Today we spoke to a very interesting guest, a man who turned his passion into a successful retail business on the other side of the world. For someone like myself, and I imagine many of you, there are luxury goods markets that remain somewhat of an enigma – overshowed by the glitz and glamour of hotspots like Dubai and Hong Kong. So, we got in touch with Pratik Dalmia of Regalia Luxury to discuss the Indian luxury and ultra-luxury market, and talk a bit about watches too, of course.
Pratik Dalmia of Regalia Luxury
Andres Ibarguen: How and when you started your business, Regalia?
Pratik Dalmia: I started this venture in 2014, as I had been a consumer indulging on luxury brands while I lived in London. When I relocated back to Mumbai, I sensed an opportunity to fuel my passion as “this is something that excites me”, I understood it might not meet my financial ambitions, immediately, but it was a growing opportunity. I was at an age where I can take risks, I can experiment with opportunities that I am passionate about and thoroughly enjoy. So, I relocated back and got started on Regalia Luxury. I also enjoy traveling so this business gave me the chance to do that as well.
We started off and it took quite an effort for me to land my first brand, Kiton. I made multiple trips to Naples as I had to convince them of my novel approach to introduce the brand in the market and allay their concerns that our family has traditionally been involved in industrial businesses and not retail. Luckily, Mr. De Matteis, current CEO and nephew of Ciro Paone was very generous and supportive, like he is still today; and he took the leap of faith and gave me a chance to represent Kiton in India.
I must add that most people who get into luxury retail they see it as a trophy business or a lifestyle business, they’re not looking at it as their primary source of income. But for me, I was at the formative stages of my entrepreneurial career and was hence seeing it as a long term and stable income generating opportunity.
Just to digress a bit and give you some context, the Indian luxury retail market is a very nascent market, we’re 1.4 billion people but less than 0.1% is the addressable market for ultra luxury brands. Add to this that, a large portion of them shop overseas. Moreover, we are not a transit hub or a shopping hub like Dubai or Singapore or Hong Kong. We have a depreciating currency and a high duty environment. Given all of that you have to be quite prudent in how you make a foray into luxury retail in India.
I was pretty clear going into it, we studied the market and we studied our targeted customer base, we realized that a larger portion of the business happens outside the store versus inside the store with the concept of home shopping. The customers seek additional pampering, having high-end luxury brands at their doorstep. And also, often convenience of being able to shop from their homes or offices, with the family as it’s a collaborative process.
AI: Nice. And so, after Kiton how did you get into watches?
PD: The logic was, I’ve got the customer, I need to deliver him a lifestyle, I want to have a greater share of his wallet. So, with Kiton we’ve got him in the best suit, with John Lobb I’ve got him in the best shoes, then what else does a man spend on, right? Watches, cars, accessories. So, we got Bovet, we’ve been very successful with Bovet since we launched it. And remember, since I’m seldom someone’s first luxury suit, I’m never their first pair of luxury shoes or their first luxury watch. Hence it was effectively cross-pollinating the same audience.
AI: Cross-selling, right. You’ve expressed that you’ve always had an interest in the luxury goods industry, but what made you think retailing in specific would be the path you wanted to go down?
PD: It’d often crossed my mind, why would I bring someone else’s brand into the country? The five brands I represent, 95% of our customers were not even aware of them until we made them aware. But then I realized what was my strength was, my strength is trading. If I were to get passionate about it, start my own brand, I’d take 10 years on it, sink in a lot of money. And I think once you start your own brand it’s very difficult to disconnect. And creating a brand is not an easy task. All of the brands that are successful today are over decades and some over centuries old. So, we consciously said that we’re going to focus on forging deep relationships with brands who are on a similar wavelength as us and collaborate together to make them a joint success in the market.
I also didn’t want a mere transactional relationship with the brand wherein their mere concern was the quantum of my order and the speed of my payment
Inside the Regalia showroom
AI: One thing that really interested me about Regalia is that you’re located in Mumbai, we actually have a lot of followers from India, I’ve recognized for a long time that there are a lot of growing luxury markets that are not being addressed by the larger brands, India being one of them. So, what made you personally want to choose Mumbai as the base for starting your business.
PD: It was a natural choice because it’s home for me in a way, so it was the starting point, but that said we have set up a small office and our first flagship store in Delhi. We also have a small representative office in Hyderabad. We kind of dot the map. Mumbai was just a choice because it’s home for me, where my network exists. So that was the main reason we chose Mumbai.
AI: Makes sense. But in terms of the luxury goods market is there something that made it specifically attractive? How many people in the city are consumers of luxury goods?
PD: There are pockets of customers across the country, it’s a finite population of people, I’m talking about ultra-luxury customers since those are the brands I offer. So, they are scattered across the country. There is some amount of cultural influence as well, in the north it’s a bit more of an ostentatious culture. Hence the willingness to spend is far larger, whereas in some of the other parts of the country its subtler.
