Watch CBSN Live

What Benetton Can Learn from Fast-Fashion Chain Forever 21

United Colors of Benetton paradeWe joke about how there seems to be a Starbucks (SBUX) on every corner now, but back in the late 80s the shop on every corner was Benetton. It was a gilded age for the Benetton Group, the Italian apparel manufacturer and creator of those colorful, highly-coveted rugby shirts of yore. At the height of its U.S. power, Benetton had 600 stores. Now that the count is down to 100 and the U.S. market represents less than 3 percent of Benetton's global sales, it's curious that VP of retail Alessandro Benetton alluded to expansion during a party for its next big ad campaign, "It's My Time." If it is indeed contemplating such a move, perhaps Benetton brass can take a page from family-owned Forever 21 to help it succeed.

The 45 year old Group is currently controlled by Edizione Srl (a holding company wholly owned by the Benetton family), which owns a 67 percent stake and has a market presence in 120 countries. Despite Benetton's concerted efforts over the past ten years to tighten management over its supply chain and to make the switch from selling its apparel in other retail outlets to stores it operates, net profit for 2009 fell 21 percent to €122 million ($168 million), as sales fell 3.7 percent to €2.05 billion.

Part of the problem is that Benetton lies in that grey area between luxury brands and fast fashion. The once-desirable wovens are too pricey for devotees of discount retailers such as Forever 21, and United Colors of Benetton doesn't conjure the kind of exclusive cachet required by upscale customers (neither does its sibling, the "glamour oriented" Sisley brand).

Changing the direction of the company -- and its possible U.S. push -- is now in the hands of newly-appointed leaders Franco Furnò (formerly of Gucci Group) and Biagio Chiarolanza (a Benetton veteran). Furnò certainly knows luxury, but he would do well to study up on some of the methodology behind Forever 21's lightning quick conversion from runway to reality. (Hint: it's a combination of private label goods and those from other suppliers).

Benetton's doing one thing right â€"- it's reinvented 80s clothing for the millennium. But the American consumer had been spoon fed low-priced apparel during this recession (who can resist the season's must-have cargo capris for less than $25 at Forever 21?). In order to remain competitive and appeal to the U.S. "recessionista," Benetton must hone its sourcing and supply chain strategies further than it has in order to accommodate customers' recently adjusted mindset.

Finally, let's not forget about the plusses of the plus-size market in the U.S. The average woman is a size 12 and as one blogger noted, the average Benetton clothing is not. Though famous for showcasing the global rainbow of ethnicities in its ads, Benetton needs to take a hard look at Forever 21's success with its Faith 21 line for the fashionista with ample curves and think about growing its range of sizes.

Image via United Colors of Benetton's Facebook page