In April, luxury retailer Genesis Colors Ltd received an additional $3 million from its single-largest investor Sequoia Capital India in a pre-IPO (initial public offering) funding round. The Gurugram-based firm that retails luxury brands such as Satya Paul, Burberry, Jimmy Choo, Michael Kors, Bottega Veneta, Coach, Canali and the Armani range in India, is looking to raise about Rs500 crore to support expansion.

In the next three years, Genesis Colors will open 10-12 new outlets each year. In an interview, Genesis Colors managing director Sanjay Kapoor spoke about the company’s plans, changing consumer tastes and problems facing luxury retail in India. Edited excerpts:

Globally, growth has slowed down for the luxury market and this will continue. Isn’t the IPO an optimistic move at this point?

It is true that growth in luxury retail has slowed down in the past couple of years globally, especially after China’s slowdown. But we are seeing improvements, not like the heydays, but a decent level of growth across American and European markets. Oil-dependent economies, such as West Asian countries and Russia, have slowed down.

India does not really matter much in the global scheme of things in luxury. Last year was relatively tough. But during the last few months, we are seeing a comeback of demand in the luxury market. This year, as I see it, will be a decent one. For us, we have grown at 20-25% compound annual growth rate (CAGR) during the past few years, and we’ll maintain this rate of growth. The scope in India is huge, essentially in the bridge-to-luxury and the segment above that. The business of luxury is no longer dependent on the old wealth, thanks to the new age business owners, entrepreneurs, professionals.

The IPO is to take the company to the next level. We are a professionally run company and the IPO will ensure better governance, improve liquidity, (and provide) growth capital for the future. This will also help us set an example to our global partners. There are a few luxury malls—two or three in Mumbai and two in Delhi— coming up in the next couple of years. It is important for us to have the capital for expansion for growth. We feel this is the right time. Also, most of our investors will not exit during the IPO.

Are you planning for a rapid expansion?

We operate 100 stores currently. Typically, on an average, we add 10-12 new stores every year. This will continue. We retail 15 brands at present and we bring one or two new brands to India every year. Part of our expansion will be opportunistic, depending on availability of suitable infrastructure. Our business will boom when proper infrastructure comes up.

We may get into new categories like we entered the home segment recently with Villeroy and Boch. The challenge is how we get the new set of customers, get the first-time buyers, and how to get existing customers to trade up. And that’s a work in progress for the next eight to 10 years.

How about luxury services?

That’s not a one-year plan. We may look at this later. Typically we work on three-year plans which we revise every year. In luxury it is a fight for the share of wallet. If someone is spending Rs20,000 a month for personalized gym service, that’s a potential customer and that’s a share of wallet we need to target. It could be service, it could be experience.

What about the non-metro markets? Are you not looking at the smaller markets with brand-conscious wealthy families?

Today, about 70% of our sales come from Mumbai and Delhi. It is good to say that smaller towns are catching up. But, I don’t see the numbers. The reality is different. Every small town has those 100 or 1,000 brand-conscious families with wealth who indulge in shopping for luxury goods. But that’s kind of an annual affair, unlike Delhi and Mumbai where people would go for buying luxury goods a couple of times or at least once every month.

There’s another reason. Delhi and Mumbai have relatively suitable infrastructure that is needed for retailing of luxury goods. And there are a new set of consumers who are well-informed, have money and are comfortable spending. Opening luxury malls or too many stores in smaller cities would not make sense simply because the scale is not there.

Outside Delhi and Mumbai, Kolkata is doing well for luxury brands. It outsells Bengaluru by 40% despite the fact that retailing of luxury goods was started in Bengaluru at the same time with Delhi and Mumbai. This is because Kolkata has a much better designed mall that is suitable for luxury retailing. Luxury is a feel-good factor. It is not about what you need. So, the experience matters the most.

Luxury brands have repeatedly asked for reduction in duty. Do you think that’s is an hindrance for growth of luxury retail in India?

No. Duty on luxury is not a barrier. There needs to be price adjustments, and every brand does that. At present, prices of luxury goods are within 10% of the home markets and cheaper than a lot of countries. The largest impediment is quality infrastructure. Right infrastructure at right price is what we need. There are very few malls, and every brand is chasing the same mall. So, the price of real estate is high at present. Luxury will flourish with infrastructure development.

In luxury, what sells in India?

In the past couple of years, we are seeing the bridge-to-luxury segment growing faster than other segments. Initially, the luxury market in India was driven by the higher-end brands like Louis Vuitton, Gucci, Jimmy Choo, Bottega Veneta.

Over a period, the market expanded and a new set of consumers came to buy luxury. In the last couple of years, we are seeing good growth in the bridge-to-luxury segment brands such as with Michael Kors and Coach. It works like this. A lady may buy one Bottega Veneta bag for a special occasion once a year while she may buy a Michael Kors or a Coach two to three times a year.

At present, about 40% of our business comes from the bridge-to-luxury brands, while mid-segment accounts for about 35% and the remaining 25% comes from the uber luxury brands.

Are Indian luxury consumers any different from other countries?

Globally, a majority of sales of luxury goods comes from women, and it is men who lead the curve in India. About 55-60% of luxury sales in India come from men and the remaining from women. There’s a reason. Indian women buy traditional clothes for wedding. So, women’s clothing is yet to see traction in the higher end. The amount of money Indian women spend for buying sarees or other traditional clothes, essentially for wedding, they don’t spend that much for buying western clothes. On the other end, accessories, hand bags, footwear and sun glasses sell well because Indian women are comfortable wearing a pair of Jimmy Choo shoes and a Gucci bag with a saree to attend a wedding. Indian women are still stuck to our culture. This, however, is excluding jewellery which is seeing more of an investment than spending in India.

On the other hand, when it comes to Indian men, our traditional clothing has taken a back seat long ago. And, Indian men spend more on formal western clothing. Also, casual has started picking up during the past two to three years.

Would localization work?

This is a constant conversation that we have. Food retailers, essentially the ones catering to the masses, have done it successfully. But it does not work for luxury. Luxury brands need to keep their identity. But what we have done is we have brought limited editions only for India keeping their brand ethos fully alive.

Canali is a beautiful example. It does beautiful nawab bandhgala, which is sold only in India. A very important thing is a brand should not change its ethos. Luxury consumers pay for the quality, design and the brand. Also, there are other things that luxury brands do. Store design and the products that are offered in India, essentially the curation of variants and colours, are according to the taste and essence of the local market. The product mix at a Jimmy Choo store in India is very different from other south Asian countries.