Startup Sunday || Season 3 Episode 22 || Nykaa! One stop beauty destination

1The French designer Yves Saint Laurent nailed it when he said, “The most beautiful makeup of a woman is passion. But cosmetics are easier to buy”. This is especially apt in today’s day and age where the ever-helpful e-commerce businesses are putting everything a consumer needs online and giving it to them with hefty discounts.

For every girl, be it a college student or a working woman, her one-stop beauty destination is NYKAA! Launched just in 2012 by Falguni Nayar, an alumnus of IIM Ahmedabad, Nykaa is currently valued at INR 3000 Cr. Let’s delve into the entrepreneurial journey of Ms. Nayar, and see how the Company has managed to achieve breakeven EBITDA and a valuation of INR 3000 Cr in a span of 7 years

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Launching it at the right time

Ms. Nayar served as the former MD of Kotak Mahindra Bank, working on the IPO deals of clients such as Adani, UTV, etc. With 18+ years of rich industry experience at the age of 50, she gave in to her entrepreneurial instincts. E-commerce industry had already seen its first wave with the launch of Flipkart in 2007. She recognized that more and more consumers would shift online for their mundane needs. businesslounge-kluF--621x414@LiveMintThere lacked a clear market leader in the beauty and personal care industry in India and the market was fragmented both offline and online. The only other true competition Nykaa had was purplle.com (also started in 2012). She picked a true sunrise sector with an average profit margin of ~7% and has emerged as an industry leader. In a December 2016 report, FICCI estimated the Indian wellness industry to grow with a CAGR of 12% to achieve a $23.4 Bn (INR 1.5 Tn) turnover by 2019-20. The Mumbai based startup started just at the right time to leverage the E-commerce growth in the country.

The Nykaa Strategy!! – Customer Experience

The cosmetic industry is about touch and feels. Be it a simple lip gloss or that perfect eyeshadow for your skin tone, the uneducated Indian customer wants to test and try the product before purchasing it. This was the biggest challenge that Nykaa face. Sephora was the only true multi-brand store that provided that experience, where customer was the Queen or King and beauty solutions was provided to help with their issues. 2Ms. Nayar brought that customer experience on the Nykaa platform and supplemented it with her online marketing strategy. They focussed on educati––ng its tech-savvy target audience through sponsored bloggers, beauty influencers on Youtube on what to buy, how to buy and how to wear it once you buy it. This increased their daily order count from 100 orders per day in 2013 to a staggering 10,000 orders per day today.

The NYKAA Way of retailing: Inventory led model

Nykaa sells over 35,000 products from 1000+ brands both Indian and International brands, mass and luxury. In their effort to provide a seamless customer experience Nykaa has adopted Inventory led model instead of a marketplace model. The difference & benefit of the two model is shown below

3Nykaa has been able to rope in the benefits of the marketplace model to its Inventory led model with the increasing number of brands it’s able to get onboard. Earlier luxury brands were reluctant to be placed next to daily brands like Dove or HUL but Ms. Nayar has changed the industry perspective, she firmly believed that today’s ordinary brand consumer is tomorrows luxury consumer. The Company now boasts three warehouses in Delhi, Bangalore, and Mumbai. Nykaa boasts of an SKU of 40,000 units distributed amongst makeup, skincare, haircare, etc with luxury brands just Clinique, MAC, HUDA Beauty, YSL, etc.

Marching ahead one nail polish at a time!!

In 2015 Nykaa launched its private label ‘Nykaa’ with a range of 30 nail polishes that have now expanded to a multitude of products in all categories from body wash to foundation and eyeshadow. To further expand it into an omnichannel experience and boost its private label it opened offline shops. Currently, it has a presence of 17 stores and recent funding of INR 75 Cr (as part of the INR 170 Cr funding) is going to be used to expand it to about 55 stores by the end FY19 end.

It has launched the Nykaa Network where customers can chat with each other about the content of similar interest, share pictures etc. They can also get advice from India’s leading makeup and wellness experts. Foreseeing the profitability in the fashion industry, it has also moved into men’s apparel with the launch of NykaaDesignStudio with premium labels like Ritu Kumar and Masaba. It also launched ‘NykaaMan’ an e-commerce platform specifically for men’s personal care products. With its constant growth and sustainability strategy, it has shown a recorded a Net revenue of INR 570 Cr in FY 18 against INR 214 Cr in FY 17. The Nykaa way is definitely working.

Conclusion:

In the growing online as well as offline space of e-commerce beauty products, Nykaa has been standing firm on its ground. However, what happens in the e-commerce space with the majors like Amazon and Myntra in the game, will be something to watch out for.

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