Beauty and personal care segment growth: On a strong foundation to go out and paint the town red

By: |
Updated: August 09, 2021 12:55 PM

“Beauty products have very attractive gross margins. Companies need not raise funds every six months,” says Kaushik Mukherjee, co-founder & COO at SUGAR Cosmetics. What’s more discounts are smaller varying between 11.5-12.5% compared with 20% at Amazon.

Beauty and personal care segment growth: On a strong foundation to go out and paint the town redWith the unit economics relatively easier to achieve and the fattest of gross margins — even better than in fashion —the online BPC space is expected to grow at a fast clip driven by a compounded 30% increase in spends over the next five years.

Even as the large horizontal players like Amazon, Flipkart, Tata Digital and Reliance continue to dominate India’s e-commerce landscape, a host of niche players are creating their own markets; among the segments that is gaining scale is beauty and personal care (BPC).

With the unit economics relatively easier to achieve and the fattest of gross margins — even better than in fashion —the online BPC space is expected to grow at a fast clip driven by a compounded 30% increase in spends over the next five years. Moreover, the share of working women is increasing while more women are shopping online. With Nykaa set to hit the stock markets, the online beauty space is now in the limelight.”

“Beauty products have very attractive gross margins. Companies need not raise funds every six months,” says Kaushik Mukherjee, co-founder & COO at SUGAR Cosmetics. What’s more discounts are smaller varying between 11.5-12.5% compared with 20% at Amazon.

Already Facebook and Instagram and of course cheap data, are encouraging more consumers to shop online. Women now constitute 44% of online shoppers, up from around 10% just four years ago.

Skin Elements, today delivers in areas like Nagaland, Manipur, Leh and Ladakh and services 10,000 order a month. Co-founder & CEO Raghav Sood says some of these regions even lack regular courier services and the deliveries are fulfilled by India Post. “Everyone knows how to shop online and cheap data plans are helping,” says Sood.

Critically there’s purchasing power to support growth. HSBC analysts estimate spends on BPC in total at about $15 billion (Rs 1 lakh crore) or roughly 17% of the total retail retail basket and around 5% ex-grocery. These are expected to grow at a compounded 13% in the next five years driven by rising per-capita income and the growing share of BPC within those spends.

Many of digital players are establishing an offline presence. Mukherjee, whose SUGAR Cosmetics has 10,000 offline outlets, observes that if you have to compete with the biggest beauty brands, you have to play the whole market. The company that typically clocks about two million monthly customer visits on its app and website makes about 50% of its revenues from offline channels. Mukherjee says while the sales from mall counters can be inconsistent since they depend on footfalls, the general trade segment has been profitable contributing nearly 30% of the offline revenues.

Premium online skin care brand Skin Pots is making inroads into tier one and two cities. The brand that offers products within the price bracket of Rs 500-1,500 has managed to get close to 6,000 customers and delivers across 280 pin codes. Founder & CEO Anondeep Ganguly says online brands allow customers to check out reviews and receive suggestions. “The big beauty brands did not have this opportunity, they would only look at retailing their products. Consumers want to go online, read the feedback and then buy,” Ganguly explains.

Darpan Sanghvi, founder & CEO at MyGlamm, that recently raised Rs 530 crore from investors including Accel, Wipro and Amazon, says he has not seen any fall in lipstick sales during the pandemic. Sanghvi believes consumers were probably making small-ticket buys like lipsticks to satisfy their cravings. His firm is working overtime to fulfil these desires. MyGlamm has set itself a stiff target of acquiring four million customers this year driven by new categories including make-up, skin, hair and personal care. The company acquired women-centric content platform POPXo last year with a view to adding to its customer base. Prior to the acquisition MyGlamm was acquiring about 30,000 new customers a month but that is now 2.5 lakh.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Private equity major Advent snaps up Eureka Forbes for Rs 4,400 crore, Shapoorji Pallonji Group to pair debt
2Over 1 crore informal workers registered on e-Shram portal
3Dish TV seeks to extend AGM, says requires regulatory nod for suggested changes on board