Nykaa Success Story: Unique E-commerce Portal to a unicorn startup

Nykaa Success Story: IIM Grad Turns 50 & Begins New Journey

The cosmetics and cosmeceutical market in India has transformed over the ages. During the Indian valley civilization, both men and women used to indulge in cosmetics concoctions to boost their personality and happiness and we have come a long way. India's cosmetic and cosmeceutical market is continuously growing at the rate of 25% per year and by 2025, this market is estimated to be valued at $20 billion.

Earlier, we had to visit a store just to pick up lipsticks, self-care products, and even after that, we were not able to find good quality products. But today, we can order these makeup products online at the comfort of our house resting assured that the products would be of standard quality.

Nykaa Success Story – About Founder

This transition from store to e-commerce platform was only possible because of Falguni Nayar, an MBA graduate from IIM Ahmedabad, and a former managing director of Kotak Mahindra Capital Company. At the age of 50, Mrs. Nayar decided to quit her job to embark on a new journey. In the year 2012, she founded her own company namely Nykaa.

Alongside her husband Sanjay Nayar, she started her company as an online corporation and gradually shifted to an omnichannel platform.

About Nykaa

Nykaa is an e-commerce portal that retails a wide range of beauty and wellness products. The word Nykaa is derived from the Sanskrit word 'nayaka' meaning 'the one in the spotlight'. Today, the company sells around 35,000 products from 650+ brands. Nykaa has grown up to 300% YoY and today, it has become a staple for many. The company has always focused on the needs of the consumer and worked closely with brands to achieve their goals. They are running at a 600-crore run rate. Along with raising the beauty standards of Indian beauty, the company's net worth has increased simultaneously, and presently, it is valued at Rs. 1,200 crores.

Nykaa Success Story - Business Model

Nykaa follows Inventory based business model, i.e. the goods purchased from manufacturers are stored in the company's warehouses and are directly sold from there. This allows the company to obtain a higher profit margin. This saves its cost from price variation and also assures fast services and reduces its time. The commission received from the brands listed on the website was their initial source of income.

Nykaa Success Story - Funding

In the beginning, the CEO of Nykaa, Falguni Nayar, raised funds from family to comply with the regulations. She raised Rs 185 crore from 20 domestic high net-worth investors in 3 rounds. In April 2020, the company entered the unicorn club after receiving funding of Rs 100 crores from Steadview capital. Nykaa's total funding to date stands at $100million from a variety of investors including TPG Growth and TS capital funds.

Although in FY18, the company incurred a loss of Rs 17.7 crores, it was able to generate a revenue of Rs. 1,159.32 crore the following year

Nykaa is also looking forward to issuing an IPO of more than $3 billion valuations in the coming months

Nykaa Marketing Strategy

Nykaa resorts to online advertising to promote its products. To highlight the best products available in the Indian Market, it also organized an award function in collaboration with Femina India in 2015 and 2016. In 2014, Nykaa also launched their YouTube channel, where they regularly post content.

The company also uses digital marketing to market its website. This brings in traffic of 17 million people monthly, out of which 50% are their routine customers. Nykaa also has social media presence across various platforms including Instagram. Recently, Janhvi Kapoor, a Bollywood actress became the brand ambassador of Nykaa cosmetics. The actress appears in print, digital and electronic advertisements and actively participates in the campaigns.

Nykaa Success Story - Problems Faced

Initially, Nykaa faced a lot of problems while collaborating with big brands. The reason was that brands weren't convinced with the idea of selling their products on an e-commerce platform.

Nykaa also faces competition from larger e-commerce players like Amazon, Flipkart, and Myntra. However, the above-mentioned companies offer many other products besides cosmetics. Hence one cannot compare these giant companies with Nykaa. The company's direct competitor is purple.com, a Mumbai-based online store that sells cosmetics, fragrances, skin, and hair care products but it lacks variety and offers limited discounts.

Nykaa Partnerships and Collaboration

In 2019, Nykaa partnered with Adobe, a software major, to enhance the experience of their customers. The company uses Adobe's experience cloud solutions, media optimizer, and analytics to boost the experience management of its consumers. The same year, Bollywood actress Katrina Kaif chose to launch their brand 'Kay beauty' in partnership with Nykaa.

E.L.F, an American cosmetic brand also collaborated with Nykaa to launch its beauty products in the Indian market. The vision was to introduce E.L F’s quality products which are in demand in the country. Apart from this, many other international brands like Charlotte Tilbury, Kao, and many more.

Such partnerships have helped Nykaa assert a new definition of ownership and creative control, expand the product universe, find diverse audiences, create hype, increase recall value and build brand loyalty. It has helped the company to attract a diverse millennial customer base.

Meeting the Consumer’s Demand

Since many Indians are still hesitant to buy cosmetics online, Nykaa opened as many as 35 stores across the country in 2 formats- Nykaa Luxe featuring Indian and international luxury beauty products and Nykaa On-trend promoting curated products based on their popularity.

Amidst the pandemic, the e-commerce portal witnessed a fall of over 70%, and to combat the situation the company decided to list essential items which include skin care and hair care products.

Nykaa Success Story - Expansion

Nykaa not only provides a platform to other beauty and skincare brands but also has launched products under their name. In 2019, the brand also collaborated with Masaba Gupta and launched beautification products like lipsticks and nail paints.

Besides, Nykaa fashion, a progression of the Nykaa brand, has good traction for western wear, emerging brands, and unique labels that are difficult to find elsewhere.

Recently, it has also introduced the consumers to another e-commerce portal, Nykaaman, and revised its target audience. Nykaa man is dedicated to men's fashion wear and grooming products. It has around 560+ brands and 42,000 products. It gives men a personalized, targeted environment to explore products that are suited to their grooming needs.

Final words

Nykaa's omnichannel model gave the company an edge in the cosmetics and cosmeceutical market. Today, it has over 5 million monthly active users. It makes a point to add innovations to its product range and offerings to build the customer's attention and fight the dynamic business environment. Its collaborations with Indian and international brands helped the company to build its presence. The company keeps looking for opportunities to grow and expand.