Merchandising:

Retail Merchandising is the process of developing, securing, pricing, supporting and

communicating the retailer’s merchandise offering. It means offering the right product at
the right time at the right price with the right appeal.

Steps in the Retail Merchandising Process:

1. Develop the merchandise mix and establish the merchandise budget.

2. Build the logistic system for procuring the merchandise mix.
3. Price the merchandise offering.
4. Organize the customer support service and manage the personal selling effort.
5. Create the retailer’s advertising, sales incentive and publicity programs.

Merchandise Mix:
The breadth and depth of the products carried by retailers is called as merchandise mix.
This is also known as Product Assortment. It includes the competing brands within a
category.

Depth of Assortment: this is the variety in any one category of goods and/or services
with which a retailer is involved. It refers to the average number of SKUs (stock keeping
units) within each brand of the merchandise line. For eg, if a retailer decides to stock 10
design of shirts in 5 different sizes and 4 different colors, it makes for the depth of
assortment. A range of women’s wear , in another example can be broken down into the
following categories:

 Indian wear

 Western blouse

 Accessories

 T shirts

 Formal trousers

 Casual bottom wear

Indian wear can again be broken down into salwar kameez, mix and match suits, ethnic
blouses, and formal evening wear. The fabric color, size, quantity per size and the total
quantity would then comprise the depth of each style

Consistency: this is an important element of the assortment dimension of a retailer.

The 2 dimension of breadth and depth describe the size of the assortment. Consistency,
 in turn, can be defined as a degree to which different types of products that comprise
the merchandise assortment are related.

Merchandise hierarchy: this is an indicator of the manner in which product

classification is done at the level of the retailer. It is a logical classification based on the
way in which customers are likely to buy the products.

The first level of classification is the company or the retail store itself.

The next level of classification is the department followed by the various categories of
products that the retailer offers in each department.

Then comes in the sub-categories: the style, the price points and finally the SKU itself.

Merchandise Merchandise Merchandise Style/ price SKU

Company
Department point
category
classification subcategory
An assortment plan is a list of merchandise that indicates in general terms what the
retailer wants to carry in a particular merchandise category. For instance, an assortment
plan for girls’ jeans would include the average number and percentage of each
style/fabric/colour/size combination that the retailer would have in inventory.

Retail merchandising requires management of the merchandise mix including:

1. Planning Merchandise Variety

2. Controlling Merchandise Variety

3. Planning Merchandise Assortment/Support

4. Controlling Merchandise Assortment/Support

5. Merchandise Mix Strategies

Developing the merchandise mix allows the retailer to segment the market and appeal
to a select group of consumers.

The components of the merchandise mix:

 Merchandise Variety :(number of product lines)

 Merchandise Assortment: (number of product items)

  Merchandise Support:(number of product units)

ZARA: Introduction
Zara is a Spanish clothing and accessories retailer based in Arteixo, Galicia. It was
founded in 1975 by Amancio Ortega and Rosalía Mera. It is a flagship chain store of
the Inditex group.
It is claimed that Zara needs just two weeks to develop a new product and get it to
stores, compared to the six-month industry average. The company also launches
around 10,000 new designs each year. Zara has resisted the industry-wide trend
towards transferring fast fashion production to low-cost countries. Perhaps it’s most
unusual strategy was its policy of zero advertising; the company preferred to invest a
percentage of revenues in opening new stores instead. This has increased the idea of
Zara as a "fashion imitator" company. Its lack of advertisement is also in contrast to
direct competitors such as United Colors of Benetton.
Zara’s Business System
Zara is the largest and most internationalized of Inditex’s chains. Zara began to move
overseas in 1990. It also began to make major investments in manufacturing logistics
and IT, including establishment of a just-in-time manufacturing system, a 130,000-
square-meter warehouse close to corporate headquarters in Arteixo, outside La Coruña,
and an advanced telecommunications system to connect headquarters and supply,
production, and sales locations. The business system that had resulted was particularly
distinctive in that Zara manufactured its most fashion-sensitive products internally.
Zara’s designers continuously tracked customer preferences and placed orders with
internal and external suppliers. Production took place in small batches, with vertical
integration into the manufacture of the most time-sensitive items. Both internal and
external production flowed into Zara’s central distribution center. Products were shipped
directly from the central distribution center to well-located, attractive stores twice a
week, eliminating the need for warehouses and keeping inventories low. Vertical
integration helped reduce the “bullwhip effect”—the tendency for fluctuations in final
demand to get amplified as they were transmitted back up the supply chain
Even more importantly, Zara was able to originate a design and have finished goods in
stores within four to five weeks in the case of entirely new designs, and two weeks for
modifications (or restocking) of existing products. In contrast, the traditional industry
model might involve cycles of up to six months for design and three months for
manufacturing. The short cycle time reduced working capital intensity and facilitated
continuous manufacture of new merchandise, even during the biannual sales periods,
letting Zara commit to the bulk of its product line for a season much later than its key
competitors. Thus, Zara undertook 35% of product design and purchases of raw
material, 40%–50% of the purchases of finished products from external suppliers, and
85% of the in-house production after the season had started, compared with only 0%–
20% in the case of traditional retailers.

