Mumbai: Even as Indian economic growth has slowed and big retailers such as Pantaloon Retail (India) Ltd, the country’s largest listed retail company, and Aditya Birla Retail Ltd are consolidating their operations to cut costs, Genesis Luxury Fashion Pvt. Ltd, India’s largest luxury retail company with brands that include Bottega Veneta, Burberry, Canali, Etro, Paul Smith, Jimmy Choo and Tumi, has almost tripled its footprint during the year. It also received its third round of private equity investment earlier this year and plans to launch Sephora, the multi-brand retail chain from Moet Hennessy Louis Vuitton SA, by December. The company plans a public listing in the next two years, Sanjay Kapoor , managing director of Genesis Colors Pvt. Ltd, parent of Genesis Luxury Fashion, said in an interview. Edited excerpts:
You are now one of the biggest luxury retailers in India. Was this an objective you started out with?
There was no plan when we started 10 years ago. We were into the business of selling ties and scarves overseas and we excelled in retail. We added one brand and it has been a natural progression from one thing that led to another. Always excel, be a perfectionist and have an interest in what you do.
How is the slowdown in the current economy impacting the luxury consumer?
In reality, even though the Indian economy has slowed, I haven’t really seen a slowdown in retail. Retail continues to grow strongly. We are seeing like-to-like growth (a measure of growth based on sales in stores that have been open for at least a year) between 15-20% in mature stores. This is because people are getting used to consumption, and people want to look good. Spending has not really slowed even if the economy has slowed. Also remember, a lot of the retail is in the large cities in India and urban India is still growing strongly.
Is it true that the luxury consumer in India buys half a dozen or more bags in a single visit, largely as wedding gifts, and pays for it all in cash?
I have heard about these consumers, but am yet to see them. I think that is the biggest myth and that is not the typical consumer. The typical consumer is reasonably well travelled, well informed, certain of his choices, reasonably price conscious. They will pay the top price, but they know the price in the home country. Take the case of Mercedes. When they came to India, they lost money initially as they kept launching models that were two years old as they were looking at keeping the pricing low. But they finally started making money when they launched the top-end model with bells and whistles. So, the Indian consumer is ready to pay the price for it, but is still very discerning and aware. There is just the odd consumer who is coming and paying for a product and is not aware.
What percentage of your sales comes from occasions, festivities?
If you include marriages, the biggest occasion in our country, I would say that 50% of our sales come from occasions. Moreover, the business is more skewed towards October to February, whether it is the weddings or the festivities.
Do you compete with ethnic Indian wear brands?
You compete for a share of wallet whether it is services, spa, restaurant, product or anything. If the family is going out or an individual is going out, they can spend on anything—it could be a handbag, or a fancy meal, or champagne. It’s about competing in a lifestyle space.
But the Western apparel market is yet to take off here...
Yes. The accessories market is much bigger than apparel for women. For men, the apparel market is much bigger as there are not much accessories there.
Who are the bigger spenders on luxury items—men or women?
Men account for 60% of the luxury market whereas women account for 40%, men are the bigger spenders. This is true even for the non-luxury market. This is because historically women spend a lot more money on jewellery. They buy more investible products like saris that can be passed down the generations. So, fast-moving items of fashion don’t typically get large spends from women. This is not only true for India, but in many parts of Asia.
Foreign direct investment (FDI) in multi-brand retail has been approved by Parliament. Do you see any brands wanting to go to the market alone under single-brand retail?
It is a positive development. It doesn’t really worry us whether a brand of ours will go single. It is good for the economy and the market. It is important for brands to do well in India. There has been so much negative PR (public relations) around India and that needs to change.
Are you seeing conversations change now with the intention of the government to push policy reform and FDI.
Nothing has changed so far. Everything needs to be crystal clear.
We keep hearing about India being the next China. But brands are not yet committing to grow here the way they have in China...
India is the next China. But we are 15 years behind them and that is a huge potential. Look at Burberry, we have three stores in Delhi alone of just this brand. We have 11 Satya Paul stores in Delhi. Don’t underestimate the economies of Delhi and Mumbai. They are very strong. Delhi, Mumbai, Bangalore are our biggest markets in that order. Delhi and Mumbai account for close to 60% of our market.
Are you considering an initial public offering?
Absolutely. By 2014-2015. It could be 2016 also.
How large do you hope to be at the time of listing?
I would rather not divulge any revenue numbers as we are a privately-held company. We are looking at growing between 40-50% annually. We have 100 stores now and will add 25 stores every year. We have an exciting portfolio of brands already and will add a few more market leader brands if required. The large challenge in this business is still infrastructure, getting the right real estate.
What is happening with Sephora?
We are launching Sephora in India by December in Select CityWalk in Delhi. We have aggressive plans to grow the business here.
You now have a portfolio spread across fashion and beauty. What about watches—the third big luxury retail segment?
We have one Tag Heuer store. But the watch business is a little bit more complicated. The duties are high and it’s got many established players.
A lot of luxury e-commerce sites are coming up, selling at discounted prices. Is this a detriment to your business?
I think e-commerce will survive (along) with brick and mortar businesses. I don’t think one will survive without the other. Luxury is a touch and feel market at the end of the day and yet supply chain is difficult here.