Diesel CEO on Fashion Retail’s Evolution

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Diesel CEO Stefano Rosso shared his perspective on what’s happening in fashion and where it’s headed next.

Diesel CEO on Fashion Retail’s Evolution

By Jessica Binns - 11/10/2017

Anyone anywhere can make a product in today’s world but the key to success is making that product relevant to consumers. That was among the insights Diesel CEO Stefano Rosso shared during a recording of the The Current Innovators podcast, hosted by Liz Bacelar, at The New School in New York City.

Unlike many fashion companies that create collections for different geographic markets, the Breganza, Italy-based lifestyle brand develops a single global collection with “very few local adaptations,” says Rosso. But in order to connect with consumers market by market, the company looks to special capsules and collaborations in order to provide that on-the-ground relevance. In China, for example, Diesel recently collaborated with top creatives and influencers that really helped to expose the brand to consumers previously unfamiliar with the Italian label. However, the impact of those “local” efforts didn’t end in the Far East. “Funny enough,” says Rosso, “we had the product here and there was line of Chinese consumers outside the SoHo store.” Within a half hour, the collection sold out.

“Nowadays, and especially in key global cities, the international community is so broad that something that’s relevant in China might be very successful here as well,” Rosso adds.

How the experience of fashion is changing

Fashion is in the midst of a “changing of the guard.” The traditional system of a designer-led megabrand that flooded stores with product and inundated consumers with advertising is over, Rosso says. Experiences such as ComplexCon — the industry-spanning arts and culture festival which the Diesel CEO attended earlier this month in Long Beach, Calif. — “are really what’s happening,” he says. Consumers want to feel the excitement about and have access to hot new products, and that might mean the experience of queuing outside the Supreme store for the most exclusive new release.

That’s where fashion is “sleeping,” Rosso explains. “They don’t understand that all of this is powered through technology, through digital experiences and social networks.”

Questioning the need for big-budget fashion campaigns, the Diesel chief says a better approach might be to drop a “super hot” product with just a week or two’s notice to start building desire. “You create the expectation, people come to live the experience and at the end, they will buy the product — which is the last piece of the puzzle and not as important as it was back in the day.”

The era of building megabrands, he says, is over. It’s much easier, as we’ve seen in recent years, to create a “hyper relevant” brand in a short period of time because the cost and structure needed to support a company that jumps from zero to $50 million in, say, two years is “quite manageable.” But if a billion-dollar brand doubles in a year and then shrinks back to $1 billion 12 months later — more than likely it can’t survive that steep a decline. “The cost of opening retail stores, hiring people and finding production facilities is such a heavy investment,” Rosso notes.

Physical versus digital retail

Admitting he was an “extremist” in thinking that the days of brick-and-mortar retail were numbered, Rosso describes physical stores as a “linking and landing place where brands and consumers meet.” What will change is how the fashion industry approaches physical retailing.

As stores and e-commerce increasingly merge into a “phygital” environment, what needs to change is the investment that apparel companies are making in their physical spaces. “I can’t have a store that’s going to become a showroom and an experiential space and still have the landlord asking for premium prices,” Rosso says, “when I’m not creating the economic value in that store that I was five years ago.”

The solution? Brands operating fewer, and smaller, stores that display products beautifully in an experiential environment that allow shoppers to take purchases home or have them shipped.

Rosso points to Amazon as a remarkable example of digital company innovating in physical retail by recreating the online experience in store. From highlighting five-star-reviewed books to showcasing comments from leading authors about their works, Amazon Books gives consumers a similar experience to what they would find if shopping on their smartphones.

“If your experience in physical is totally different from digital, consumers are just going to walk out of your store,” Rosso says.

Tech to watch

The Diesel chief is keeping a close eye on technologies such as augmented reality and virtual reality (VR), despite the fact that no one in fashion is making money on them yet. Rosso’s interest in VR in particular is tied to the unrelenting pressures upending physical retail. If commercial rents remain high and opening new stores is cost-prohibitive, then why not create a virtual experience that brings the store into the consumer’s home anywhere in the world through an affordable VR headset?

“Reading a book is sometimes boring, but living it is something else,” he explains. “VR can give you that experiential quality. Everybody that can’t afford to be somewhere at a specific time is able to live the experience from home.”

Rather than replacing the need to visit a store, VR can coexist alongside brick and mortar, according to Rosso. VR can help brands do certain things better and cheaper, but because humans are inherently social and tactile creatures, such technology will never replace the drive to see, touch and feel in person.

“I have the feeling there’s something there that definitely can be useful for society,” he says.