Overview
The wellness and beauty industry in India is growing at a fast rate due to the young generation, rise in middle-class and its incremental disposable income, urbanization, digitalization, and an overall shift towards a much better and healthy lifestyle and personal care. The growth rate of such cosmetic or beauty retail market in India is around 16% CAGR and by the year 2025, it is expected to reach $20 billion. One such fastest-growing beauty destination is “Nykaa” which has emerged as the largest omnichannel brand in India. Nykaa is a market leader in online destination for beauty and wellness products in India.
Nykaa has more than 2500 brands and over 5 lac products to meet the demand of customers and a one-stop-shop solution for them. It has six warehouses all over India to stock well-curated and well-priced products. Nykaa is into the retail business and its products are totally authentic that are sourced directly from different brands. The comprehensive collection of Nykaa’s beauty & wellness products includes skincare, makeup, personal care, hair care, fragrances, luxury, and wellness products for both male and female.
Other than retailing, Nykaa also keeps on advising through its different platforms, such as the expert portal, the bio-monthly magazine i.e. BeautyBook, and the virtual makeover studio. Nykaa today has become the biggest beauty brand as well as it symbolizes fashion, affordability, and top-notch brands. The headquarter of the brand is in Mumbai and it has various offline stores in different parts of India to enhance its public reach.
A Brief Background of Nykaa
Nykaa’s history is backed by 2012 when India’s online beauty industry was slowly growing and players such as Flipkart, Amazon, and Limeroad were the main players. During that time, Falguni Nayar launched Nykaa that focused more on a niche market of fashion and beauty rather than a large variety of goods. Due to this, Nykaa experienced major success and became a renowned brand in the retail and e-commerce industry.
Being an MBA graduate from IIM, Ahmedabad, Falguni Nayar, Founder & CEO of Nykaa worked with Kotak Mahindra in their investment banking division. After working for 18 years in the same organization, she started her venture in the beauty and makeup industry.
The company had started with three variants of the Nail Enamel Collection of Nykaa i.e. pop, shimmer, and pastel. Once they witnessed the quick success in nail enamels, other products were launched by the company i.e. eyeliners, bath and skincare, highlighters, lipsticks, fragrances, primer, sponges & applicators, concealer, and other makeup related products. Nykaa further expanded by designing affordable, trendy, and superior quality products.
The company underwent into expansion mode in 2015 i.e. from online-only to omnichannel model and started selling fashion products. The company introduced private labeled products in 2016 in the category of bath and body care.
“The power list” was launched by Nykaa Fashion in 2019 in partnership with Vogue India. Further, in the month of October of the same year, it came into partnership with Bollywood actress Katrina Kaif for launching the Kay Beauty brand.
Nykaa raised Rs. 100 crore in April 2019 in Series E funding round.
– Growth Journey of Nykaa
Business Model of Nykaa
Nykaa follows an inventory-based business model in which all items are stored at a single place in an inventory and processing of orders is done as per the availability of products in the stock. Using this inventory-based business model, Nykaa buys products directly from stores and manufacturers. Nykaa has warehouses in different cities i.e. Mumbai, Banglore, and New Delhi where such products are stored. These products are sold further on the website of Nykaa or by using its offline store formants i.e. Nykaa Kiosks, Nykaa Luxe, and Nykaa On Trend.
This business model facilitates Nykaa in ensuring the receiving of all bulk orders at once rather than a single item at a time. As part of its business model, Nykaa follows the below strategies to offer a hassle-free experience of shopping to its customers:
Omnichannel Experience
Nykaa has provided an omnichannel experience to users by allowing them to try on some brands (like Hudabeauty) that don’t have any retail outlets in India. Customers are also provided with the facility to shop through a laptop or phone. Moreover, in case of any confusion, customers can simply visit Nykaa’s stores and try products.
Network Community
There is a network community developed by Nykaa in which users can do conversation, share their ideas and tips, learn and see new tutorials, and also, get inspired by others. This strategy has helped the company to retain its customer base and also, in attracting new customers. The offline presence of Nykaa is available in two store formats i.e. Nykaa Luxe and Nykaa On-Trend.