Design:
Each of Zara’s three product lines—for women, men, and children—had a creative team
consisting of designers, sourcing specialists, and product development personnel. The
creative teams simultaneously worked on products for the current season by creating
constant variation, expanding on successful product items and continuing in-season
development, and on the following season and year by selecting the fabrics and product
mix that would be the basis for an initial collection. Top management stressed that
instead of being run by maestros, the design organization was very flat and focused on
careful interpretation of catwalk trends suitable for the mass market. Zara created two
basic collections each year that were phased in through the fall/winter and
spring/summer seasons, starting in July and January, respectively. Zara’s designers
attended trade fairs and ready-to-wear fashion shows in Paris, New York, London, and
Milan, referred to catalogs of luxury brand collections, and worked with store managers
to begin to develop the initial sketches for a collection close to nine months before the
start of a season. Designers then selected fabrics and other complements.
Simultaneously, the relative price at which a product would be sold was determined,
guiding further development of samples. Samples were prepared and presented to the
sourcing and product development personnel, and the selection process began. As the
collection came together, the sourcing personnel identified production requirements,
decided whether an item would be insourced or outsourced, and set a timeline to
ensure that the initial collection arrived in stores at the start of the selling season.
The process of adapting to trends and differences across markets was more
evolutionary, ran through most of the selling season, and placed greater reliance on
high-frequency information.

Frequent conversations with store managers were as important in this regard as the
sales data captured by Zara’s IT system. Other sources of information included industry
publications, TV, Internet, and film content; trend spotters who focused on venues such
as university campuses and discotheques; and even Zara’s young, fashion-conscious
staff. Product development personnel played a key role in linking the designers and the
stores, and were often from the country in which the stores they dealt with were located.
On average, several dozen items were designed each day, but only slightly more than
one-third of them actually went into production. Time permitting, very limited volumes of
new items were prepared and presented in certain key stores and produced on a larger
scale only if consumer reactions were unambiguously positive. As a result, failure rates
on new products were supposed to be only 1%, compared with an average of 10% for
the sector. Learning by doing was considered very important in achieving such
favorable outcomes. Overall, then, the responsibilities of Zara’s design teams
transcended design, narrowly defined. The teams also continuously tracked customer
preferences and used information about sales potential based, among other things, on a
consumption information system that supported detailed analysis of product life cycles,
to transmit repeat orders and new designs to internal and external suppliers. The design
teams thereby bridged merchandising and the back end of the production process.
These functions were generally organized under separate management teams at other
apparel retailers.

