Diesel’s Collaboration with AllSaints

Collaborations represent a voluntary cooperative relationship in which participating firms expose themselves to the risk of opportunism (International Business Review, 2001, 341).

Diesel has over forty years positioned itself as a premium luxury brand and prides itself as an alternative to the established luxury market. There’s no shortage of competition, however with the UK clothing market forecasted to grow by over fifteen percent by the year 2022 (ReportLinker, 2017). This essay explores Diesel’s place in the sector, and a suitable collaboration with a complementary brand.

Competition

Diesel’s key competitors in the UK are identified in the assessment presentation and include stalwarts such as Levi’s and Hugo Boss, and contemporaries such as Giorgio Armani, Replay, and AllSaints.

 Analysing Diesel’s competitors, both strengths and weaknesses that stand out. The prestigious Giorgio Armani marks itself out with quality products and competitive prices. The brand also has a knack for innovative marketing, standing out as the first fashion brand to live broadcast a fashion show to a global audience via the internet. However, it is an aspirational brand with typically more expensive products in most categories; this limits its presence and scaling opportunities.

Levi’s leverages its strong global presence built around its subsidiaries and distribution channel, also having stylish products priced competitively, the brand has a connection with younger people. It, however, has a weak retail sales record and is a constant victim counterfeit.

The relatively new AllSaints, founded in 1994, ingrains itself within the popular culture through smart marketing. It’s named after a famous London street (The Guardian, 2010), and leverages young British celebrity influencers. The brand’s strong connection to the music industry sees it regularly collaborate with popular artists (London fashion review, 2011), while also being actively involved in social causes and activism (Drapers, 2011).

Brand Positioning

The figure below illustrates Diesel’s position in the market with a focus on its price level in comparison to some of its compatriots and some older brands.

             Giorgio Armani

                                         Hugo Boss              

High price

                                     Diesel

                AllSaints

Replay

Classic

                                            Levi’s

                                                               Modern

Low price

Figure 1: Positioning Map

Diesel’s strategic report credits the brand’s high position on the top of consumers’ minds to its innovative marketing strategies, such as the “Be Stupid” (Zhang D, 2016, 9) campaign. Internet technology is also to credit for disseminating viral campaigns and capturing the psyche of a fresh and young market.

PEST Analysis

An analysis of the political, environmental and social-technical factors influencing Diesel reveals that the clothing industry in the UK and Europe has endured a difficult period over the last two years owing to several factors such as terrorist attacks in France and England’s withdrawal from the European Union. However, the industry is still on a positive growth trajectory, with an estimated worth of over two trillion, according to the Mckinsey Fashion Index. Evolving technology is also contributing to the changing customer habits, which should be a big factor in the development of Diesel’s marketing strategy.

Political Volatility

The macroeconomic and geopolitical environment in the UK, as it is globally, is increasingly a volatile one. In 2017, the commission and threat of terrorist attacks in London was a concern for businesses in the city and many other regions, and the disruptive of regular commerce negatively affected the bottom line of many brands.

England’s withdrawal from the European Union was also an issue that caused a lot of anxiety as anticipation of the consequences of such an exit impacted consumer behavior. As volatility became normalized in 2017, all dimensions of business were affected including consumer demand, fashion tourism, labor, and resource costs (BoF and Mckinsey, 2017, 56).

            It is a recommendation that industry players adjust their strategies accordingly: by adopting a consumer-driven approach that shifts with the buyers’ needs, build a solid supply chain to improve operations, diversify business and manage the costs of doing business (BoF and McKinsey, 2017, 56).

Technological change

”Placing big bets on technology increases a company’s chances of being a future winner” (BoF and McKinsey, 2017, 84).

 Market trends such as localization and fashion cycles pull in different directions and leveraging technology helps deliver results. In fact, technology has already changed fashion retail since the advent of e-commerce. In this era of the internet and online shopping, consumer choices are globalized, and they can pursue options, which in turn affects general sales. The competitiveness arising out of a globalized market requires aggressive and specialized target marketing, inclusive of personalized customer service.

To improve profit margins, labels are looking at emerging technology as a tool to address sourcing and supply problems. According to the International Labour Organization, over fifty percent of salaried workers will be displaced by automation in the next few decades, and it is the textile and clothing industry that will lead the way (Chang, J.H., and Huynh, P., 2016).

            There is a growing need to take up new digital processing tools across all market segments with the view of creating efficiency, and integrating design with cost. Even so, some smaller compatriots within the industry will be held back by a deficiency of capital for automation or unwillingness to change. 

Economic Volatility

            Economic volatility impacts market revenue. The clothing industry is one of the biggest employers in most economies. The UK clothing market has been on an upward trend, driven by inflation owing to a weak pound driving up import and manufacturing costs (ReportLinker, 2017). The volatility should result in lower sales, but encourage franchising in external markets.

