Nykaa is an Indian online retailer founded by Falguni Nayar in 2012 with headquarters in Mumbai. It offers beauty, wellness, and fashion products in 76 stores, as well as on its website and mobile applications. The company became the first unicorn startup in India headed by a woman in 2020. Among Nykaa’s products are products manufactured both in India and abroad. The company changed from selling beauty products exclusively online to offering omnichannel services in 2015. With more than 2,000 brands and 200,000 products across its platforms, it will be the world’s largest retailer by 2020.
As a result of its launch, they have not only redefined beauty and personal care e-retail in India but also helped to nurture the emergence of an eco-system that was previously relatively nascent. As a company, they have put forth an extraordinary amount of effort to reach out to you with international brands, domestic brands, luxury and prestige brands, premium brands, niche, and cult brands, plus expert advice and videos combined with more than 72 Luxe and On-Trend and Kiosk Stores, an ever-growing online community for beauty buffs, and a Beauty Helpline. The Nykaa marketplace includes over 2400 brands that are 100% authentic, including makeup, skincare, haircare, bath and body, fragrance, grooming appliances, personal care products, and health and wellness products.
Based on the Sanskrit word ‘Nayaka’ meaning “actress,” Nykaa is about celebrating the star inside each woman, and being their guide as they discover their own unique identity and style. Offering a wide range of genuine beauty products from around the world as well as beauty advice, Nykaa is truly passionate about helping its customers look and feel their finest. They believe that beauty is our passion, so they do everything that they can to help our customers.
Development & Challenges
A former investment banker, Falguni understood the intricacies of dealing with finances for business investment. She did not raise funds from foreign investors but raised funds from domestic investors. She procured brand-name products directly from manufacturers, sourced fresh products from warehouses, and priced all products honestly
- The first phase was implementing her business model by developing a website, employing a core team, and creating a user interface.
- The second phase focused on operations and technology, such as getting genuine products to the store and a seamless shopping experience for the customers. It further expanded its reach by owning inventory space in Mumbai, Delhi and Bangalore in addition to working online.
- The third phase of the brand’s lifecycle was marketing, promotion, and making it popular.
Nykaa’s IPO is set to take place on November 2, 2021. Its shares were subscribed 81.78 times between October 28 – November 1, 2021. Nykaa was valued at Rs 1 lakh crore when it made its debut on the stock market. Further, Nykaa’s valuation reached nearly $13 billion in its debut.
For the quarter ending September 2021, Nykaa’s consolidated net profit reduces by 95% from Rs 27 crore reported in the same quarter last year, and by 69% from the same quarter last year.
Story of Nykaa
The idea for Nykaa came to her when she experienced feeling empowered and confident when she was guided through how to properly use beauty products and being told which products to use. In spite of Falguni not being a regular consumer of beauty products, she felt attracted to buy those worth hundreds of dollars thanks to the right guidance at stores like Sephora. Falguni felt she had to replicate this scenario in India. It was also important to her that Indian women feel empowered. In India, I wanted to replicate that model – a multi-brand retailer offering the most beautiful products, along with a lot of support for customers…I want to stand for women who strive to be beautiful for themselves, and for no one else. Nykaa related to Indian women because they were ready for that. Falguni Nayar explains the need for women to get out of their shells and be confident about handling both their professional and personal lives equally. A woman who aims to accomplish something with strong determination and willpower will certainly succeed. Nykaa is in essence an e-commerce website that offers beauty and wellness products from all leading brands including Lakmé, Kaya Skin Clinic, L’Oréal Paris, etc. There are 17 stores in the company’s offline presence and it is expanding. More than 850 brands are curated, and there are 35,000 products in the store. In the upcoming years, Nykaa will see more and more success under Falguni Nayar’s leadership. Women’s empowerment is one of the brand’s primary focuses, as well as great career opportunities. One secret of Nykaa’s success is its focus on beauty and fashion. Other players like Amazon, Flipkart, Snapdeal, ShopClues have diversified into a wide range of products.
Here are the secrets to success:
In contrast to Nykaa, which targets beauty and fashion-based products, other large players like Amazon, Flipkart, Snapdeal, and ShopClues offer a larger selection.
An overview of marketing strategies:
The marketing strategy of Nykaa relies largely on Content Marketing. They provide high-quality content to show global trends, drive traffic to their website, as well as to remarket and re-target customers through email marketing and social media.
Introducing Nykaa – the business plan
The business model of Nykaa is based on inventory and it is an eCommerce retailer of consumer products. Directly from the manufacturers, the company purchases its products and stores them in designated warehouses located in New Delhi, Mumbai, and Bangalore. Nykaa’s products are available for purchase on its website as well as in Nykaa’s three offline store formats: Nykaa Luxe, Nykaa On Trend, and Nykaa Kiosks.
Model of the revenue generated by Nykaa
According to Nykaa, it raked in $324.77 million (around Rs 2,440.89 crores) in FY21, a 38.10% increase from what it was in FY2020.
