The year was 2014, and I was invited to Khan Market for a beauty product launch. Sipping wine at Perch, and waiting to speak to Falguni Nayar about her vision for Nykaa (it was a budding ecommerce beauty platform with fabulous and trending nail paints), I was introduced to her children, who were shadowing their mother and mingling with the gathered journalists. My first impression was that the siblings were enthusiastic, eager to listen to the beauty editors and had their own vision of what they thought Nykaa could become.

Cut to 2023 – today the brand has emerged as a beacon of innovation and success, with many remarkable achievements and a trailblazer in the beauty retail industry, with the Nayar twins each becoming ‘Generals’ for the brand – Anchit for BPC and Adwaita for Fashion and Home.

According to Anchit Nayar, Executive Director & CEO – Beauty E-Commerce, Nykaa, the relentless commitment of Nykaa to deliver an optimal customer journey has been at the heart of their success. By empowering the brand partners to realize their full potential and consistently driving stakeholder value, the brand has played a pivotal role in reshaping the beauty retail landscape in India. As the Indian BPC market continues to expand, there has been a significant shift in consumer preferences. Skincare, makeup, and fragrance have emerged as the fastest-growing segments, poised to experience an omnichannel compound annual growth rate (CAGR) of over 15 percent from 2020 to 2035. Moreover, the premium segment of the market is also growing at a remarkable 2.5 times the rate of the mass segment, and Nykaa is strategically positioned to capitalize on this tremendous opportunity.

“As we unlock India’s immense potential, our mission to democratize access, awareness, and aspiration for beauty will continue to guide us in one of the world’s largest and fastest-growing beauty markets. Reflecting on the BPC landscape, India’s per capita BPC consumption is still in its nascent stage, with only $15 spent per capita compared to developing countries such as Vietnam (at $30), Brazil, and Thailand (at around $100), and developed countries (at approximately $200). However, as India’s per capita GDP is expected to reach $5,500 by 2030, its BPC spending per capita is also projected to grow to $50. This presents a significant opportunity for us, since Nykaa already boasts an annual consumption value of $80 per customer, which is more than five times the national average,” elaborated Anchit.

IMPRESSIVE GROWTH

In the fiscal year 2023, Nykaa Beauty achieved substantial growth, characterized by key performance indicators registering a remarkable 30 percent year-over-year increment. The online platform experienced a double-digit growth in terms of visits, which reached close to a billion, with customer’s visiting 50x a year on an average. A noteworthy milestone was reached this year as the count of transacting customers surpassed the 10 million threshold! This achievement served as a significant testament to the exceptional growth trajectory of the brand. With an expanding customer base and the brand’s adherence to customer-centric shipping policies, Nykaa maintained substantial average order values, which currently stand at a commendable Rs 1,857.

“With our expertise and focus on perfecting the art of retailing, combined with a highly engaged and loyal customer base, Nykaa is globally recognized and trusted and has become the preferred partner for leading global and domestic brands looking to establish their presence in the Indian market. Our Global Store business exemplifies our commitment to bringing the best international brands into India, offering them end-to-end services that encompass onboarding, registration, marketing strategy, go-to-market strategies, online and offline distribution, and post-sales support. Moreover, our luxury offering sets the standard, attracting partnerships with leading luxury brands worldwide,” stated Anchit.

OMNICHANNEL RETAIL

Recognizing that beauty was an experiential and sensorial category, Nykaa invested in physical retail expansion. In FY 2023, they had 145 stores across different formats. These included Nykaa Luxe stores featuring the premium assortment of brands, on-trend stores highlighting the best-selling products in a curated assortment, and kiosks for the brand-owned labels. “Our brick-and-mortar retail stores have experienced a 67 percent YoY growth in gross merchandise value and now contribute 8.3 percent to our total BPC GMV. Approximately 30-40 percent of some of our most premium brands’ business comes from our brick-and-mortar stores. These stores offer a highly curated range of 80-100 brands; due to our ability to drive traffic and high throughput, we achieved EBITDA break even well within 12 months. Retail not only supports its own growth but also complements the online channel by serving as a customer acquisition and retention channel for those seeking to discover unique brands, engage with beauty advisors to improve their knowledge of beauty, and experience products in a conducive environment,” he explained.

Considering the nascent stage of development in the Indian beauty market, the pillars of Nykaa’s retail strategy from inception have been centered on content and education. With an extensive following of 11.6 million individuals across various social media channels, the brand has strategically leveraged these platforms to cultivate customer loyalty and raise brand awareness. The approach involves crafting omnichannel experiences that encompass live streaming sessions on the mobile app and the establishment of Beauty Bars within the extensive network of nationwide stores.