            Urbanization impacts the economy since it’s a trend that normally has a positive effect on the clothing industry. As a new class of influential markets grown globally with expanding cities, and immigration into these areas with less conflict, it creates shopping hubs for consumers positioning them centrally in the evolution of fashion. 

Social Factors

Social factors directly impact the growth of the fashion retail industry. The UK is an urbanized environment, with an ever-increasing population. This target market is inclusive of a millennial generation, which wants good quality, good prices, and personalized convenience.

Today’s consumer is always has access to feedback, opinions and is conscious of value. This trait sees the modern consumer diversify their clothes-buying habits, more willing to associate with different brands. It does present an opportunity for brands to consider collaborations, thereby giving the consumer the best of both worlds.

There’s a need to reconfigure the traditional brick and motor store, as competition shoots up with more players coming into the industry. The modern consumer is increasingly hard to pin down, having a diverse taste, and so utilizing customer relationship technology should prove crucial in helping create a seamless consumer experience.

The world is getting healthier which invariably creates a problem of having vastly contrasting consumer groups for industry players to satisfy. According to analysis from McKinsey, the elderly in developed countries will increase in number by over seventy percent in the next fifteen years. At that time, people over sixty should be over thirty percent of the population, which translates to a growth of over fifty percent in developed urban markets (BoF and McKinsey, 2017, 72).

The millennial generation has also rapidly expanded and is assumed to dominate the current global population. Eighty-five percent of these people live in emerging markets and have a spending power of approximately $2.5 trillion, which is forecasted to go up in the next few years (BoF and McKinsey, 2017, 73). This consumer group is individualistic and difficult to group. Going by the 2016 Mckinsey millennial survey of 11000 US consumers (BoF and McKinsey, 2017, 73), they make purchasing choices depending on value, quality and image of brand and products.

It is imperative to pursue effective ways of communicating to and engage these diverse consumer groups, focusing on the distinct values that resonate with each instead of just their respective ages.

An unlikely union between the wellness movement and fashion, owed to the former’s rise in popularity, has seen the fashion industry profit rather than having to compete. Lifestyle trends founded on health and wellness are the rave globally and has informed Diesel’s proposal, in the assessment, to incorporate vegan leather into the product line. Also, it should offer wellness experiences to interested customers. Since wellness extends to more a holistic sense of a person’s being, incorporating the mental, physical and emotional and more, it would bode well to reflect and connect to these attributes thereby creating a deeper relationship with the consumer (BoF and McKinsey, 2017, 75).

The fashion industry is also transforming with brands increasingly deviating from the traditional fashion cycles in the western markets. The ”see now, buy now” trend is increasingly garnering momentum as pop up shops become the norm alongside traditional runway shows. As more high-end brands follow this trend, the ripple effect will be felt throughout the industry with players adjusting their sell-in model to remain competitive (Bof and Mckinsey, 2017, 76).

Organic growth is also driving brand growth. With the advent of online and mobile shopping, having numerous stores is no longer in vogue within the industry. ”Brands need to focus more on like-for-like sales, increasing domestic demand and growing through value rather than volume” (BoF and McKiney, 2017, 82).            

Collaboration

Rationale

The fashion industry used to be considered elitist and a preserve of gatekeepers and high-profile glitterati (Hypebeast, 2017). But the advent of brand partnerships at the mainstream level has seen the sector open its doors to a broader audience, different cultures and adopting new attitudes.

Luxury brands such as Luis Vuitton, Burberry, and Tommy Hilfiger are collaborating with street-wear labels such as Supreme in search of newness and cool (BoF, 2017), and management consultants Bain & Company posit that millennial buyers will account for forty-five percent of the luxury market by the year 2025 (BoF, 2017). This segment of the market is comfortable with street-wear and finds it the norm, and it’s in keeping with this point of view that luxury brands seek collaborations in a bid to ingrain the younger consumers with their ethos.     

The main point of engaging in a going concern is to make money off the venture, and collaborations offer an opportunity to engage and learn from one another, triggering growth. A collaboration effort should be a learning battlefield (Hamel, 1991) and it is crucial for brands to seek, absorb, and transfer knowledge from collaborative arrangements (Osland and Yaprak, 1995).

In line with Diesel’s strategic marketing report, the target market envisioned is a rebellious one, young and individualistic. This audience does not adopt trends easily, is artistic, athletic and adventurous. This has seen the Diesel collaborate repeatedly with Ducati and Adidas (Zhang D, 2016, 13) to create a sporty line. Both brands share values with Diesel, such as fun and rebellious brand culture.

