Nykaa Business Model | How does Nykaa Make Money?

Anamika Mahapatra Anamika Mahapatra
Apr 3, 2022 7 min read
Nykaa Business Model | How does Nykaa Make Money?

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 categorised 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

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: It 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 a 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.

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.


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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.

They were still losing money after five years of operating, but they eventually broke even. However, it has done a great job in reducing the client's cost from Rs.1000 to Rs.200-300. It intends to increase its physicality from 35 to 180 stores by 2024. The key rivals of Nykaa are: Purplle, Plum, and MyGlamm

Nykaa Marketing Plan

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.

It also promotes its site through online marketing. They also put a lot of money into things like Influencer Marketing and Content Marketing. 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

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.

Nykaa has acquired three firms. Dot & Key Wellness was its latest acquisition, which happened on October 22, 2021.


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Conclusion

Nykaa's allure as worldwide beauty biz will never fade. Over years, the brand has amassed a large number of loyal consumers. Every woman desires to appear presentable. This is why brands seek young women. As a result, it has introduced a variety of goods, including celeb sponsorships. It also aims at offering users high-quality items and services at reasonable prices. The portal also intends to broaden its horizons.

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?

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

Who is the CEO of Nykaa?

Falguni Nayyar is the current CEO of Nykaa.

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