Chief executive Alessandro Bogliolo explains why he dropped wholesale accounts and is opening more shops to “premiumise” the Italian brand, while also seeking to boost revenues by advertising on porn sites.
A favourite among UK department stores and independents alike, Diesel found itself in the spotlight last year when – in a bid to elevate the brand to a more premium proposition – the company declared its “brave decision” to exit several global multi-brand chains.
The bold move was not a “repositioning”, insists chief executive Alessandro Bogliolo, who joined Diesel in October 2013 from Bulgari to lead the strategy, but was instead driven by a perceived need to go back and “be faithful to the origin of the brand”.
“When I bought my first pair of Diesel jeans in Rome many years ago, they cost 100,000 lira (£38 in today’s money). I was taken aback because I would have normally paid half of that,” he recalls. “Quality and craftsmanship in the product was high and we are now going back to what we [as a brand] were [back then].”
”If there are difficult decisions [to be made] that have a negative effect in the short term, but add value in the long term, we can make them”
Speaking to Drapers over a lunch of antipasti at his office in Breganze, an hour’s drive from Venice, he continues: “Over the past few years the brand developed quickly and we ended up in some points of sales that were not in line with that [premium] positioning. We took a decision at the end of 2014 to exit a certain number of multi-brand retailers.”
Diesel declines to say how many accounts closed but Sports Direct-owned USC – which sold its products in all 90 stores – was one of the biggest in the UK, as reported by Drapers at the time.
The label took an €85m (£60m) hit in wholesale turnover in 2015 – 18% of its total wholesale revenue – as it sought to “detox” itself from stockists that did not fit the new strategy and instead focus on those that were “in line” with the new premium distribution model.
“It had a big impact on profitability but we needed to be consistent with the past and the position of where we want the brand to be,” he explains. “It was a brave decision but a tangible sign of the approach of this company. If there are difficult decisions [to be made] that have a negative effect in the short term, but add value in the long term, we can make them.”
The €1bn (£727m) turnover business now has 102 wholesale accounts in the UK but Diesel declined to reveal to Drapers how many have been dropped or details of the company’s financial performance.
“Diesel is a great partnership and those kinds of difficult decisions are taken after long consideration, and in a unanimous way,” says Bogliolo.
“It’s not just about me or Renzo [Rosso, Diesel’s founder] – the work is that of a large group of people, designers, and managers,” he adds, all of whom are based in Diesel’s modern, campus-like headquarters complete with nursery centre, basketball courts and a helipad.
Backing Bogliolo’s strategy and explaining the reasons for appointing the CEO to lead the charge, Diesel founder Renzo Rosso says: ”We were very structured from a business point of view, but I realised that we needed a leaner organisation, which can react quickly to the increasingly demanding market needs. Allessandro Bogliolo is the right man for that: he is the most organised manager, and I chose him to guide a new era.
“Working with him and Nicola [Formichetti, Diesel’s aristic director], together we came to the conclusion that we had to “premiumise” our product and our distribution, and we took the hard decision to cut our wholesale distribution. We want to be the premium alternative brand in the luxury world.”
Bogliolo continues: “A lot has changed over the last couple of years. The economy is moving much faster, so we as a team had to move with it.”
To keep up, Diesel “streamlined” its top European team in October and restructured in the UK as it sought “more direct and consistent” management of key accounts.
Diesel’s managing director of northern Europe, Jonny Hewlett, is set to move into a bigger, yet-to-be-confirmed position within the business after a consolidation of the firm’s leadership of northern, southern and central Europe into one role.
The European business is now led by Joanna Onland, who was previously managing director of southern Europe, while former regional director for central Europe, Thorsten Link, has departed.
Fifty-year-old Bogliolo, who sports a pair of straight-leg indigo Diesel jeans teamed with a dark blazer, says: “When I joined, we had a traditional organisation divided by country and following the political map, which then evolved into a regional approach. Now, we have one, Europe-wide structure. It ensures consistency across the markets but we are also maintaining local, client-facing teams, as we want to stay as close to the consumer as possible.”
One industry insider said the changes may be linked to the business trying to manage the drop in wholesale revenue following Diesel’s exit from some mainstream retailers: “I’m not surprised at the shake-up. Diesel is moving to a more premium positioning and, in order to do that, you have to come out of certain retailers. When you move away from those big cash cows it’s hard to replace that revenue, so they are trying to manage this and get things in place moving forward.”
The shift upmarket could work for discerning customers on the high street, according to Elaine Jones, manager of premium menswear independent Lapel Clothing in Derby. “If the product is right, men are willing to pay a premium for it,” she says. ”With jeans in particular, they won’t think twice about paying £120 or £150. Diesel is one of our bestselling denim brands.”
Diesel’s retail business – comprising its website and 400 stores worldwide – is, of course, an essential medium for building close relationships with shoppers. The plan to revamp the retail arm, which accounts for between 55% and 60% of global sales, involves relocating some shops, opening others and launching a new store concept.
Bogliolo confirmed that Diesel would open more stores this year in London and Greater London, but declined to give details of locations. However, sources have indicated that the business is eyeing up Redchurch Street in Shoreditch as one possible location.
Diesel currently has 12 shops and one higher-end Black Gold store in the UK, as well as 15 concessions including Selfridges and Harvey Nichols. In 2015, the business relocated, renovated and opened 20 shops globally, and plans to do the same during each of the next three years. Diesel will not confirm which stores will be refurbed but that “the retail concept will be visible in select UK stores in the near future”.
“It’s not just by exiting stores that you build for the future,” says Bogliolo. “A lot of the big stores haven’t been updated since the end of the 1990s and after 15 years it’s time for rejuvenation. That’s where the core of the investment and effort has been going.”
The business relocated its two stores in New York at the end of November, moving from 5th Avenue and Lexington to new units on Madison Avenue and Columbus Circle, which the brand feels have better adjacencies.
“The Lexington store was the first shop Renzo opened in 1996, so to close it was a big decision emotionally, but neither of the locations [5th Avenue and Lexington] worked anymore.”
He continues: “Over the last few years both areas have become much more commercial – all the premium brands have left. On 5th Avenue our neighbour used to be Fendi; when we closed, it was Microsoft.
“Opening two shops on the same day is the most tangible sign of our investment in the brand. We did it without fanfare but it is a huge statement for Diesel and symbolic of the work we are doing.”
The Madison Avenue shop is the first to feature Diesel’s new shop fit, which will be rolled out globally this year. It features a hand-finished cement exterior and a bright, more “gender neutral” interior with glass displays and a “denim temple”.
“Our current concept is very industrial and masculine. The new one is more gender friendly. In our old shop fit, womenswear clashes with the surroundings, which are too industrial,” adds Bogliolo.
The business will also renovate its stores in Milan, Barcelona, Geneva and Munich later this year. Diesel will then open a new shop in Tokyo – Japan is its biggest market for both retail and wholesale – in March. It already has 95 shops in the country.
Towards the end of last year, Diesel opened two shops in the UK – in Bullring Birmingham and Sheffield – to service customers in areas where the brand had left big wholesale accounts. “We exited several chains, so we decided we needed to be present in those areas again but in a more elevated way, where shoppers can have the full experience of the brand.”
Diesel Madison Avenue
Bogliolo says that despite the brand becoming more “elevated”, prices have not been affected. “Since joining two years ago, Nicola [Formichetti, Diesel’s creative director] has modernised the brand; he has made it cleaner and more in line with recent fashion trends, without losing the DNA of Diesel.”
He explains that while prices have not changed, the average basket size has grown by 10% in the last two years because customers are buying more premium products in addition to the standard T-shirts and jeans for which Diesel is known.
“In the past, we were mainly about cotton T-shirts and jeans but we have a lot more leather and outerwear now, so the total spend is increasing steadily,” he says.
The average retail price for Diesel jeans is €130/£99 but Bogliolo says the bulk of purchases now fall between €180/£137 and €300/£228. Wholesale prices for spring 16 range from £12 for a T-shirt to £295 for a leather jacket.
The brand’s creative director Nicola Formichetti, who previously collaborated with singer Lady Gaga on her music videos and was the man behind the infamous meat dress, explains that since joining Diesel in 2013 he has sought to reboot it with a greater focus on its core values: denim, rock leather, and military-style outerwear. He says his focus has been on “modernising and elevating the product with those three pillars being always present in every collection.”
Ecommerce is also an important part of Diesel’s business and currently makes up 10% of total sales globally but Bogliolo says it is growing “exponentially” following a website relaunch in September.
“The new site has had strong double-digit growth and we see this continuing. Diesel was one of the first fashion brands to launch a website back in 1996, so it needed an update. The new site combines storytelling and great content with the ability to buy, which was what our customers were asking for from us.”
Marketing is also key for the business in 2016. For its spring 16 campaign, the label is continuing its tongue-in-cheek advertising featured for autumn 15. The shots, which Bogliolo describes as “cheeky”, include singers Joe Jonas and Kiko Mizuhara captioned with the phrase, “We have more followers than @diesel,” among others. The innovative strategy also involves ads on Tinder, Grindr, PornHub and YouPorn – a first for a fashion brand.
Formichetti explains: ”We are simply following people and where they go online! A massive part of web traffic is on those websites and dating apps, this is valid in any country really, it’s a global reality. We are obviously not promoting pornography, we are just bringing out advertising where the traffic is highest on the web.”
“We wanted to show our strong point of view,” Bogliolo adds. “We used to be known for our powerful campaigns but in more recent years they have become safer and more traditional. We wanted to bring that sense of fun back.”
Consistency is key for Diesel in this transitional phase for the business. In order to return the label to its former glory, the team needs to make sacrifices and alter how the brand is viewed by the discerning premium shopper they are trying to attract. With his luxury background and long-standing love for the product, Bogliolo is undoubtedly the man to fire up this Italian favourite.
Diesel spring 16