AI: Why do you think this discrepancy exists? In Italy the discrepancy is a bit the opposite, a mix of cultural but also economic-based factors. The north of Italy is generally more prosperous and industrial while the south’s economy is more influenced by agriculture. Does a division of that nature exist or would you say it’s mostly cultural?
PD: It’s purely cultural, some are conservative cultures and some are fairly modern cultures.
AI: So, what do you think of the future of the luxury or ultra-luxury goods sector in India, do you see it continuing to grow?
PD: Well, our population is getting younger, savings culture is changing – India is traditionally a high savings society but that is now decreasing. Social media has also been very influential over the tastes of the younger generation, everyone is going out of their way to have a certain appearance online. For those reasons we believe it’s going to spiral down and result in consumption. I’m not saying the average Indian is going to go out and buy haute couture, but I think the aspiration for it is coming in far earlier than it would typically be. It’s a long runway and there’s tremendous opportunity, for that reason we are committed long-term to the business.
AI: What I would take away from what you just said as key is that it’s a long runway. A lot of people underestimate that in luxury goods, especially thinking of a market from a macro perspective. Something I’ve always maintained as a hypothesis is that there are stages of development for a luxury goods market. You mentioned the aspirational aspect and I think the stage of development India is at would see more and more people start to wear premium luxury brands, Gucci belts and Louis Vuitton bags, before the market gets to the stage of Bovet or Ressence in terms of horology.
PD: And that will always happen, right. When I started consuming and indulging, I wouldn’t go for these independent and niche brands, but now I would seldom visit boutiques for the big labels. All customers mature over a period and develop a sense of appreciation for quality, design and craftsmanship.
With our brand portfolio we cater to a slightly older audience, because of our price points they like the subtlety of our brands because it is the craftsmanship that is talking not the brand name.
AI: It’s more than a status symbol, I guess, that’s where most people arrive at a certain point.
PD: My customer is not someone who’s attire is a reflection of their success.
AI: Right, and I think part of the development of a market in this macro sense is having companies like Regalia contribute on the supply side as the demand side is also growing.
PD: Well, we would like to believe we are doing our share in widening the options available for connoisseurs locally in India and have adopted a niche and bespoke approach for the same.
AI: What speaks to you specifically about the brands that you carry? What’s the common node? We’ve mentioned Kiton but you carry a few others as well like Isaia.
PD: I think what stands out for me is the disproportionate focus on quality and craftsmanship. And I say this with all credit towards other luxury brands, but in most cases, you’re paying the price for the brand, for the logo. But here you are paying the price more for the quality of materials, the uniqueness, the craftsmanship, the heritage. That’s what for me is the unifying thread, if you see most of our brands, the youngest brand we have is Ressence, which is 10 years old, but otherwise every other brand we have are a few decades old. Also, the working relationship, that’s what’s important. I don’t want to be lost; I’m not saying I trouble the owner everyday, but I don’t want to be lost in some corporate hierarchy. India’s a market where you need to be nimble, you need to be agile, you need to react fast. And that’s important if you want to succeed.
AI: When you say that you need to react fast, what do you mean exactly?
PD: Just to give you an example on the fashion side, in India we have our own cultural trends or preferences. So, to be able to react or create something that is suitable for the local market, despite not having a very large demand for it, is important. That’s the flexibility that we require.
AI: And what do you think drives tastes in the Indian luxury or ultra-luxury goods market? Being largely uninformed, the only significant cultural driver I would think is Bollywood, there’s a few movies and TV series I follow and I see it reflected to an extent when I read Indian news. What would you say?
PD: I think it depends largely on the level of consumer you’re targeting, I can speak well for my target audience, I don’t think things like Bollywood are an influencing factor for them - for the level of audience I’m looking to reach. I think it’s more about awareness, so by that I mean there is not many external influencers that can steer the purchasing decisions of this segment of consumers. They want to know that they’re purchasing from a reliable source, that they’re paying the best possible price; they have done their own research, because remember: I’m never someone’s first luxury watch or I’m never someone’s first pair of shoes. They’re more interested in knowing the brand, they’ve read up about it before making a choice. So, it’s more about, am I able to communicate a sense of assurance or reliability when they make their transaction with us.
AI: Right, and I suppose ultra-luxury consumers everywhere would have similar driving factors behind their purchases.
PD: Exactly, because they can be guided but they can’t be told what to buy. The clients I cater to have been wearing Italian sartorial fashion for over 20 years, so they don’t need to be told what to buy. Of course, you can give some advice but they know what they want and will make an independent decision.
Ressence Type 1
AI: Are you yourself a watch collector?
PD: Yes, but I’m not a very big collector, I’m still early days, still have to build my collection.
AI: Do you have an affinity for anything in particular? Vintage, modern, any specific brands?
