Having started off as an online retailer for makeup and skincare in 2012, Nykaa recently forayed into fashion and men’s grooming products with independent websites and apps.
By Sonam Saini
Having started off as an online retailer for makeup and skincare in 2012, Nykaa recently forayed into fashion and men’s grooming products with independent websites and apps. The company also plans to expand its offline presence, from 35 stores currently to 180 in a few years. Falguni Nayar and Anchit Nayar talk to Sonam Saini about all this and more. Edited excerpts:
How do you plan to invest the recently received funding of Rs 100 crore from TPG Growth?
Falguni: We are close to EBITDA breakeven, so we don’t really need the money. We raised the funds more as a hedge against uncertainty, keeping in mind the political environment.
Our net revenue for the year ending March, 2019 is likely to close in excess of `1,200 crore, as compared to `570 crore last year. While the bulk of our business continues to be online beauty sales, physical retail contributes a single-digit percentage to our total revenue, but this is likely to grow to 20% over the next two years. Currently, we have 35 offline stores; the plan is to add 40 stores by the end of this fiscal and reach a store count of 180 in a few years. We may also mark our international foray soon. We use money mainly for warehouse and store expansion.
What are the offline formats you use? How challenging is jostling for space alongside established brands in multi-brand malls?
Anchit: We have two offline formats, Nykaa Luxe for premium brands and Nykaa On Trend, which offers bestseller products that are trending on Nykaa.com. We help drive footfalls into malls by building buzz using our social media presence. We are bringing in a younger, diverse crowd to the malls and that, in turn, is giving us premium spaces. Currently, we have six high street stores and three others in the pipeline, but mall stores are what give us the maximum footfalls.
Falguni: When we first started, we did not get the right spaces in malls; we had to work hard to convince the mall personnel. If there was a competing store like Shoppers Stop or Sephora, we would be told, ‘We already have such stores’, or we would be placed alongside Indian clothing brands, maybe on the second floor. But now, we are given prime spaces that are usually kept for international cosmetics brands.
Is it tough to create synergies in your offline and online businesses? Where do more conversions happen?
Falguni: On our website, we get over a million visits per day. In an offline store, we could get 100 footfalls in a day, and with 35 stores, that would add up to 3,500. While it is true that the conversion rate is higher offline, we can stock, say, only 80 products in a particular store; whereas online, we have over a thousand products. While physical stores are special, online shows endless opportunities.
You’ve diversified outside of beauty into books, home décor, wellness, etc. Would you agree that the beauty business is too niche to scale up?
Falguni: Not really. Whether we talk of ‘mom and baby’, wellness or fashion, these categories were a part of our mega menu right from the time we launched. As there was so much to do, we focussed on starting with makeup, skincare and, now, haircare. We are finding the best global brands and convincing them to enter India with us. There is more work to be done on other categories but these are early days. We have a huge customer connect, so we thought, why not extend the portfolio logically?
Is Nykaa a horizontal marketplace now, with the recent foray into fashion?
Falguni: No. We will choose the right verticals to expand in. If we were believers in a horizontal marketplace, we would not have launched a separate app and website — Nykaafashion.com. The same is true for the men’s grooming products platform, Nykaaman.com.
Yes, the customer may be common and we could obtain synergies between our sites, but we want to be a demand-led retailer, not a ‘push’ retailer.
We are a multi-brand retailer, with more than 150 brands listed with us. We believe private labels in fashion will have a far higher percentage share than beauty, and could contribute up to 40% as the business grows. We don’t want to be a discount-led fashion website; we would rather be a curated, style-led one.