Using re-meshing process for assembling the garment parts with invisible seams.

THE COMPLEX MANUFACTURING SET UP OF BENETTON Internally and externally decentralized operations 9 factories of its own (7 in Italy, 1 in France and 1 in Scotland), each performing one, more or all operations. Over 220 other production units (groupers and subcontractors) Jeans manufacturing completely outside of Benettons factory Purchasing, Technical Research and Planning at the headquarters Ponzano Veneto, Italy. Wool bought from Italy, pre-dyed cloth for jeans imported from US.

THE CO-ORDINATED SUPPLY CHAIN OF BENETTON

Feb March

Production Planning of woven cotton and woolen items starts 8 10 months before the scheduled launch (Spring-Summer or Autumn-Winter Collections) Presentations to Agents Agents to Customers and Orders Received Trial Productions made, rough production plans made, negotiations and purchase orders placed for Raw material and Accessories Orders produced and delivered to stores

May July

July End

November - January

October

Payment to Sub contractors, collections from retail franchisees

THE LOGIC OF LOGISTICS AT BENETTON

Extreme care in planning the logistics

Stores planned with limited storage space merchandize placed directly to the shelf
No manufacturing without order in hand Order Collection by agents and relaying the same to Benetton for production Merchandize pre-marked in currency of destination country Sophisticated information system New warehouse of 200,000 sq foot at Castrette 10 robot stacker cranes handling 250,000 boxes of merchandize, 15,000 boxes handled daily

All the boxes labeled at the factory. Can be read by optical scanners that routed the
merchandize through warehouse.

New warehouse saved 20 % of the transport costs.

THE UNITED WAYS OF MARKETING AT BENETTON

PRODUCT
Products branded under different labels 012 Benetton for children Jeans West for youth My Market higher fashion content for men & women Sisley for sophisticated men For each trade name, appropriate style of furniture, equipments, color of lightings, type of music, dress style of sales people etc

PRICE
Median Retail Price $ 20, ranging from under $ 10 to $ 120 Pricing was lower compared to the

competitors for the quality it gave

Very good value for money High fashion content Array of bright colours Excellent price-quality combination

THE UNITED WAYS OF MARKETING AT BENETTON Benettons Marketing

PLACE (DISTRIBUTION)
Agents assigned huge territories through verbal agreements across Europe Agents to recruit , help and train store owners, assemble the orders, stock recording etc for a commission and profit from the stores they help open. Store owners carried Benettons merchandize only maintain min sales level and pay to Benetton on time Stores always at prime location without compromise.

PROMOTION
Stores at Prime locations wit bright , inviting appearances, open shelves Advertisements in Television, Press, and even sponsored sports events such as Italian rugby team and handball team, also a race car in 1983 for F1 Maintained the youthful and sporty image, with lots of bright colors.

Spent a lot of money on magazine advertisements , aimed at young adult All stores to use Benettons fixtures and follow or child.
basic merchandizing concepts like open shelves.

THE PROBLEM
Increased competition from Italy and Europe Benettons product line had reached a saturation point

Benetton
Arrival and spread of bigger brands such as Kappa Sport and Stefanel Increased imports from far east and stagnant Italian economy

Alternatives

Penetrate further in to the European Market

Develop other markets such as USA and Japan

THE PROS AND THE CONS OF ENTERING USA

CONS PROS

IF THEY DO ENTER USA, THEN

Marketing Support

Huge promotional investments (min $ 2 Million in advertisement)

Advt Budgets allocation to different media options

Operational Support

New Plant with Dyeing Facilities and a Warehouse ? New Warehouse only to stock the merchandize coming from Italy ? Direct Distribution to US Retail Sites from Europe Air Shipments

THE SUGGESTION
Direct Distribution to US Sites from Europe + Alternative Products in Japan

THE UNITED WAYS OF SAYING THANK YOU

GRAZIE !! BUONA GIORNATA!!