Nykaa Business Model | How Does Nykaa Make Money?

Nykaa Business Model | How Does Nykaa Make Money?
Nykaa Business Model 

Are you aware of any lucrative e-commerce platforms from the last ten years? Technically, no. As they were either bought, as Walmart did with Flipkart, or they were categorized as Infibeam. However, none of them succeeded on their own. In the last decade, over 20 online stores have attempted their fortune in India, but none had succeeded until Nykaa, a retailing label that sells cosmetics, wellness, and fashion items, entered the fray. This firm has developed so much that it extended from an internet label to an omnichannel approach in 2015, which has enabled Nykaa to become a market leader.

About Nykaa
How Was Nykaa Founded?
Business Model of Nykaa
What Is Unique About Nykaa?
How Does Nykaa Make Money?
Nykaa Marketing Plan
Funding and Acquisitions by Nykaa

About Nykaa

Nykaa is an Indian e-commerce firm that offers cosmetics, wellness, and fashion items through its portals, apps, and 76 physical locations in India. Falguni Nayar, a senior managing director at Kotak Mahindra Capital Firm, started it in 2012 as a billion firm. It offers items made in India and those made elsewhere in the world.

The firm transitioned from a web-based to an omnichannel business in 2015 and started selling things other than beauty products. It introduced Nykaa Pro in 2020, and Nykaa Fashion began operating in Delhi in December 2020, with the goal of making its fashion company omnichannel. It also began selling over 2,000 labels and 200,000 items through its multiple networks. Several women who desire to begin their own e-commerce firms can draw ideas from this company.

How Was Nykaa Founded?

Nykaa's triumph is encouraging to us since few people over 50 have the confidence to resign and create a business from the ground up, yet Ms Falguni Nayar did just that and founded Nykaa. She grew up in Mumbai and earned a finance degree from IIM Ahmedabad. She accepted a strategy consulting role after her MBA and served in a fine position at Kotak Mahindra Bank. However, in 2012, she launched the "Nykaa" label.

She once visited a Sephora store in another country and was astounded by the diversity of beauty merchandise under one dome. There were also complimentary samples, makeovers, and a bunch of discourse about beauty going on around the store. It was a woman's fantasy come true.

This level of beauty diversification, expertise, and impartial advice was not offered to Indian women. For them, purchasing makeup meant a trip to the local pharmacy or a cosmetics boutique with untrained employees. High-end products were usually accessible in malls and high-street retail stores, giving customers little option. Falguni spotted a chance. At the stroke of 50, she left her senior management post at Kotak Mahindra and started Nykaa.com. The rest, as they say, is history.

Nykaa’s in-house brands,

  • Nykaa Cosmetics & Naturals: In-house personal brand of make-up, Bodycare and skincare line
  • Nykaa Fashion: Apparel, bags, accessories, etc.
  • Nykaa Man: Men’s skincare, haircare, and grooming products.
  • Nykaa Pro: Offers multiple brand access to beauty & make-up professionals.
  • Nykaa Network: Interactive beauty forum.

Business Model of Nykaa

Lets explore the Nykaa business model and the key factors that have contributed to its success.

Its inventory-driven business model for the BPC (Beauty and Personal care) category is one of its key benefits. While it faces the risk of expiration and incurs inventory costs, it enables the firm to provide identification for all its items and ensures availability and prompt delivery. Its solution enables fungible stock across traditional and digital channels, making stock management easier.

Online BPC buyers are concerned about the increasing availability of counterfeit goods. As a result, a guarantee of legitimacy provides buyers with the peace of mind.

Omni-Channel Strategy:

Nykaa has a strong omnichannel marketing strategy that includes various touchpoints to engage with customers. This includes email marketing, social media marketing, influencer marketing, and offline events. By leveraging these various touchpoints, Nykaa has been able to reach a wider audience and create a strong brand presence.

It also has a geographic footprint in 38 different cities. It aims to expand its physical storefronts.

The function of retail stores is twofold:

  • They give customers the opportunity to try out things before making a decision.
  • They build a more resilient distribution network that will allow for potential hyperlocal delivery.

Shops also provide face-to-face encounters with experts and, in the case of some multinational premium brands, play a key role in personal branding.

