As you sow, so shall you reap

It’s easy, at first sight, to dismiss the retailer rebellion against Benetton as “a quarrel in a far-away country between people of whom we know nothing”. Actually, it isn’t that far away and, though confined to one country at the moment – Germany – it could easily spread to a number of others. In fact, disaffected Benetton retailers in nearly all the company’s main European markets – France, Italy, Holland and Spain – are following the German case with interest. If there is a domino effect, it is hard to imagine British retailers will remain unaffected.

The essence of the quarrel is as follows. Certain German franchised retailers are withholding money from the parent firm because of mounting losses – in some cases more than 30 per cent of turnover – which they directly blame on Benetton’s “misguided” and now notorious advertising campaign. Benetton utterly refutes the accusation, claiming the losses are down to poor local management. And it has gone to law to recover the outstanding money.

Worth noting is the fact that Germany is Benetton’s most important market outside Italy. Further, the flamboyant solicitor representing the rebels claims to be advising 50 retailers with 150 stores. So this is no small beer. Moreover, whatever Benetton says, the advertising strategy is indeed implicated in Benetton’s plight, though not perhaps the only cause of it.

The clothes retailing side of Benetton certainly has its problems. Analysts believe the company’s traditional activities are close to saturation point in main European markets. Recent diversification into food retailing is seen as Benetton’s tacit acknowledgement of this. Note also the recent resignation of Benetton’s long-serving managing director, Aldo Palmeri, who distanced his departure from acquisitions policy but made enigmatic reference to “new demands” put upon him by the Benetton family.

In the ordinary course of events, Benetton’s trading difficulties would probably raise no more than an eyebrow. After all, most of continental Europe is only now emerging from recession. But Benetton is no ordinary clothes retailer. It has engineered itself into a position of uncommon awareness through an emotionally manipulative advertising campaign. And now it is reaping the whirlwind in minute media scrutiny of its activities. One can understand the impotent frustration of the company’s PR machine. But to blame the problem on media sensationalism is, to say the least, a little ironic.

Benetton, page 9; cover story page 21

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