Key Activities
Nykaa is mainly involved in two main value chain activities i.e. Primary and Supporting activities.
Primary Activities
Primary activities include below five categories:
Inbound Logistics
These logistics are related to sharing, receiving, and storing inputs of products. Material handling, warehousing, and architecture are included in this for maintaining the database of customers for Nykaa. The company has outsourced most of these activities.
Operations
In the operations process, the raw material is transformed into the final products. There are quite broad activities in Nykaa’s café. This includes customer data collected from the database of Nykaa for the purpose of making new strategies of the company as per the buying behavior of customers.
Outbound Logistics
This is related to the distribution of the final goods of Nykaa to the customers and channel partners. Retailers, wholesalers, and distribution channels are included in this.
Sales and Marketing
The main focus of sales and marketing activities in Nykaa is to create a sales medium through which potential customers of the company can purchase its products. This category includes various activities like pricing strategies, promotional activities, ad campaigns, and selection of channels, etc.
Marketing Strategies of Nykaa
In the digital world, Nykaa works on a digital marketing model. Nykaa has adopted top-class digital marketing strategies to target all types of audiences in every demographic having internet access i.e. girls and women, students, and professionals. Nykaa uses below mentioned different digital marketing strategies:
– Content Marketing
Nykaa has established a team of creative people and young professionals as a part of its content strategy and by doing so, Nykaa is able to attract customers by creating trendy and eye-catchy content that goes well with the mindset of the audience. The creative content also attracts customers to purchase products of the company. The aim of Nykaa is to attract audiences of different categories by developing trendy content for different platforms such as blogs, websites, video content i.e. tutorials, web articles.
– YouTube-based Marketing
Nykaa has a dedicated youtube channel named “Nykaa TV” through which it engages its audience using videos. This channel offers the best and latest video guides to customers for how to use beauty and wellness products, and also, makes them aware of society’s latest trends. Using a series of “how-to videos”, customers and users can choose the right products and can understand the right way to use them.
– Platform Marketing
Nykaa promotes its brand on websites and mobile applications as both of these are specially designed to attract audiences. Great importance is given to brand positioning through the website of Nykaa across all the platforms. This reveals that there is the continuous availability of updated and fresh content for the target audience of the company. To increase online sales, Nykaa uses blogs, target ads, and guides.
– SEO (Search Engine Optimization)
To improve organic research and establish the presence of its brand, Nykaa is using SEO services. By adopting the best SEO services, the company has optimized its content using potential keywords that result in keeping it high in search results.
– Email Marketing
As part of a promotion strategy, Nykaa utilizes email marketing by sending emails to those shoppers that are highly engaged. This also includes sending trending mailers to provide a concise look at the industry’s popular trends.
– Influencer Marketing
Nykaa has also adopted influencer marketing strategies to create awareness during the launch of its upcoming products. By collaborating with influencers, Nykaa could reach millions of followers in days that enhanced their media value a lot. Nykaa has also introduced Jahnvi Kapoor (Bollywood actress) as its brand ambassador.
– Social Media Optimization
Nykaa has also made a strong social media presence by leveraging various social media platform in generating leads. Following social media platforms are used by Nykaa:
Facebook: Nykaa uses its Facebook fan page to share different offers and deal posts that have increased its fan following by millions. A “shop now” option is also integrated to increase reachability. This option links customers to the e-commerce website of Nykaa to shop beauty products if they desire.
Instagram: the Instagram account of Nykaa is very creative and visual because different videos are showcased across the world that consists of user-generated content. Different range of products, deals, offers are advertised on Instagram of Nykaa and also, different videos of many influencers are posted.
Snapchat: Nykaa has collaborated with Snapchat for a campaign to enter into a new type of audience.
Services
In this, those activities include through which Nykaa can keep a close watch of information related to post-sale data. It is also used to maintaining the information for further use related to the progress of its goods.
