Renzo Rosso on rebooting Diesel, while fine-tuning his fashion kingdom
today Sep 16, 2019
Renzo Rosso, who owns more fashion-forward brands than anyone in Italy, is one busy man. These past 24 months, he has been hyper occupied rebooting his flagship brand Diesel, which had been showing alarming signs of fatigue.
Fortunately for Rosso, the rest of his empire – which includes Maison Margiela, Marni, Viktor & Rolf and DSquared2, all contained in the holding company Only The Brave (OTB) – is made up of brands that are already rather successful, or about to become profitable.
Last week in New York, Renzo presented the latest collection of Diesel Red Tag, one of his strategies to remake Diesel. This time it was a collab with A-Cold-Wall, following on from partnerships with Shayne Oliver, Glenn Martens and Gosha Rubchinskiy. All designed to connect Diesel to a millennial target audience.
While in Manhattan, we caught up with Rosso to hear how his radical readjustment of Diesel is progressing and get the lowdown on the latest state of play in his far-flung fashion dukedom.
"Diesel is 41 years old this year, and two years ago we decided to reboot. It’s a brand that has had great success, made a lot of money but needed freshening up," he concedes.
"Thanks to Diesel I was able to buy more brands. But that also meant I spent more time taking care of these new companies and less and less in Diesel. My mistake. So, two years ago I got back in strongly. Diesel was in the hands of the managers for too many years. Yes, we hit the numbers, but by selling to everybody. The product became much more easy and simple. It was not the beautiful Diesel it once was," he shrugs.
The original concept of Diesel reflects Rosso himself. Modern, not too fashion, not so extreme, but crammed with little details that make each product that bit different. Diesel always emphasized quality creation in terms of construction, double-point stitching or treatments. Though it was the vintage finish that was the real DNA of the brand.
"It’s like a house, a new villa has no energy, an old one does," he argues.
Rosso’s first move – upping the creativity, initially with Nicola Formichetti. Rosso had made the Italo-Japanese stylist his creative director for five years until December 2017.
"Let’s say that Nicola is a fantastic guy, a great stylist, but not a creative director," he cautions.
At first, he admits, the new focus on younger products made some older customers react badly. No soft touch, Rosso ruthlessly slashed distribution – cutting 320 million euros of turnover.
"Essentially chopping our wholesale distribution, like e-tailer Zalando, which was being heavily discounted. We renegotiated the deal and reduced discounting," he explains.
Diesel brand closed multiple flagships, while its American CEO, Renzo’s son Stefano, closed down major accounts like Macy’s and Nordstrom, though kept Saks and Hudson's Bay and added Neiman Marcus and Bloomingdales.
"Fewer doors but in better spaces, with double positions – in the denim and fashion departments – and close to the brands that make sense. I mean Stone Island, Off-White, Palm Angels and M6," insists Stefano.
"Sending Stefano to the US was vital for us," chimes in the proud dad.
In total, Diesel reduced its USA business from some $160 million to $100 million. Worldwide, Diesel actually lost money last year, but will return to profitability this year.
"Cutting always costs money initially," winces Rosso, an earthy Venetian known not to suffer fools gladly.
In 2018, Diesel scored 810 million euros in turnover, down a blistering 19% from 980 million euros a year before. The brand once peaked at 1.1 billion euros.
Rosso has been steadily lowering the entry-level price, yet pushing up the price in the higher categories. His Red Tag is very much about branding and not business. Glenn Martens’ much admired capsule collection turned over less than $500,000, while, A-Cold-Wall’s new capsule will go into 60 to 70 stores, with a one million target.
"It’s super cool and super niche and got us to where we wanted to go, meaning into the best stores in world – from Dover Street Market to LuisaViaRoma. We needed people to talk about us again. So many celebrities have again started wearing Diesel. Just look at social," says Renzo in his heavy Italian accent, referring to social media.
"Young kids, like my daughter, who is 16. Her classmates in Milan didn’t know Diesel. Now some of them go to our Milan store, try on a look in the changing room, take a photo and put it on Instagram. And then leave the look on the floor! Okay, we’d prefer if they bought it. But it’s still a good thing!"
Before, Diesel was effectively targeted at the 40 and over generation.
"Now we are targeting at State of Mind. Before we didn’t have millennials on board, now we also have Generation X," argues Renzo, before Stefano adds: "I call it the Lost Generation because for the past 10 years we were not able to engage in the right way with the young generation."
Rosso first came to America in 1978, when he launched Diesel, in the era of Fiorucci, Andy Warhol and Studio 54.
"I love America, it’s the dream of us Italians, of pink Cadillacs and jukeboxes. When I arrived the first time, taking a car into Manhattan from Kennedy Airport I felt like I was back home," he laughs.
The Italian billionaire is just back from China, which he sees as driving fashion trends. He took in a day of cool hunting, and is now planning a new Red Tag event in Shanghai.
"I felt like an old man there. You cannot pay with a credit card or cash. Everything is with a phone, you even pay the bums on the street that way!" he chuckles.
Diesel’s reboot has been stop and go. A half-decade ago, Rosso expensively revamped a flagship on Madison Avenue, which they have since closed.
"It was too upscale. Back then the retail model still ruled. Not anymore, especially in the last three years due to social. People live on their phones. Look at all these people," he says over breakfast at the ever-fashionable Mercer Hotel in SoHo, where the majority of the clients are indeed on their phones.
Half way through breakfast, Marc Jacobs swings by, greeting Rosso and an editor, before Renzo trots out the door after him for a proper hello. Raising the question: Could he maybe make a bid for Jacobs?
