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Family-Run Italian Fashion Company Is Taking Aim at the U.S. Market

May 07, 1985|From Reuters

PONZANO, Italy — Based in a Venetian-style mansion in northern Italy, a family-run company called Benetton has in 20 years blossomed into Italy's biggest producer of fashion clothing and is now gearing up for an assault on the U.S. market.

The company already has 3,000 shops worldwide, with more than 200 in the United States. In New York, for instance, it sometimes seems that a new Benetton store is opening in one neighborhood or another every day.

Bright colors, design flair and high technology are at the heart of a formula that has seen Benetton, formed in the mid-1960s, grow into a worldwide operation producing 35 million garments a year, more than half of them for export.

After firmly establishing itself in Europe as a leading producer of knitted wear and coordinated fashion clothing, Benetton has turned to the United States, Middle East, Eastern Europe and Asia for new markets.

The company, which bears the surname of the three brothers and a sister who founded and own it--Luciano, Carlo, Angelo and Giuliana Benetton--has cultivated a classless, youthful appeal with an emphasis on simple, elegant designs.

Those designs can be called up at the touch of a button from computer memory to program production at Benetton factories and enable them to meet orders from any one of 3,000 shops worldwide that sell the company's clothes.

Sales have risen nearly 10-fold in six years. Last year they soared to $330 million, and company officials expect to announce soon a big jump in profits from the $7 million recorded in 1983.

"Our clothes are not targeted at a particular income group," says Davide Paolini, Benetton's official spokesman. "And even though we recently opened a factory in Scotland to make quality cashmere sweaters, we want to keep our image popular."

Benetton shops, also found under various guises such as 012 and Sisley, can be seen on New York's fashionable Fifth Avenue, the swanky Faubourg Saint Honore in Paris and London's Bond Street. However, they are also familiar to the less affluent on streets throughout Europe.

The Benettons plot company strategy from the top floor of a marble-floored and frescoed 18th Century mansion overlooking one of their factories in Ponzano, a village some 30 miles north of Venice.

Gearing Up for U.S.

The company is gearing up for a big move on the tough U.S. market though company officials are reluctant to forecast the exact rate of planned growth in the next few years.

"We have received 800 requests for franchises to open Benetton shops in the U.S. between now and 1987," Paolini said.

Benetton opened 165 shops last year in the United States, lifting its total to more than 200, with a presence in every state.

One of the secrets of Benetton's success is the unusual arrangement it has with holders of its franchise.

There are no royalty payments under the Benetton system, but franchise holders put up the money for the shops--all designed by in-house architect Tobia Scarpa--and sell only Benetton clothes at prices set by the company.

"An advantage of this is that we never have to carry unsold stocks because all our clothes are made to order for Benetton shop-owners," says Leopoldo Scorzato, a senior manager.

For the system to work, Benetton must be able to meet orders very quickly so that shopowners can respond to sudden changes in taste or surges in demand for particular garments.

Computerized inventory links between company headquarters in Ponzano and sales offices in Italy and abroad provide the company with up-to-the-minute reports on changes in what customers want.

Production is highly automated and Benetton has invested heavily in computer technology to cut costs and increase its range of designs it can offer.

The average design has a life of around three months before it is committed to the company's computer archive, but Rossetton says stylists can give a design a new lease of life simply by calling it up on a terminal and making adjustments.

Garments are cut in Benetton factories, which employ 1,650 people, while assembly is subcontracted to 200 small firms scattered around northern Italy.

Benetton--which sponsors a Formula One motor-racing team--is investing some $25 million in an ambitious, futuristic, computer-operated warehouse.

Company analysts say Benetton has little to fear from cheap Asian producers in the foreseeable future as long as it can keep its costs low and stay abreast of popular taste in fashion.

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