PD: Well because I’m in the business I’m usually steered more towards independents, I’m fond of them, and that’s the reason I’ve pursued them.
AI: Are there any other hobbies that you regularly indulge in?
PD: Pre-Covid era I would be on a plane 15-20 days a month, I really enjoy traveling, going to new places, and of course, despite being vegetarian, I think food is an extremely important part of my life. So, I enjoy experimenting with new cuisines and I am generally passionate about business development. I’m constantly exploring new opportunities and new avenues for my businesses.
AI: And back to the Indian luxury or ultra-luxury goods markets, how do you think it fits in competition with markets in its vicinity like China, Japan, Singapore, Hong Kong etc.
PD: The ability to spend exists but we don’t have the depth of the market that they have. There are brands with hundreds of stores in China while they have only a handful in India. So that would be a good representation of the contrast. There are genuine hidden gems who can really spend a lot of money on individual brands, but unfortunately there aren’t scores of them that warrant a massive rollout of stores.
AI: So, I guess the difference in markets comes down to the concentration, maybe in Mumbai has a certain concentration of these consumers while China might have 10 cities with the same level of concentration, and the United States might have 40 or 50.
PD: Exactly, the first luxury brands only starting coming in a little over 10 years ago. While the royal families of India back in the 19th century, of course, patronized and were the biggest customers for brands like Rolls Royce, Cartier etc. and we all know this heritage. However, the ‘re-launch’ of these kinds of brands back in India has only been in recent history, as late as 2010.
AI: And so, with that in consideration what are your future plans for Regalia? Would you think of going international, to another market, or are you planning more to focus on the Indian market?
PD: Our strategy has always been that I want to deliver lifestyle to my customer, so we’ve been expanding categories. We’re looking at brands in luggage, brands of automobiles, my strategy has always been that I want to offer a lifestyle. I want to widen my portfolio but I don’t want to have a portfolio where I have two brands competing with each other. I want every offering to be clearly distinct. We grow at our own pace. As I said it’s my own business, I don’t have any pressure from external investors, but that doesn’t mean I’m slowing down or I’m going to be stagnant. At the same time, however, I want to have a measured pace of growth, something that I can sustain.
AI: There was a time when any time you’d go to shop for a certain class of product you’d be received with a glass of champagne, offered a seat, and it would be a nice relaxing experience – being served individually. Whereas now you might go into a store and have to stand in line, where no one will look at you until it’s your turn at the counter. I guess it’s a function of supply like you alluded to, managing 10 stores is different than 1. I could see a lot of retailers cutting back on physical locations in the future, maintaining only their flagship stores in the 5th Avenue or Montenapoleone type of areas – where they will offer this individualized shopping experience. But I think the more generalist customers will simply be directed towards their online options, as a lot of them have already started to lean towards.
PD: Well it’s a trade off right, I think some big brands with the resources will want to dot the key high streets of the world. Whether you want to consider that as a marketing expense or a strategic move, whatever. They will look at that retail store as a profit center but those that can afford it will definitely want to be on 5th Avenue, Bond Street etc. It’s eventually a function of might, resources, deep pockets for companies.
AI: And I think that’s also an interested aspect about the luxury goods industry and a few others. There are some sectors which I think are seeing a lot of consolidation, so deep pockets are key. However, one thing that’s great about the luxury industry is that independence holds a lot of value, there’s always room for someone to carve out their own niche.
PD: Right and there’s many examples of that. Chanel bought 20% of F P Journe recently and that’s testament to the fact that independents are on the right track.
AI: Yup and those independents are what makes it such a nice industry, in my view, it’s what allows it to be so dynamic.
Finally, I just wanted to ask you about the current crisis, I’m aware of how it’s affected different retailers in Italy, Europe, and the US, in general. But how would you say the current health crisis has affected retailers in India?
PD: I think what’s happened, of course, is that it’s making us all rethink our ways of connecting and engaging with customers. Our business is milestone driven, so if people are home sitting in their pyjamas, they are less incentivized to buy fashion without social engagements or corporate functions. So, the two categories we deal with are fashion and watches, and on the watch side it’s mostly occasion or milestone driven – weddings are a big occasion in India and purchases for weddings continue to happen. But yeah, it’s difficult, we’re all redesigning our business, we’re all thinking about how to remain relevant in such a challenging time.
AI: I guess staying relevant is most important, things being occasion driven means that with less occasions due to social distancing, brands and retailers become somewhat less relevant. Would you say that there has been a noticeable decrease or have adjustments allowed for sales in the market to stay more or less equal?
PD: There’s definitely been a decrease, I’d be lying to you if I said we were back to pre-Covid levels, but we’re really optimistic that before the fiscal year ends, which is March 31st in India, we should at least be back to pre-Covid revenues.
Thank you very much for speaking with us, Pratik!