Supporting Activities
There are a few supporting value chain activities too of Nykaa that are meant to support the above primary activities. These supporting activities are as under:
- The infrastructure of the Firm
- Tech-development
- Human Resource Management (HRM)
These activities are further categorized into different industry-specific activities in which Nykaa runs its operations. The above supporting activities are described below:
The Infrastructure of the Firm
This consists of quality management, planning, and legal services, general management, and finance & accounting. These activities play a full role in supporting the value chain of Nykaa. Planning and financing strategies of Nykaa are defined at the corporate level, quality management, and legal and accounting work at the business unit level.
Technology Development
The most prominent factor in Nykaa is technology as it supports almost all functioning of the company. Different activities such as technology selection, process engineering, field-testing, and component & feature design are included in Nykaa’s technology development.
HRM
The human resource management of Nykaa facilitates the company in different key activities such as hiring and selection of employees, assessing and developing skills of employees, people planning, training, and compensation.
Customer Segment
Nykaa focuses on niche marketing strategy while targeting customers. The main customers of the company are upper-middle-class society and mainly women. It also caters to the beauty and wellness needs of men. Mostly the customers of Nykaa are in the age group of 18-50 years. Modern women are targeted by the company that is required to look groomed.
Nykaa’s customers can be categorized in below four categories:
Active Seekers
This category includes customers of 19-25 years old who require all advice on beauty products. These customers are comfortable with technology, shop online, and read blogs.
Multi-Taskers
This includes customers who are 27-45 years old and who have less time and too much work to do. This category consists of confident working females who are well aware of what they want.
Beauty Aficionados
Customers of age group 25-45 years who are extremely conscious of beauty and style and spends much time on browsing sites of new brands or products fall under this category.
Brand Seekers
This category includes customers between the age group of 25-45 years who are more specific to brands and incredibly stylish. These customers often travel and are exposed to international brands.
Value Preposition
- Nykaa has a direct tie-up with brands and thus, it is able to deliver quality products with discounts given by brands.
- The company provides fast deliveries of products which is a great advantage of Nykaa as most women prefer to shop online rather than visiting offline stores and it is convenient too for them in terms of time-saving and cheaper.
- Nykaa offers a one-stop destination for all types of products related to beauty and wellness.
- The cost of the company’s products is also relatively cheaper as compared to other e-commerce giants.
- There are plenty of choices available in the wellness service of Nykaa and this includes their exclusive GrabOn coupons to attract customers and provide them products at a discounted price. Different seasonal coupons and deals are offered by Nykaa that includes a range of exciting benefits to customers in order to provoke them to continue purchasing products from the portal.
- Nykaa has its own blog through which it displays free of cost beauty tips and also, it has a beauty channel on YouTube to provide free makeup tutorials to its audience.
- Nykaa’s key differentiators also include creating awareness among customers on unique selling proposition (USPs) of online available products, giving sufficient information to boost the confidence of customers in the company’s selected products, and provide recommendations on specific products as per the unique needs of customers.
Key Resources
Key resources of Nykaa include the following:
Social Media
One of the key resources of Nykaa is its social media. The social media marketing of the company is excellent and a great source of displaying advertisements and other useful and informative content related to their products. Nykaa has a social presence on different social medial channels such as Instagram, Facebook, Twitter, YouTube, etc. Through social media, Nykaa is able to remain in constant touch with its customers.
Nykaa also has a YouTube channel i.e. Nykaa TV that consists of videos to help customers in understanding different cosmetics they can use. These videos also help those customers who are not aware of the type of products they should use and of which brand. These videos are posted by Nykaa on a regular basis so that subscribers receive useful information.
Website and Online app
The website of Nykaa i.e. Nykaa.com is a great resource for the company for selling its products online. Similarly, Nykaa’s app allows customers to select from more than 1 lac beauty products online and more than 850 brands.
Using the website and app of Nykaa, customers can easily browse different products under different categories ranging from makeup, haircare, skincare, health & wellness, men, appliances, personal care, mom & baby, etc. The website and online shopping app of Nykaa allow customers to purchase beauty products online with attractive discounts and at the best prices.