Adidas is a brand with a vibrant, youthful feel, and as one of the biggest brands in the world of fashion, its market base is segmented proportionately amongst diverse age groups. Adidas targets young adults, adults, and children, triggering their passion in sports and fitness.

Adidas would be an appropriate collaborative partner for Diesel, with the view of leveraging their joint strategies to improve market penetration.

Adidas offers Diesel the opportunity to create a customer base with a younger audience that would be priced out, but are loyal to Adidas, seeing as it offers a wider range of products priced competitively enough for their reach.

This collaboration would be ideal as the brands share a sustainability ethos and have a zest for sustainable business. Adidas collaborates with organizations such as International Labor Organization, and International Finance Corporation, which coincides with the Diesel brand extension idea to tap the vegan leather market.

Other than the compatibility of the two brands, the collaboration provides an opportunity to take advantage of changing lifestyle in developing economies. An improvement in taste and preferences of the customer base has seen increased demand for premium products and services.

An expansion in the product line, as would be achieved through collaboration, provides an opportunity to enter new markets seeing as the developed worlds’ market is saturated.

Through backward integration, the collaboration should strategically incorporate an open system of operation between development and operations. 

Threats

Adidas leverages its promotional activities on celebrity endorsements because they play a role as inspirational figures for the young. Diesel as a brand does not utilize that marketing method, so that might prove a rough spot in the relationship. However, this type of branding is effective in creating touch points with the community, sponsorship in major sporting events has proven successful for Adidas in increasing its customer base.

Due to extensive outsourcing and emerging technology for creating sustainable textile products, expensive production methods do eventually price out customers in developing countries. Having high prices though relays the premium nature of the brand.

Competition is rife in the sport-leisure wear sector of the fashion market. Stalwarts like Nike will always provide competition, while the internet offers a global audience for emerging brands. This is the nature of doing business, and fair competition always breeds innovation.

The collaboration offers an opportunity to develop localized manufacturing; this is because outsourcing majority of production leads to industry dominance by suppliers.

Government regulations will always affect commerce and with over ninety percent production happening outside the UK, regulations, duty, and tariffs come into play. While this will invariably increase costs, the consumer bears the brunt when prices are configured.

It is theorized that collaborations could be running their course and becoming sterile, that some are not authentic, which is easily discernable by an informed consumer. A case in point is the recent partnership between H&M and Erdem that got significantly less attention for the brands compared to previous efforts (Shannon S., 2017). ”Mass market fashion retailers could learn something from street-wear brands and sports-wear giants about keeping their collaborations fresh” (Shannon S., 2017). However, this point of view is skewed considering the levels of success street-wear brands such as Supreme and Adidas are having with such unions.

It goes to show that if the suitability is right, then it can be made to work. To counter the negative narrative of outdatedness, Diesel should seek to produce collaborative products in small quantities/ volumes, while also striving to achieve an element of surprise and freshness. Besides it never is a complete failure considering the exposure that the accompanying campaign would generate.       

Collaboration Launch

Not all collaborations are created equal (Vogue, 2017), and it depends on the reasoning behind it. This collaborative effort between Diesel and Adidas can be defined as disruption, by trying to find new ways to expand reach to a new audience.

Consumer needs and behaviors are more sophisticated, technology-driven and harder to predict. It is with this in mind that the collaboration launch will be geared towards triggering an emotional response from customers. The launch process envisioned is a stepped one.

The process starts with celebrity endorsements at social events. Celebrities drive pop culture, especially musicians. To easily get noticed out in the market in this modern age, influencer marketing is a necessity, Adidas is a known collaborator with acclaimed creative, Pharell Williams, with resounding success so far (Vogue, 2017).

As we’ve become more reliant on the internet compared to traditional media for communicating, social media takeover would quickly follow; utilizing artistic expressions of the collaborated product to create photo and videos shoots, which would also include celebrity influencing on social media.

There would be scheduled pop up shop events, in keeping with current trends. The main locations targeted would be universities, particularly at school fairs, and malls that would provide access to a younger customer base with the buying power of their working-class parents.

Music speaks to the emotions of most buyers, and music videos even more so. In keeping with this, subliminal messaging would also be done via appearances in music videos. The same can be done in other films of relevance, which is a staple for most campaigns (Vogue, 2017).

Conclusion

The fashion industry is integral to the global economy, with an estimated value of $2.4 trillion as of 2016 (BoF and McKinsey, 2017, 06). Far from being a trivial pursuit, the industry can be a stimulus for most economies and drive growth.

Collaborations are going to become key in meeting changing consumer demands, while increasingly, globalization of markets and competition has pushed brands to adopt joint ventures as viable strategies in acquiring managerial and technological skills, developing markets and sharing of business risks.

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