"Everyone is in the Mercer. Yesterday, we were chatting with Kendall (Jenner) and today I ran into Kim (Kardashian) walking in the door," marvels Rosso, who is in partnership with the hotel’s founder André Balazs. The Italian owns a 21% stake in Balazs’ London flagship, Chiltern Firehouse.
He is again considering a public flotation for Diesel.
"I think I have to do that, for the people who worked so long in the company; for transparency; for the family. It’s more modern and honest. In Milan Borsa, as we are Italian. I think Prada going to Hong Kong was a mistake. They suffered so much after a very high price in the beginning," he laments.
He has enjoyed capital gains already on the stock market. Renzo was an early partner of Yoox, and was obliged to sell his 8% stake when Richemont staged a buy-out. He was a founding investor in the e-commerce platform, with a 5% stake, and then acquired more.
"Richemont gave me a lot of money, a lot of money," he says, indicating it was several hundred million.
After Diesel, OTB's largest business is Margiela, which is close to breaking 200 million euros in annual revenues.
"Next year will be the first one when we will be finally profitable," enthuses Rosso, who bought the conceptual house back in 2002.
"Margiela was always losing money, a few million one year, another year sometimes less. To keep the brand the way Martin wanted we never pushed the brand to sell more. We kept it cool and exclusive but now there is growth in womenswear and in accessories. Now accessories are 60% of turnover, compared to 12% when we arrived,” explains Rosso, who appointed John Galliano to be the creative director in 2014, after the talented British designer had been fired from Dior.
"John is doing an incredible job. In the beginning he needed to recharge and to understand the DNA. That took time, now what he does is a very good reference to all fashion people. The greatest brands and designers look at what he is doing!"
"John is not the easiest guy to manage but he has great imagination," concedes Rosso, who left the day after our interview to Los Angeles in order to meet Galliano, who was doing "market research" for his next collection.
"Now Margiela is flying with almost 40% increase in sales. I am serious, from 140 million euros to 190 million euros," Rosso practically shouts.
Back in Italy, Rosso acquired the much-admired Marni in 2012. There, Rosso has backed youth, naming Francesco Risso as the brand's creative director.
"Francesco is a young kid, just 32 I think, and he arrived at Marni, which had an old target group of consumers. He took two years to understand the Marni brand – now we are much younger, and selling out. Now Marni grows by 20% – and sells out. Basically you can measure success by the sell-through,” insists Rosso.
Marni’s revenues have now reached 175 million euros, and "will be break-even this year, and profitable next year." Moreover, 55% of turnover is in accessories.
"All luxury brands that make money have real accessories business. Diesel is different, accessories are less than 20%," he admits.
His smallest brand is Viktor & Rolf, which operates more like a couture house than a true fashion label.
"It’s a couture brand with events and licenses; wedding dresses, lingerie, custom tailoring," explains Renzo, albeit one which floated on a unique success story – the scent of Flower Bomb.
Despite being created by two avant-garde conceptualists, the fragrance is a global success. So much so, that last year L’Oréal's turnover with Viktor & Rolf was some 120 million euros.
"The royalties are larger than the turnover," he giggles.
L’Oréal's turnover with Diesel was almost as much, around 100 million, for its scents. Though, Diesel’s biggest license is actually with Fossil, which earned Diesel $150 million, all from selling watches priced on average at $180.
No wonder he’s in talks with several beauty giants for a Marni scent, but so far nothing has been signed.
OTB”s most recent acquisition was taking a minority stake this spring in Amiri, the premier luxury casualwear line by Mike Amiri, an Iranian-American based in LA.
Renzo also went to LA to prepare a new business plan for this business, which turns over some $60 million annually.
"Amiri still doesn’t have flagship so far. But he does have a semi-permanent pop up inside Maxfield and it does great!"
Finally, OTB does not own a stake in DSquared2, but has a worldwide master license in the Milan-based brand. Asked how long it will last, he laughs, "at least for my life!"
This is through Staff, his highly advanced manufacturing unit, which has operated the license with DSquared2 for over a decade.
Annual DSquared2 sales are over 250 million euros, and OTB controls 80% of that, except shoes and underwear.
"Every year they achieve double-digit growth. Dean and Dan (the Caten twins who founded the house) are special. They're always the same, they want to control everything. They want to control the materials, the pattern, fittings and they are totally 100% into their product. You cannot change them. They have their own community, with a great international fan base worldwide," argues Rosso.
All told, OTB's brands besides Diesel account for 40% of the group's annual revenues of 1.5 billion euros. A remarkable success story given Italy’s flat economy over the past decade.
Looking ahead, what does he think will be the biggest difficulties to confront in future?
"Luxury will remain fantastic – between China and India – lots more consumers are being born every minute. But the problem is how to create more desire in these consumers. You can have everything you want in a day now. So, that’s why our Red Tag capsule is made for pre-order and we deliver in December."
Many people today regard fashion as being in disgrace for ecological reasons. What is Renzo’s view?
"Fashion has very good visibility. So us running sustainability can help the world to wake up faster, before we destroy the planet. The new generation sees things with a different eyes. They are pushing the world to be more responsible," he says.
Precisely because so many of its clothes are based on treating fabric, Diesel has huge water use.
"Honestly we use a lot. But other people talk, we have been busy. Now, we never use chemicals in treatment but natural dyes, and we use lasers. Plus, we recycle water. We have reduced water use by 80%. And, we hired Livia Firth’s ecological team four months ago. Now we are finalizing a new plan," he concludes.