Sourcing & Manufacturing

Zara sourced fabric, other inputs, and finished products from external suppliers with the
help of purchasing offices in Barcelona and Hong Kong, as well as the sourcing
personnel at headquarters. While Europe had historically dominated Zara’s sourcing
patterns, the recent establishment of three companies in Hong Kong for purposes of
purchasing as well as trend-spotting suggested that sourcing from the Far East,
particularly China, might expand substantially.
About one-half of the fabric purchased was “gray” (undyed) to facilitate in-season
updating with maximum flexibility. Much of this volume was funneled through Comditel,
a 100%-owned subsidiary of Inditex, which dealt with more than 200 external suppliers
of fabric and other raw materials. Comditel managed the dyeing, patterning, and
finishing of gray fabric for all of Inditex’s chains, not just Zara, and supplied finished
fabric to external as well as in-house manufacturers. This process, reminiscent of
Benetton’s, meant that it took only one week to finish fabric. Further down the value
chain, about 40% of finished garments were manufactured internally, and of the
remainder, approximately two-thirds of the items were sourced from Europe and North
Africa and one-third from Asia. The most fashionable items tended to be the riskiest and
therefore were the ones that were produced in small lots internally or under contract by
suppliers who were located close by, and reordered if they sold well. More basic items
that were more price-sensitive than time sensitive were particularly likely to be
outsourced to Asia, since production in Europe was typically 15%–20% more expensive
for Zara. About 20 suppliers accounted for 70% of all external purchases. While Zara
had long-term ties with many of these suppliers, it minimized formal contractual
commitments to them.
Internal manufacture was the primary responsibility of 20 fully owned factories, 18 of
them located in and around Zara’s headquarters in Arteixo. Zara’s factories were
heavily automated, specialized by garment type, and focused on the capital-intensive
parts of the production process—pattern design and cutting—as well as on final
finishing and inspection. Even for the garments that were manufactured in-house, cut
garments were sent out to about 450 workshops, located primarily in Galicia and across
the border in northern Portugal, which performed the labor-intensive, scale-insensitive
activity of sewing. These workshops were generally small operations, averaging about
20–30 employees (although a few employed more than 100 people a piece), which
specialized by product type. As subcontractors, they generally had long-term relations
with Zara. Zara accounted for most if not all of their production; provided them with
technology, logistics, and financial support; paid them prearranged rates per finished
garment; carried out inspections onsite; and insisted that they comply with local tax and
labor legislation. The sewn garments were sent back from the workshops to Zara’s
manufacturing complex, where they were inspected, ironed, folded, bagged, and
ticketed before being sent on to the adjoining distribution center.

Distribution

Zara had its own centralized distribution system. Zara’s system consisted of an
approximately 400,000-square-meter facility located in Arteixo and much smaller
satellite centers in Argentina, Brazil, and Mexico that consolidated shipments from
Arteixo.
All of Zara’s merchandise, from internal and external suppliers, passed through the
distribution center in Arteixo, which operated on a dual-shift basis and featured a mobile
tracking system that docked hanging garments in the appropriate bar-coded area on
carousels capable of handling 45,000 folded garments per hour. As orders were
received from hand-held computers in the stores (twice a week during regular periods,
and thrice weekly during the sales season), they were checked in the distribution center
and, if a particular item was in short supply, allocation decisions were made on the
basis of historical sales levels and other considerations. Once an order had been
approved, the warehouse issued the lists that were used to organize deliveries.
Lorena Alba, Inditex’s director of logistics, regarded the warehouse as a place to move
merchandise rather than to store it. According to her, “The vast majority of clothes are in
here only a few hours,” and none ever stayed at the distribution center for more than
three days. Of course, the rapidly expanding store network demanded constant
adjustment to the sequencing and size of deliveries as well as their routing. The most
recent revamp had been in January 2002, when Zara had started to schedule
shipments by time zone. In the early morning while European store managers were still
stocktaking, the distribution center packed and shipped orders to the Americas, the
Middle East, and Asia; in the afternoon, it focused on the European stores. The
distribution center generally ran at half its rated capacity, but surges in demand,
particularly during the start of the two selling seasons in January and July, boosted
utilization rates and required the hiring of several hundred temporary workers to
complement close to 1,000 permanent employees.
Shipments from the warehouse were made twice a week to each store via third-party
delivery services, with shipments two days a week to one part of the store network and
two days a week to the other. Approximately 75% of Zara’s merchandise by weight was
shipped by truck by a third party delivery service to stores in Spain, Portugal, France,
Belgium, the United Kingdom, and parts of Germany. The remaining 25% was shipped
mainly by air via KLM and DHL from airports in Santiago de Compostela (a major
pilgrimage center in Galicia) and Porto in Portugal. Products were typically delivered
within 24–36 hours to stores located in Europe and within 24–48 hours to stores
located outside Europe. Air shipment was more expensive, but not prohibitively so.
Thus, one industry participant suggested that air freight from Spain to the Middle East
might cost 3%–5% of FOB price (compared with 1.5% for sea freight) and, along with a
1.5% landing charge, a 1% finance charge, miscellaneous expenses, and (generally) a
4% customs duty, bring the landed markup on FOB price to 12% or so. In the case of
the United States, a 20%–25% landed markup seemed a better approximation because
of tariffs of up to 12% as well as other added cost elements.
Despite Zara’s historical success at scaling up its distribution system, observers
speculated that the centralized logistics model might ultimately be subject to
diseconomies of scale—that what worked well with 1,000 stores might not work with
2,000 stores. In an attempt to increase capacity, Zara was beginning construction of a
second distribution center, at Zaragoza, northeast of Madrid.
This second major distribution facility, to be started up in summer 2003, would add
120,000 square meters of warehouse space at a cost of €88 million close to the local
airport and with direct access to the railway and road network as well.

