NEW YORK — He’s got hair like Harpo, talks like Chico and — judging by the worldwide growth of his brand — is as clever as Groucho.
But when Diesel owner Renzo Rosso speaks about the future of the company, it’s clear that he doesn’t have Marx brothers comedy in mind. He is focused on one goal: Redefining the luxury-goods business.
For starters, he’s not all that keen on the word “luxury.”
During an interview at the company’s SoHo store, Rosso said, “I don’t like to say luxury. Premium to me is more modern, more fresh.”
As the high-end jeans sector has taken off during the last few years, the term premium has come to apply to jeans that retail for $100 or more, with jeans that sell for more than $150, earning a superpremium moniker.
Diesel’s pricing is far above those levels. The Molvena, Italy-based brand’s jeans start at $99, “but in reality, nobody buys that,” said Giorgio Presca, vice president of marketing and sales.
Diesel jeans top out at about $380 and the average price point is $179, up from $129 three years ago, Rosso said. Diesel’s wholesale prices are about half its suggested retail prices.
The company plans to present its new, even higher-end positioning for the Diesel brand at a runway show tonight at Manhattan’s Hammerstein Ballroom.
As the company has moved to reposition itself in the U.S., it has sharply cut back its retail distribution. In the past year, the firm reduced the number of locations where Diesel is sold by 40 percent to 150 doors. Major chains such as Macy’s were dropped entirely, though the brand remains a key supplier to Macy’s corporate sibling, Bloomingdale’s.
The move was part of a recognition that there are a limited number of stores in the U.S. where shoppers are willing to pay $180 or more for jeans.
Rosso acknowledged that cutting back Diesel’s U.S. account base, which meant walking away from $20 million in sales, made him feel like having “a heart attack.” But he said the move allowed the brand to do more business with its remaining accounts, driving up its U.S. revenues last year by 26.1 percent to $145 million.This year, he is targeting U.S. volume of $165 million.
“We cut 40 percent [of customers], but we weren’t decreasing our sales,” Rosso said. “We just established a better volume with our partners.”
Presca added, “We don’t want to be bigger, we want to be relevant. That is a big difference. We don’t want to sell tons of the same product to everybody. We want to sell a different assortment at every store if possible.”
The moves at Diesel’s licensees have been even more dramatic, with prices on some products doubling, as distribution was halved. The brand’s sunglasses, produced by Safilo, top out at $280. Watches, made by Fossil, retail in Europe for as much as 2,000 euros — more than $2,500 at current exchange rates. Shoes, manufactured by Global Brand Marketing, reach $350.
The price increases have brought Diesel’s U.S. positioning in line with its niche in Europe and Asia, Rosso said.
“Two years ago, you could have a very big gap,” in average price point from country to country, he said. “Now every country is exactly the same.”
The trading-up of the Diesel brand also prompted Rosso late last year to pull the plug on Diesel StyleLab, which had been positioned as Diesel’s higher-end sibling.
After the repositioning of Diesel, “they were too similar,” Rosso said.
To hammer home the message of the changes at Diesel, the company boosted its advertising budget to $12 million this year, which Presca described only as a substantial increase. Diesel plans to begin running ads in high-end glossies, including Harpers, Elle and Vogue. (Vogue, like WWD, is owned by Advance Publications Inc.)
“Before, we were only in very alternative and niche magazines,” Presca said. “Now, we are entering mass distribution magazines.”
Diesel is continuing its U.S. retail rollout. The SoHo location, a 4,500-square-foot, two-level space on Spring Street, features an airier design than the firm’s 33 other U.S. retail units. Another addition is a small suite of rooms for private shopping that is intended to appeal to celebrities.Previously, the brand had handled VIP shoppers at its Lexington Avenue store, which last week closed for renovations. Without a private area, the appearance of a well-known shopper often brought sales to other customers to a halt as the store was clogged with autograph seekers.
The firm plans an additional three U.S. locations this year, which will be outlet stores. As part of a bid to further control its distribution, Diesel has taken over disposing of its unsold and out-of-season merchandise to prevent the goods from being diverted into off-pricers and jobbers.
Rosso said Diesel is also ready to enter the Chinese market. It’s using the same strategy it used in opening the South Korean market on its Chinese debut. It has opened a wholly owned office in China and after several years of studying the market, plans to open two stores in Shanghai, one in Beijing and possibly another unit in Shenzhen by September. Over the next three years, Diesel’s plan calls for a total of 14 stores in nine Chinese cities.
Presca described the pace of growth as measured.
“It’s not just entering the market for the sake of making the business, but for the sake of building the brand,” he said.
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