Affiliate Program and Content-First Strategy:

Nykaa is capable of promoting a broad brand and influencer-led learning through innovative and engaging content across video and textual forms, thanks to a team of over 1300 influencers and 12.6 million fans across prominent social media sites. The Nykaa army generates and shoots the bulk of Nykaa's material in-house.

Furthermore, the Nykaa Affiliate programme uses influencers on a wide scale, allowing external creators to create material on their part across multiple digital channels. The support of well-known influencers adds to the platform's credibility.

Focus on Beauty and Wellness

Business model of Nykaa is focused exclusively on the beauty and wellness industry. By narrowing its focus to a specific niche, it has been able to establish itself as a specialist in this area. This has helped Nykaa create a unique brand identity and gain the trust of its customers.

Exclusive Product Range

Nykaa has a range of exclusive products that are not available on any other e-commerce platform. This has helped Nykaa create a unique selling proposition and differentiate itself from its competitors. The exclusive product range includes its own in-house brand, Nykaa Cosmetics, as well as other exclusive beauty and wellness products.

Tech-Enabled Operations

Nykaa has a strong focus on technology, which has helped it to optimize its operations and enhance the customer experience. Nykaa has invested in various technologies, including artificial intelligence and machine learning, to personalize the customer experience and offer customized recommendations.

What Is Unique About Nykaa?

Nykaa's BPC offering is extensive, with about 200K stock-keeping units (SKU) spread across a range of nearly 2500 worldwide, local, premium, and niche brands. It also sells things under its own label.

The consumer experience starts with a one-of-a-kind approach to product research that includes handpicked pieces and keyword or aesthetic look searches. Buyers may then search for merchandise using ratings, testimonials, how-to videos, and influential material, and interact with product specialists. This enables an immersive element, with the quality of the suggestions constantly increasing based on each clients’ unique retail habits.

Tech supremacy

It’s constantly improving its digital platform, not just to meet today's difficulties but also to ensure future flexibility. The company's data crew can use large volumes of data to offer dynamic, hyper-personalized customer experiences throughout their platform trips.

A step into the glamour

Nykaa Fashion, a selected and supervised Taobao, started in 2018. It houses 1350 labels and over 1.8 million SKUs with fashion items across 4 customer segments: women, men, juniors, and home merchandising, which covers clothing, accessories, jewellery, and housewares. It selects designer labels and evaluates them for design and content. It has a customer base of less than 2% in the online fashion business, which is projected to be valued at INR 439 billion.

Online-Only presence:

Nykaa is an online-only retailer, which means it does not have a physical store presence. This allows Nykaa to keep its overhead costs low and offer competitive pricing on its products. By focusing on online sales, Nykaa has been able to create a seamless shopping experience for its customers.


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How Does Nykaa Make Money?

Nykaa holds items bought directly from manufacturers in its warehouses, where they are supplied whenever there are online or offline purchases. Buying straight from the manufacturers results in larger profit margins and increased market rivalry. It serves as an overarching brand for its health and cosmetics goods, which are sold through its stores and online. It also guarantees delivery within 1-4 days of the order being placed.

Overall, Nykaa generates revenue through a combination of product sales, B2B sales, advertising and promotions, influencer marketing, and premium product offerings. By diversifying its revenue streams and offering various services to brands, Nykaa has been able to establish itself as a leading player in the Indian e-commerce industry.

Nykaa Marketing Plan

Nykaa's marketing plan is designed to enhance brand awareness, build trust, and drive sales through a combination of online and offline marketing activities. They spend a lot of money on internet ads to market their brands as it ensures that they hit the desired audience with minimal money and more influence. They partnered with the perfect events, such as Femina, to emcee the "Nykaa.com Femina Beauty Awards" in 2015 and 2016. Here are some of the key elements of Nykaa's marketing plan:

  1. Social Media Marketing: Nykaa has a strong presence on social media platforms such as Instagram, Facebook, Twitter, and YouTube. The company uses these channels to promote its products, share user-generated content, run social media contests, and engage with its followers. Nykaa also collaborates with beauty influencers on social media to promote its products and reach a wider audience.
  2. Content Marketing: Nykaa has a dedicated blog section on its website that features articles on beauty, wellness, and lifestyle. The company uses content marketing to provide value to its customers, build trust, and position itself as a thought leader in the beauty industry.
  3. Email Marketing: Nykaa has a large database of subscribers who receive regular emails about new product launches, sales, and promotions. The company uses email marketing to drive traffic to its website, increase sales, and keep its customers engaged.
  4. Search Engine Optimization (SEO): Nykaa invests in SEO to improve its search engine ranking and drive organic traffic to its website. The company uses a range of tactics such as keyword research, on-page optimization, and backlink building to improve its visibility in search engine results.
  5. Offline Marketing: Nykaa also invests in offline marketing activities such as events, in-store promotions, and print advertising.
  6. Personalization: Nykaa uses artificial intelligence and machine learning to personalize the customer experience on its website. The company uses data on customer behavior and preferences to provide customized product recommendations, improve the search experience, and drive sales.

They've also secured an agreement with Janhvi Kapoor to be their endorser, allowing them to reach the ideal audience for their items, which is the youth. This has aided Nykaa greatly because the monthly visitation on their site is 17 million, and 50% of Nykaa's overall clients are repeat buyers, requiring Nykaa to promote heavily in the online world to acquire new ones.  

Funding and Acquisitions by Nykaa

The company has also made a number of strategic acquisitions to expand its product range and services. Here's a summary of Nykaa's funding and acquisitions:

Funding:

  1. In 2015, Nykaa raised $3.5 million in a Series A funding round led by private equity firm TVS Capital.
  2. In 2016, Nykaa raised $12.5 million in a Series B funding round led by Hero Group's Sunil Kant Munjal and existing investor TVS Capital.
  3. In 2018, Nykaa raised $24 million in a Series C funding round led by Lighthouse Funds, with participation from existing investors TVS Capital and Max Ventures.
  4. In 2019, Nykaa raised $14 million in a Series D funding round led by TPG Growth, with participation from existing investors.

Acquisitions:

  1. In 2018, Nykaa acquired 20Dresses, a fashion e-commerce platform that offers a personalized shopping experience to customers.
  2. In 2019, Nykaa acquired the online fashion platform Pipa Bella, which specializes in jewelry and accessories.
  3. In 2020, Nykaa acquired the on-demand beauty services platform, Femina Flaunt, which offers home beauty services.
  4. In 2021, Nykaa acquired the homegrown skincare brand Dot & Key, through the subscription and purchase of equity shares.

Nykaa has generated a total of $148.5 million in 13 rounds of fundraising. Their most recent fundraising came through a Secondary Market round on November 26, 2020. When the company went public on November 10, 2021, it opened at $2,018.00.


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Conclusion

Nykaa has become a prominent player in India's e-commerce industry with its unique business model that focuses on providing high-quality beauty and wellness products, excellent customer service, and innovative marketing strategies. The company's strong online and offline presence, personalized customer experience, and diverse product range have enabled it to differentiate itself from its competitors and establish itself as a leader in the Indian beauty and wellness market.

Moreover, Nykaa's success is not just limited to its business model, but also in its commitment to customer satisfaction, employee engagement, and corporate social responsibility. The company's initiatives to empower women entrepreneurs and promote gender equality in the workplace have been widely recognized and lauded.

FAQs

How does Nykaa make money?

Nykaa is an e-commerce company that sells its products and products of its partnered brands through its online and offline stores.

What type of business model is Nykaa?

Business model of Nykaa is an inventory-based model. The company purchases the products directly from the manufacturer and stores them in its warehouse.

What is unique about Nykaa's business model?

Nykaa's business model is unique in that it focuses on providing high-quality beauty and wellness products, excellent customer service, and innovative marketing strategies. The company has also diversified its product range and services through strategic acquisitions, allowing it to offer a more comprehensive beauty and fashion experience to its customers.

Who is the CEO of Nykaa?

Falguni Nayyar is the current CEO of Nykaa.

What are some of Nykaa's strategic acquisitions?

Nykaa's strategic acquisitions include the fashion e-commerce platform 20Dresses, the online fashion platform Pipa Bella, and the on-demand beauty services platform Femina Flaunt.

How has Nykaa differentiated itself from its competitors?

Nykaa has differentiated itself from its competitors through its focus on providing high-quality products, excellent customer service, and innovative marketing strategies.

What awards has Nykaa won?

Nykaa has won several awards for its innovative marketing campaigns and customer-centric approach. In 2020, the company was named the most trusted e-commerce brand in India by brand consultancy TRA Research.

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