Nykaa – A focused e-tailing platform, that’s also profitable!
India's homegrown version of Sephora, is redefining online beauty space
Nykaa, with its etymological roots in Sanskrit, ‘Nayaka’ meaning an actress or the one in spotlight strives for the latter for its clientelle. It is the largest multi-brand omni-channel beauty & personal care focused Electronic retailing (e-tailing) platform in India.
Founded in 2012 by Falguni Nayar, a former senior executive at Kotak Mahindra Capital Co. – a reputed Indian NBFC. She recognized the potential and strength of the beauty industry and tapped into the market with India’s homegrown version of Sephora. In a very short span, Nykaa emerged as one of the most successful consumer internet start-ups in India. As per media reports, it seizes >30% market share of India's online beauty market.
Nykaa keeps users up-to-date with the latest beauty trends, expert advice and videos, to more than 72 Luxe and On-Trend Stores, an ever-growing online community for beauty buffs, along with a Beauty Hotline. With 1200+ genuine brands, six warehouses across India that stock bulks of well curated, and decently priced products, Nykaa offers a comprehensive selection of makeup, skincare, hair care, fragrances, personal care, luxury and wellness products for women and now also for men.
Started as a pure play online retailer, Nykaa has variegated into offline retail that now operates a network of 80+ stores across 30+ cities. In 2018, they ventured beyond beauty & personal care items and launched to 2 sub-brands Nykaa Fashion for women and Nykaa Man geared towards male grooming, fashion & accessories for men. The online site boasts over 15 million registered users, with 5 million+ monthly active users (MAUs) and fulfills over 1.5 million orders per month. Despite competition from horizontal e-commerce giants such as Flipkart & Amazon India, Nykaa has managed to carve out a niche market backed by focus on content, curation & convenience which has earned them a 'loyal' customer base.
The company achieved a revenue of INR 18 Billion (~USD 250 Million) in FY20 with a strong growth trajectory over the past few years. It’s evident from the fact their revenues have grown 100x over FY15-20, of course, off a low base. Interestingly, they achieved such strong growth without substantial cash burn. They not only witnessed sharp improvement in profitability over the years; but also achieved EBITDA breakeven in FY19 and which jumped to >INR 800 million in FY20 with margins at 5%. This is in sharp contrast to most e-commerce platforms which have shown rapid growth but only at the cost of margin.
Nykaa’s journey clearly highlights how entry barriers in the sector are reducing, as online channel allows new franchises to rapidly gain scale and challenge the distribution moat enjoyed by traditional FMCG (Fast-moving Consumer Goods) companies. Of course, this will unfold over long-term but definitely worth for investors to keep an eye on the nextgen companies in the consumer space.
The company is gearing towards an IPO worth USD 3 billion by the end of 2021. Nayar owns about 51% stake in the company, with its investors including Fidelity Management and TPG Growth Capital. Once the IPO goes live, Falguni is set to enter three comma club and become one of the richest self-made woman in India.
I want every little girl who’s been told she’s bossy to be told again she has leadership skills.
― Sheryl Sandberg, COO at Facebook
Sources:
Jefferies Report on Nykaa (May 2021)
https://koolkanya.com/blogs/kool-kanya-news/nykaas-founder-falguni-nayar-set-to-become-a-billionaire/
https://www.forbes.com/sites/anuraghunathan/2021/03/08/nykaas-founder-looks-set-to-become-a-billionaire-and-indias-second-richest-self-made-woman/?sh=6136626b4207