Retailing

Zara aimed to offer fresh assortments of designer-style garments and accessories—

shoes, bags, scarves, jewelry and, more recently, toiletries and cosmetics—for relatively
low prices in sophisticated stores in prime locations in order to draw masses of fashion-
conscious repeat customers. Despite its tapered integration into manufacturing, Zara
placed more emphasis on using backward vertical integration to be a very quick fashion
follower than to achieve manufacturing efficiencies by building up significant forward
order books for the upstream operations. Production runs were limited and inventories
strictly controlled even if that meant leaving demand unsatisfied.
Both Zara’s merchandising and store operations helped to reinforce these upstream
policies.

Merchandising

Zara’s product merchandising policies emphasized broad, rapidly changing

product lines, relatively high fashion content, and reasonable but not excessive physical
quality: “clothes to be worn 10 times,” some said. Product lines were segmented into
women’s, men’s, and children’s, with further segmentation of the women’s line,
considered the strongest, into three sets of offerings that varied in terms of their prices,
fashion content, and age targets. Prices, which were determined centrally, were
supposed to be lower than competitors’ for comparable products in
Zara’s major markets, but percentage margins were expected to hold up not only
because of the direct efficiencies associated with a shortened, vertically integrated
supply chain but also because of significant reductions in advertising and markdown
requirements.
Zara spent only 0.3% of its revenue on media advertising, compared with 3%–4% for
most specialty retailers. Its advertising was generally limited to the start of the sales
period at the end of the season, and the little that was undertaken did not create too
strong a presence for the Zara brand or too specific an image of the “Zara Woman” or
the “Zara Girl” (unlike the “Mango Girl” of Spanish competitor Mango). These choices
reflected concerns about overexposure and lock-in as well as limits on spending. Nor
did Zara exhibit its merchandise at the ready-to-wear fashion shows: its new items
were first displayed in its stores. The Zara name had nevertheless developed
considerable drawing power in its major markets. Thus by the mid-1990s, it had already
become one of the three clothing brands of which customers were most aware in its
home market of Spain, with particular strengths among women between ages of 18 and
34 from households with middle to middle-high income.
Zara’s drawing power reflected the freshness of its offerings, the creation of a sense of
scarcity and an attractive ambience around them, and the positive word of mouth that
resulted. Freshness was rooted in rapid product turnover, with new designs arriving in
each twice-weekly shipment. Devout Zara shoppers even knew which days of the week
delivery trucks came into stores, and shopped accordingly. About three-quarters of the
merchandise on display was changed every three to four weeks, which also
corresponded to the average time between visits given estimates that the average
Zara shopper visited the chain 17 times a year, compared with an average figure of
three to four times a year for competing chains and their customers. Attractive stores,
outside and inside, also helped. Luis Blanc, one of Inditex’s international directors,
summarized some of these additional influences:
“We invest in prime locations. We place great care in the presentation of our storefronts.
That is how we project our image. We want our clients to enter a beautiful store, where
they are offered the latest fashions. But most important, we want our customers to
understand that if they like something, they must buy it now, because it won’t be in the
shops the following week”.
It is all about creating a climate of scarcity and opportunity.
For the customers who did walk in through the door, the rapid turnover obviously
created a sense of “buy now because you won’t see this item later.” In addition, the
sense of scarcity was reinforced by small shipments, display shelves that were sparsely
stocked, limits of one month on how long individual items could be sold in the stores,
and a degree of deliberate undersupply.
Items that were slow to sell were immediately apparent and were ruthlessly weeded out
by store managers with incentives to do so. Returns to the distribution center were
either shipped to and sold at other Zara stores or disposed of through a small, separate
chain of close-out stores near the distribution center. The target was to minimize the
inventories that had to be sold at marked-down prices in Zara stores during the sales
period that ended each season.
Such markdowns had a significant impact on apparel retailers’ revenue bases: in the
United States, for example, women’s apparel stores averaged markdowns of 30%-plus
of (potential) revenues in the mid-1990s.17 Very rough estimates for Western Europe
indicated markdowns that were smaller but still very significant. Zara was estimated to
generate 15%–20% of its sales at marked-down prices, compared with 30%–40% for
most of its European peers.
Additionally, since Zara had to move less of its merchandise during such periods, the
percentage markdowns on the items affected did not have to be as large—perhaps only
half as much as the 30% average for other European apparel retailers, according to
Zara’s management.

