Nykaa: The Success Story of Falguni Nayar
Updated: Sep 2, 2020
When a global recession was eliminating job opportunities and producing a new generation of entrepreneurs in the market, the years 2007 to 2012 became a promising period for a new and diversified set of startups in India. In July 2012, Falguni Nayar, an IIM Alumni and Ex-MD of Kotak Mahindra Bank, founded an online beauty and wellness store named Nykaa.com. Initially, it started as an e-commerce platform for beauty products and later became an omnichannel model and began selling fashion products for a better shopping experience to their customers.
Synopsis of Nykaa.com:
The range of products offered by Nykaa.com across different brands:
Complete Skincare Collection
Cleanser- Complete Cleanser Collection
Toners- Complete Toners Collection
Moisturizers- Complete Moisturizers Collection
Masks- Complete Masks Collection
Eye Care- Complete Eye Care Collection
Lip Care- Complete Lip Care Collection
Body Care- Complete Body Care Collection. Body Butter
Nykaa’s Business Model:
Nykaa.com has launched its e-commerce platform as an inventory model and has three warehouses in New Delhi, Mumbai, and Bangalore. The profit margins are high as they have no middlemen, and the goods are sold directly from there, which leads to a reduction in the customer acquisition cost from Rs 1000 to Rs 200-300.
Later in 2015, Nyka released its private label and offline merchandise with two retail formats such as Nykaa Luxe (mostly Luxury and Premium brands) and Nykaa On-trend (having a portfolio of latest trends on Nykaa's online platform).
Nykaa’s Marketing Strategy:
While several brands and merchandise in the cosmetics industry using offline advertising, Nykaa.com has been following a 360-degree coordinated marketing and content marketing strategy for the last seven years. Nykaa’s digital marketing helped it reach an average cart size of Rs 1200-1500. It caters to a target audience of 18-35 years age group. Recently they started the print, digital and electronic advertisements with their first brand ambassador Janhvi Kapoor.
Competitors and Competitive advantage:
The nearest competitors to Nykaa.com are Purple.com, and the indirect competitors are Flipkart, Myntra, and Amazon. Purple.com was founded one year before Nykaa.com by Manish Taneja and sells nearly the same range of items as Nykaa and is funded nearly $53.7 Mn in total with 85+ employees. The competitive advantage of Nykaa.com lies in the fact that they buy their products directly from diversified manufacturers and store it in their warehouses, helping them to maintain low consumer dissatisfaction rates and driving to significant profit margins.
According to the public report, Nykaa raised its funds by $100.9 million over six investment rounds, with a valuation of $724 million at the latest.
The following are Nykaa’s funding rounds:
How Nykaa diversified its user base during COVID-19?
Before Covid-19, lipstick sales had an overwhelming share in the Indian Cosmetic industry, as it is the most popular make-up product for Indian consumers, which contributed to the sales of 13,00,000 units to Nykaa. Even though lock down and extended work from home caused a downturn in revenue of lipsticks, the business deficit was compensated by the eye make-up segment and face masks. According to the sources, Nykaa's private label relied on its R&D to create a new range of eye shadow cosmetics to its users.
Since 2015, the company has ambitious plans to compete with global cosmetics companies having private labels. Private labels need to be well-known in the market and come with high customer loyalty and experimental guarantee. However, though Nykaa is well known in online mode, the broader Indian customer base still relies on offline channels. Therefore, Nykaa has to grow its offline stores to tier 2 and tier 3 cities in the coming years.
The company is now planning to go for IPO, which will serve to further expand its verticals, i.e., cosmetic products, and merchandise.