Anchit concluded, “In FY 2023, we expanded to 38 fulfilment centers with 55 percent YoY growth in the total square footage of our warehouse space. This investment enabled us to roll out the regional warehouse strategy, bringing us closer to our customers. In the spirit of providing our customers with the best experience, we introduced Prive 2.0, our revamped loyalty program, last year. The response to Prive, a three-tiered program comprising Member, Gold, and Platinum tiers, has been phenomenal.”

FASHION FORWARD

Since its inception in 2018, Nykaa Fashion has embarked on a journey guided by a profound belief in the immense potential of the Indian fashion market and the desire of discerning Indian consumers for a fashion-forward shopping experience. As the brand continues to expand its presence and offerings, Adwaita Nayar, Executive Director & CEO – Nykaa Fashion, shared that her conviction has grown only stronger. At the helm of Nykaa Fashion’s vision is a steadfast commitment to its unique positioning. Over the course of the past four years, the brand has had the privilege of serving more than 4.3 million customers and collaborating with over 2,850 brands.

According to Adwaita, the distinct value that it brings to its customers is evident as they discover curated products that are often elusive elsewhere, inspiring the clients to elevate their style. “The Indian fashion market is projected to reach $147 billion in 2027, with a CAGR of 14 percent over the next five years. Within that, the online segment is expected to grow from $15 billion in 2022 to $49 billion by 2027, increasing its penetration from 19 percent to 33 percent. Fashion represents 4X the size of the total addressable market (TAM), and Nykaa’s foray into the fashion industry allows us to expand our TAM significantly, providing ample room for sustained growth,” she elucidated.

A FOCUS ON ASSORTMENT

In Nykaa Fashion’s journey through FY 2023, one of the standout achievements has been the enhancement of its product assortment. The brand nearly doubled its portfolio of brands, growing from 1,500 to over 2,850, reinforcing its ‘Global Store’ assortment by introducing sought-after international retailers and brands, including names like Revolve, Cider, and Alo, who made their exclusive debut in India through Nykaa Fashion. The Global Store has conferred a distinctive advantage to the platform, already contributing to nearly 25 percent of western wear sales in Q4 FY 2023.

“We are confident that fortifying our differentiation is the right and only way for Nykaa to build a sustainable and long-term presence in the fashion space. Our trajectory over the past four years has demonstrated product-market fit and a strong connection with our customers. We have ended FY 2023 with Rs 25,000 million in the GMV, recording a YoY growth of 47 percent and serving 2.5 million customers. Fashion now contributes to 26 percent of the GMV. Our position is reflected in key metrics such as our AOV of Rs 3,500+ and our New Season sale growth of 20 percent+, both surpassing industry standards,” Adwaita revealed.

Another notable milestone in the array of advancements was the rapid expansion of Nykaa Fashion’s portfolio of proprietary brands. Within the span of this year, they augmented portfolio from seven brands to a total of 13, yielding a GMV of Rs 3,313 million. This impressive figure signifies a remarkable year-over-year growth rate of 141 percent, significantly outpacing the overall growth rate of the platform. In FY 2023, this burgeoning business segment made a substantial contribution, accounting for 12.9 percent of Nykaa Fashion’s GMV, a substantial increase from the 7.8 percent it represented in the previous year. They also successfully entered new categories such as active-wear and sarees and also tapped into new audiences like Gen Z and men. “Some of our more mature brands, including Nykd and 20 Dresses, have now become sizeable, crossing Rs 850 million and Rs 1,500 million in sales (Annual GMV), respectively. We have taken these brands far beyond Nykaa’s own platforms – they both are now available on third-party online and offline channels. Notably, Nykd, our lingerie business, has demonstrated exceptional promise in less than three years from launch,” she concluded.

NYKD’S GROWTH STRATEGY

“Nykd stores are not just places to buy lingerie; they're spaces designed to educate, engage in meaningful conversations, and showcase top-notch products. In every Nykd store, we make sure that at least 20 percent of the space is a dedicated area where customers can have open and comfortable conversations about lingerie with their friends, family members, or our advisors to identify their comfort and fit,” explains Preeti Gupta, Business head - Owned Brands, Nykaa Fashion.

• Creating the Right Atmosphere: It's not just a place to shop; it's an experience that reflects the brand’s ethos.
• Empowering through Education: Educating customers by trained experts about finding the perfect fit and experiencing maximum comfort.
• Fostering Open Dialogues: Stores are designed to encourage open conversations. They provide personalized fittings to make sure customers feel comfortable discussing their needs and preferences.
• Showcasing Quality: Quality and innovation ranging from product quality, innovation in fits, fabric usage, and design addresses problems faced by users.