Retailing Aspects:
Zara’s stores functioned as both the company’s face to the world and as information
sources. The stores were typically located in highly visible locations, often including the
premier shopping streets in a local market (e.g., the Champs Elysées in Paris, Regent
Street in London, and Fifth Avenue in New York) and upscale shopping centers. Zara
had initially purchased many of its store sites, particularly in Spain, but had preferred
long-term leases (for 10 to 20 years) since the mid-1990s, except when purchase was
necessary to secure access to a very attractive site.

Zara actively managed its portfolio of stores. Stores were occasionally relocated in
response to the evolution of shopping districts and traffic patterns. More frequently,
older, smaller stores might be relocated as well as updated (and typically expanded) in
new, more suitable sites. The average size of the stores had gradually increased as
Zara improved the breadth and strength of its customer pull.
Thus, while the average size of Zara stores at the beginning of fiscal year 2001 was 910
square meters, the average size of the stores opened during the year was 1,376 square
meters. In addition, Zara invested more heavily and more frequently than key
competitors in refurbishing its store base, with older stores getting makeovers every
three to four years.
Zara also relied on significant centralization of store window displays and interior
presentations in using the stores to promote its market image. As the season
bottomwe topwear
progressed and product offerings evolved, ideas about consistent looks for windows
ar
and for interiors in terms of themes, color schemes, and product presentation were
prototyped in model window and store areas in the headquarters building in Arteixo.
jeans skirts trousers
These ideas were principally carried to the stores by regional teams of window dressers
and interior coordinators who visited each store every three weeks. But some
adaptation was permitted and even planned for in the look of a store

bottomwe topwear
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zara
jeans skirts trousers

Skinny fit Loose fit

accessori
apparel footwear
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Two ripped patched

toned

Faded Dark Indigo

blue blue

Size range:XS:26 ,S:28,

M:30, L:32

Price: Rs.3990
UNITED COLORS OF BENETTON: an introduction

United Colors of Benetton:

A global brand, and one of the most well known in the world, United Colors of
Benetton
has an international style that combines color, quality and fashion. Each
season the women’s wear,men’s wear, children’s wear and underwear
collections offer a total look for everyday, for work and for leisure, in the city
and outdoors. The Benetton Baby label is a new product line dedicated to the
prenatal and the under-fives world.
The brand is present in many other sectors, from the elegant accessories to
the eyewear lines and perfumes, from the home collection to baby products.
The above products are available in selected specialized shops worldwide.

HISTORY:
Benetton Group is a global fashion brand, based in Treviso, Italy. The name
comes from the Benetton family who founded the company in 1965.
Benetton Group is listed in Milan. Benetton has a network of around 6,000
stores in 120 countries. The stores are managed by independent partners
and generate a total turnover of over 2 billion euro. In 1965, Luciano
Benetton, the eldest of four children, was a 30-year-old salesman in Treviso.
He saw a market for colourful clothes, and sold a younger brother's bicycle in
order to buy his first second-hand knitting machine. His initial small
collection of sweaters received a positive response in local stores in the
Veneto region, and soon after he asked his sister and two younger brothers,
Gilberto and Carlo, to join him. In 1965, the entity known as the "Benetton
Group" is formed.
In 1966, the Benettons opened their first store in Belluno and three years
after in Paris,
with Luciano as chairman, his brother Gilberto in charge of administration,
their younger brother Carlo running production, and Giuliana as a chief
designer.
Today, the Benetton Group is present in 120 countries around the world. Its
core business is fashion apparel: a group with a strong Italian character
whose style, quality and passion are clearly seen in its brands, the casual
United Colors of Benetton, the glamour oriented Sisley, the leisurewear
brand Playlife. The Group produces over 150 million garments every year. Its
network of around 6,000 contemporary stores around the world, offers high
quality customer services and generates a total turnover of over 2 billion
euro.

Around 6,000 stores worldwide:

The development of Benetton's commercial network, characterised by

prestigious locations in historic and commercial centres and by the high level
of customer services offered, has been supported by a major programme of
investment worldwide.
The Benetton stores carry complete collections, as well as a wide selection of
accessories, offering a full range of Benetton style and quality.

Design:
A staff of 300 designers from all over the world creates the collections for the
casual United Colors of Benetton. The design team is also engaged in
researching new materials and creating new lines for different targets from
children, men and women to expectant mothers, offering them not only
practical and modern styles but also maximum comfort.
The result is the latest trends in design and a rich output of many models a
year which are realized with computer assisted design systems fully
integrated with the rest of the company's production phases.

Production:
Consistently high quality is one of the fundamental characteristics of the
Benetton production process from the raw materials to the finished garment.
A constant commitment to innovation, a crucial factor for development, has
always
characterized the Group’s business organization, from communication to IT,
from research into new materials to integrated logistics. Special attention is
given to innovation in production, where all systems and equipment are
constantly renewed.
The Benetton production system, co-ordinated by a high-tech facility at
Castrette (Italy)
is capable of turning out over 150 million garments every year.

Logistics:

Benetton has direct control of the logistics phase for both own manufactured
and sourced products, and has invested in modelling, organization, and
automation of logistic processes in order to completely integrate the entire
production cycle, from client orders, to packing and delivery.

Automated Sorting System

The state-of-the-art logistics operation at Castrette (Italy) has a fully

automated innovative sorting system, whose propulsion is based on
electromagnetic fields, capable of handling individual orders for around
6,000 Benetton shops worldwide.
Folded and hanging garments are automatically sorted, packed into boxes
and
sent through a one-kilometer tunnel to the Automated Distribution Center.

Automated Distribution Center

The Automated Distribution Center covers an area of 30,000 square

meters,with a total capacity of 800,000 boxes, and is able to handle 120,000
incoming/outgoing boxes daily with a workforce of only 28. The finished
product is sent directly to the Group's around 6,000 retail outlets in 120
countries worldwide.

Merchandise Mix:
The breadth and depth of the products carried by retailers is called as
merchandise mix.
This is also known as Product Assortment.

United Colors Of Benetton: Merchandise Assortment

Woman And Man:
United Colors of Benetton chooses a keyword for the Autumn/Winter 2010-11
collection:
freedom, a clear and simple word with many meanings. In this case, the
freedom we allow ourselves when choosing our look every-day.
United Colors of Benetton has always followed this principle and offers even
greater freedom of choice for the new winter season.

Accessories:
The Autumn/Winter 2010-11 United Colors of Benetton accessories and
footwear
collection explores new frontiers of in terms of shape, material and colour.

LIFESTYLE:

Lifestyle is a collection of surprises created by Benetton to satisfy everyone's

tastes and
needs. It concludes exclusive fragrances; sunglasses and eyewear frames for
men, women and children; luggage sets for all travel needs; lots of stationery
ideas for school; proposals of every kind for our home.

Verde.Rosso.Giallo.Blu.United (fragrances) :
Benetton is colour: colour celebrating the diversity of the world, colour
speaking to every
culture, colour as a universal means of communication. Colour as passion, as
instinct, as something to which we all share the same spontaneous human
response.
Like colour, fragrance is a universal language, communicating through
intuition, emotion
and evocation. Now colour and fragrance come together in a collection of
scents inspired by Benetton's legacy – a legacy of creativity, universality and
youthfulness, with colour at its heart. A collection of four perfumes
representing an homage to Benetton's history and presence, inspired by the
iconic colours and the wool stitch - timeless elements of the brand's DNA.

Adult Eyewear:
Glamour and originality distinguish United Colors of Benetton eyewear. A
wide range of
frames with all the colour, energy and comfort you would expect from
Benetton.

Adult Sunglasses:
The United Colors of Benetton sunglasses are coloured according to tradition:
trendy but without going to extremes. It is a collection with wrap-around
frames and shaded lenses for unique and unmistakeable proposals.

MERCHANDISING POLICY OF UNITED COLORS OF

BENETTON:
Benetton Group (the "Parent Company") and its subsidiary companies
primarily
manufacture and market fashion apparel in wool, cotton and woven fabrics,
as well as
leisurewear. The manufacture of finished articles from raw materials is
undertaken partly within the Group and partly using subcontractors, whereas
selling is carried out through an extensive commercial network both in Italy
and abroad, consisting mainly of stores operated and owned by third parties.

Return Policy:
Unworn, full priced merchandise with tags attached and accompanied by the
original
receipt can be exchanged within 14 days at the store of purchase. There will
be no refunds or store credit. All sale merchandise is final sale. For hygenic
reasons all sale of underwear and inner garment are final, returns or
exchange of these items will not be permitted. Payments made by Credit
Card, will receive the applicable amount credited to the card account within
14 working days .

Retailing Aspects:

Each collection is characterized by different proposals with several themes,

offering
products sensitive to market trends and fashion moods and maximising
stores' attractiveness, in order to satisfy the requirements of the most
demanding customers.
The structure also involves a segment of products known as Capsule,
capable of
presenting fashion-forward garments and accessories at any time during the
season.
Moreover UCB offers additional service to the network with Continuative
Items, which
ensure that collection's core products are restocked as quickly as possible.
Orders for these products are entered directly, and as the information
systems of the production and logistics units are linked, the system provides
immediate confirmation and guaranteed delivery times (first in, first out).

Latest Promotional Activity : LUCKY YOU

From 30 October 2010, customers purchasing in a single transaction three
items from the
United Colors of Benetton “Toddler” and “Kid” (from size 74 to XXL) lines
among those
marked with the special LUCKY YOU sticker will receive the cheapest item
free (subject to
availability in-store at the moment of purchase).
The promotion will be valid at participating “United Colors of Benetton”
stores,
displaying the special “United Colors of Benetton. Lucky you” advertising
posters.
The UCB’s product merchandising policy is also important in its success
because they
emphasized a climate of scarcity and opportunity. So, its consumers know
that if they like
something, they must buy it in this moment and not later. All these
characteristics makes UCB a
business model difficult to imitate and for this reason its competitive
advantages are more
sustainable.
In conclusion, Benetton uses knowledge management to balance structure
and creativity.
They recognize that both creativity and structure is crucial in ensuring the
success of the venture.