Below are the methods Nykaa uses to earn revenue-
· Products for sale:
As the brand’s primary source of revenue, it sells its own products and those of its partners.
· Campaign advertisements:
The company also benefits from banner advertising which brings in a lot of traffic, which in many cases turns into sales. Besides discount income, commissions, and other sources of revenue, the brand also generates income through miscellaneous sources.
Investing in Nykaa – Funding
During its blockbuster debut on the Indian stock exchanges, Nykaa’s valuation crossed the $13 billion mark. Initially trading at a premium of 82%, the stocks of this famous Indian cosmetics company have surged to approximately 96%. There is approximately $341.9 million in funding.
Acquisitions of Nykaa
As of today, Nykaa has acquired 3 companies. On October 22, 2021, Dot & Key, a skincare brand based in Kolkata, became the last acquisition that the company had.
Challenges faced by Nykaa
Nykaa came late to the cosmetics market and has to compete with numerous other professional companies. Nykaa’s market is dominated by companies like Ajio and Myntra. Moreover, it must come up with a unique selling proposition.
According to Kannan Sitaram, a Venture Partner at Fireside Venture, one of Nykaa’s biggest challenges is to remain relevant and interesting to the customers so that they don’t leave disappointed.
A civil case has been filed against Nykaa by France’s L’Oréal, alleging that Nykaa has infringed on its copyright. The suit was filed at the Delhi District Court in November 2019. There was a case against Nykaa because of the similarity in the packaging that Nykaa has to Maybelline, which was found out by the French cosmetic giant. Due to the long-drawn-out legal battle, both sides have agreed to call off the case and settle terms between them, which have been approved by both the Delhi District Court and the Delhi High Court. Nykaa has created a new, modified artwork for L’Oréal based on its new settlement terms.
Growth at Nykaa
According to the company, Nykaa has over 5 million monthly active users. As of October 2021, here are some more highlights from the brand’s growth:
There are over 15 million registered users on Nykaa.
The company has over 70 outlets in India.
Hundreds of brands are available on Nykaa.
The merchandise offered by Nykaa is over 130,000 products available on the website, through the app, or at the stores.
When Nykaa experienced a fall of up to 70% of its sales in April 2020 due to the outbreak of the Coronavirus pandemic, the company has seen its toughest days.
Although the company reacted swiftly, it listed all of the essential items and removed all of the non-deliverable inventory in order to keep them in stock. A few weeks later, the company started leveraging the capability of its hyperlocal delivery to move beyond its physical stores.
The Nykaa region recovered quickly from the COVD-19 pandemic and was already over 90% better off than it was during the outbreak by the end of 2020.
In the wake of the Coronavirus outbreak, the unicorn corn cosmetics and beauty products brand saw its consumers shift toward the essential categories, such as skin and hair care products, and this helped it increase faster than its rivals. Also contributing to the success of the company was its shifting from an online model to an omnichannel one. In the process, these actions changed not only the brand’s perception among customers but helped Nykaa gain audiences that previously weren’t or couldn’t be reached.
As soon as the pandemic effects started to wear off, in October 2020, Nykaa launched an intimate wear brand.
Founder and CEO of Nykaa, Falguni Nayar, announced sweeping growth in the platform’s sales and profitability. Due to this, the company has successfully launched its initial public offering on October 28, 2021, with the price band being fixed at INR 1,085-1,125 per share. According to the company, its upcoming IPO would be valued at $7.4 billion. As of July 16, 2021, Nykaa has already become a public company limited by shares, and it filed it’s Draft Red Herring Prospectus (DRHP) on August 20, 2021.
At the time of Nykaa’s IPO, market capitalization reached Rs 1 lakh crore. At the end of the IPO round on November 1, 2021, the company’s shares were 81.78 times oversubscribed. In its debut on the Indian market, Nykaa’s valuation soared to almost $13 billion.
FSN E-Commerce, the parent company of Nykaa, witnessed a record rise in its share price on the stock market on November 10, 2021, resulting in 96% returns for investors. On the BSE, shares of FSN E-Commerce, priced at INR 1,125 per share, closed at INR 2,206.70, 96.15% higher than the issue price.
The closing price was INR 2,018 per unit, or 96.26% higher than the listing price. According to Bloomberg Billionaires Index, Falguni Nayar, Nykaa’s CEO, has a net worth of $6.5 Bn after the brand was listed.
On November 15, 2021, Nykaa’s parent company, FSN E-Commerce Ventures Ltd., reported a 96% decline in profits, which led to its share prices falling. During the quarter before the initial public offering, the company’s marketing costs rose significantly, resulting in a fall in profits. A net profit of Rs 1.2 crore was recorded by the company in the quarter that ended in September, compared to Rs 27 crore in the previous year. Revenues increased by approximately 47% as a result of a 92% increase in expenses. A decline of close to 7.3% had been experienced on an earlier trading day. As a result, the company’s shares declined by 5.2% on 16th November.
Plans for Nykaa’s future
In order to grow its offline business, the company aims to expand. 180 stores will open all over India by 2024 in an effort to expand its offline presence.