It’s nearly 20 years since the cool kids of Europe were all decked out in their Benetton jeans and T-shirts, displaying not just their fashion credentials but their hunger to be associated with the brand’s hugely controversial advertising campaigns on race, sex, religion, violence and free speech.

Those days of notoriety have long since faded from most people’s memories, and today United Colors of Benetton stores occupy a crowded space in retailing, jostling for recognition between the packed stores of Zara, GAP, Uniqlo, Esprit and H&M. The company that once sold more clothes than any other in Europe now relies on Italy for almost half its sales, and overall revenues have been declining in recent years. In an effort to help it stand out from the seemingly endless racks of affordable casualwear and make waves in new markets, this very Italian company has created a new post – chief merchandising and creative director – and, significantly, has appointed a non-Italian.

You Nguyen, previously merchandising and design vice-president of Levi’s Women, will oversee brand development, store fit- outs and the creative direction of design, though he’s adamant that he is not a designer. Nguyen is also diplomatic about his role as a repair man for the brand.

“I don’t think of it as having gone wrong, but I think it’s been distracted by the fast- fashion model,” he says. “When Zara, H&M and Uniqlo appeared in the marketplace, everyone in the industry globally was taken by surprise. Benetton has been distracted from being who we are in trying to compete with those players. I have huge respect for them, but they’re different.”

Benetton’s first-half earnings for 2011 show a business just ticking over, thanks to growth in some markets subsidising losses and stagnation in others. Profits were €22m lower than in the same period a year ago, with rising cotton and wool prices compounding the generally gloomy economic climate. Surges in takings in Russia (39%), Korea (11%) and Mexico (18%) contrast with a 1% rise in Italy.

The new Benetton, Nguyen says, should be more about durable design than fashion. “I’m not sure Benetton has a role to play in the fashion world,” he says. “Fashion is in one day, out another. I hope that we have a longer point of view and a more sustainable point of view than consumable, disposable fashion. That’s our point of difference: we’re a historic brand with strong heritage. For me it’s going back to understanding what made Benetton Benetton, and starting to make those things relevant to today.”

Nguyen was born in Saigon and moved with his family to Paris at the end of the Vietnam War. He thought of becoming a doctor “until I saw blood and realised that wasn’t for me” and then studied French literature and philosophy. In his new office not far from Venice, he recalls his unlikely introduction to the world of fashion. “My cousin was working for Issey Miyake in the press office and about four weeks before a collection was due to launch, one of her colleagues quit. She completely freaked out and begged me to come and help. I was on school vacation at the time and said I didn’t have a clue what to do. She said: ‘It doesn’t matter – if you’ve got two arms, two legs and a head, you can help.’”

It was instant love, not with fashion but with design, though Nguyen was sure he wasn’t cut out to be a designer. He went to the US to study for an MBA, with plans to eventually promote the businesses of designers whose work he loved. Now he finds himself getting to grips with a brand whose heyday was in catering to a very different consumer market. Individuals are crossing price and brand-perception boundaries several times in a single outfit, with perhaps a luxury designer bag, a Benetton sweater and a Zara scarf. “Zara is not my competition. H&M is not, but in a way they do compete for share of wallet. How we decide to influence the consumer to spend that €20 or €50 or €75 is where the challenge is.”

Italian roots – something none of the fast-fashion brands can compete on – will be key to Benetton’s future. “As a foreigner, I hope I’ll be able to remind the company that Benetton is an Italian brand,” Nguyen says. “There’s a sense of style that’s unique to the culture of Italy that we can offer; there’s a way of being, a love for life, a passion that’s central to the Italian culture, and an appreciation of things that are aesthetically pleasing. My non- Italianness allows me to remind the team that they should be very proud of their Italianness.” The brand will emphasise quality craftsmanship, design and service. Shoppers might not be getting a bespoke shirt handmade in Napoli, or a four-ply cashmere sweater, but they’ll be getting a hint of that heritage, fuelling national pride in Italian customers and aspiration for those overseas.

What Nguyen won’t be doing is trying to reinvent the Benetton shock campaigns of the 80s and 90s. “I’m not sure if we were to produce a communication programme about creating controversy today it would mean the same thing that it did 20 years ago. The world’s changed; controversy is everywhere. It wouldn’t deliver the same impact,” he says. “To me what matters is not that [those ads] were controversial, but that they meant something, they reached consumers because they had a point of view. We were strong in the 80s and 90s because our point of view happened to be relevant to the consumer at that time.”

What’s the current point of view, then? “It’s always been saying what we believe, supporting things that matter to us. We have a strong point of view on sustainability and reducing our impact on the environment, and we have a point of view on celebrating positivity. To me, what’s controversial now is celebrating happiness and human love.” Brands without a mission statement on sustainability and global harmony are hard to find these days but, given its heritage, Benetton does have more credibility in this arena than most.

The clothes will matter too, of course, and Nguyen is not expecting people simply to buy into a vision of multiracial, carbon-neutral harmony. Styles will be more about allowing an individual take on a classic design. On his office wall are the words: “Classic is when artistry, timing, craftsmanship and clarity inhabit the same moment, creating something timeless.” The fit, the way they wash, the value for money and the Benetton experience will all matter; Benetton jeans will offer something different to GAP, Diesel and Levi’s, and not just a broader range of colours.

Stores will be different, with less emphasis on selling, though Nguyen says each will still have something for sale. “I hope to turn the store into, yes, a place for a commercial transaction, but also a place of communication, sharing and, in many ways, teaching on things we’re passionate about. I want stores of the future to be more like a workshop space, saying: ‘I have something to share with you, what do you bring back to me that’s part of the energy to move?’”

Stores will no longer be standardised around the world, but should reflect the very local community they serve. “To me, Benetton sells sweaters, absolutely, but it also plays a significant role in the community.” Staff shouldn’t look uniform from one store to the next; branches should collaborate with different groups and individuals, with formats that take account of where they are. Benetton in London’s Oxford Circus shouldn’t be a carbon copy of Benetton in London’s East End, he says. His vision is of a system in which a store could decide to hand over its window to a local community group, and which continues to celebrate art and architecture. “I don’t see us as a fashion company, more a design company.”

Does that mean going down the Armani route, then, following the brand that now stands for fragrance, furnishings and hotels as much as it does for fashion? Nguyen is an admirer of Burberry’s ability to innovate without deserting its core principles, a brand that’s now in everything from picture frames and hot-water bottles to lipstick, sunglasses and watches. Benetton beyond clothing will happen. “Absolutely,” he says. “I’m known to be quite impatient, but I’ve got to temper it and say we must first deal with the priorities of the brand and not hurry, but I’d love at some point to do home interiors. Benetton is an exciting brand, the brand has been asleep, so to me the role of an outsider is to remind the company that this is who we are – there’s a lot to be celebrating and innovating from the core of who we are.”

Growth in emerging markets is what’s been sustaining Benetton, though he says Italy will always account for a high proportion of sales. For Nguyen, who is taking Italian lessons, his international background is an advantage. “In meetings, we flip between Italian, French, English, sign language, whatever it takes to get the message across. This flexibility is very important if we as a company want to grow in the international market.”