Virtual Stores
Nykaa also has its offline virtual stores where customers can visit for beauty advice, virtual makeover tool, free expert advice, assistance on the phone, and articles on beauty trends, etc.
Workforce
The team of Nykaa is highly energetic, motivated, and includes young people.
Technology
Different technology products and services are used by Nykaa that are its key resources that include Google Analytics, HTML5, jQuery, etc. For its website, the brand is using 48 technologies including Google Analytics, Viewport Meta, and iPhone or Mobile Compatible. (Source)
Customer Relationships
Nykaa provides good customer service by following activities:
Online Content Creation
Nykaa has a content strategy that is aimed at educating and generating awareness among customers who are looking for an excellent buying experience with advanced technology. Through its content, Nykaa educates customers on its products available online and also, recommends products according to the needs of customers. Adequate information is provided on these products so that customers can select their desired products with confidence. Nykaa customized its content in the form of IT lists, Beauty Book articles, Stores Product reviews, Editor’s choice widgets.
Tools
Nykaa uses different tools to facilitate customers. Tools such as the monthly buying guides and different seasonal or festival stores for sale guidance like monsoon store, eyeliner and kajal store, summer store, Diwali store, skincare by age are specifically meant for the benefit and convenience of customers.
Skin, Hair and wellness tool of Nykaa i.e. Routine Finder helps customers in making their perfect beauty regimen and for this, products are recommended that best suit their skin, hair, and wellness needs. This facilitates customers by educating them in products that work together, their benefits, and their appropriate order to be used for better results.
One more tool is Beauty Book which is an in-house next-gen digital magazine of Nykaa that focuses on expert advice, tutorials, and trends in different formats, and includes articles, FB lives, web series, etc.
Customer Support Automation
In order to provide better customer service, Nykaa has automated parts of its customer support. This has helped Nykaa in providing seamless conflict resolution to customers. Through automation, Nykaa handles repetitive requests of customers related to returns, refunds, cancellations, shipping inquiries, replacement concerns, payment hassles, etc. on its app through bot-qualified questions. By automating customer support, Nykaa is able to handle more customer queries in a detailed way that results in more after-sale customer satisfaction and improved customer loyalty.
Nykaa Support
Nykaa provides customer support related to shopping, order, payments, and others by email and customer care contact number. Also, it has a grievance cell to handle the grievances of customers.
Key Partners
Key partners of Nykaa include beauty partners i.e. luxury beauty brands as the company sells the products of these brands directly to the customers. These beauty partners include luxury brands like M.A.C., Maybelline New York, Biotique, L’Oreal Paris, The Face Shop, Kama Ayurveda, and many more.
Channels
Key channels of Nykaa includes its website and online app where customers can get useful information about products and buy online. Different tools are available on the website of Nykaa such as :
Try it On: This is a beauty tool through which customers can try different shades in the makeup range of Nykaa. This tool also includes various options for different skin types.
Personalized Widget: This is a personal tool that Nykaa has provided for every shopper that allows them to save videos of products that are recently viewed.
Videos of Product Pages Tool: This tool helps customers in understanding products in a better way.
Get the Look Widget: Through this tool, shoppers can purchase products according to a look they like.
Routine Finder: This tool suggests personalized products according to the daily routine of customers.
Sales Channel
Nykaa has categorized its sales channel into four categories i.e. Kiosks, Web. Nykaa on Trend, and Nykaa Luxe.
Cost Structure
Nykaa major expenses or costing of Nykaa includes the following:
Nykaa’s expenses that occurred in FY19 are shown below through graph:
Revenue Stream
The revenue of Nykaa is recorded at INR 1860 Cr in FY20 and EBITDA (earnings before interest, tax, depreciation, and amortization) stood at INR 94 Cr (Source); Whereas, in FY19, the company had earned revenue of INR 1160.98 Cr.
The Revenue model of Nykaa includes the following income sources:
Nykaa’s income of FY19 from different income sources are shown below through graph:
