Benetton Group SpA, the Italy-based global clothing retailer, seems to have fallen on hard times. Until recently, financial results were excellent: Worldwide sales of Benetton’s brightly colored Knitware and contemporary clothing doubled between 1993 and 1998 to $ 1.63 billion. In 1993 alone, sales were up about 10 percent, and net income increased by 13 percent. The strong showing in 1993 was due in part to the devaluation of the Italian lire (currency), which enabled Benetton to cut prices for its clothing around the world.
By contrast, 1994 results were discouraging. Sales were flat at $ 1.69 billion, operating profits fell 5 percent to $ 245 million, and margins narrowed to 13.9 percent down from 14.7 percent during the three-year period 1991-93. The sales slump was surprising in view of the fact that Benetton had opened stores in China, Eastern Europe, and India, and extended the brand into new categories such as footwear and cosmetics. Some industry observers believed that Benetton’s wounds were self-inflicted. According to this view, 1994’s results represented the backlash from Benetton’s highly controversial global advertising campaigns, now several years old, keyed to the theme “The United Colors of Benetton”.
Various executions of the ads, in magazines and on posters and billboards, featured provocative, even shocking photos designed to focus public attention on social and political issues such as the environment, terrorism, racial issues, and sexually transmitted diseases. The creative concept of the ads reflected the views of Oliviero Toscani, creative director and chief photographer for Benetton. “I have found out that advertising is the richest and most powerful medium existing today. Therefore, I feel responsible to do more than say, ‘our sweater is pretty,’’ he told The New York Times. Vittorio Rava, worldwide advertising manager said, “We believe our