How Nykaa captured the web magnificence market in India pre IPO

Storyboard | How Nykaa captured the online beauty market in India pre IPO

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Storyboard | How Nykaa captured the web magnificence market in India pre IPO

On Day one (28 October), Nykaa proprietor FSN E-Commerce Ventures IPO was subscribed 1.55 instances. The wonder e-tailer’s journey is a David vs many Goliaths battle. The corporate managed to create a neighborhood of loyal prospects whereas going through competitors from multi-category large tech platforms resembling Flipkart and Amazon in India.

Watch: Nykaa IPO | Ought to You Add This Inventory To Your Cart?

Rather a lot labored in favour of Nykaa. The platform, which was launched in 2012, grew on the again of a number of macro components that led to the emergence of a brand new section of web shoppers. This included low-cost web, smartphone penetration, progress in trend spend by youth, growing spend on trend from tier II cities and the rising affect of social media.

This wave introduced an entire set of patrons on-line together with ladies. The inflection level got here round 2014-15, when most e-commerce platforms began seeing traction and conversion when it comes to gross sales. Nykaa had an edge as a result of it was serving a fully underserved market of magnificence and private care (BPC) the place large platforms resembling Flipkart and Amazon weren’t investing a lot.

Nykaa scaled in a giant method, including all kinds of merchandise throughout classes from mass market, mass premium, and premium to luxurious segments. One might discover HUL owned Lakmé, Maybelline, Kama Ayurveda and Estee Lauder, all in a single place.

Learn extra: Why mutual funds discovered investing in Nykaa’s IPO trendy regardless of stiff valuations

Taking magnificence to plenty

Sreedhar Prasad, web enterprise professional and former accomplice at KPMG, tells Storyboard that in contrast to every other class in e-commerce the place high quality offline options had been accessible, magnificence didn’t have many such choices for shoppers. A number of magnificence choices had been solely restricted to multi-brand shops (MBOs) which had been solely current in malls.

“…the offline availability of the manufacturers that had been being offered on Nykaa was extraordinarily much less. Nykaa took these manufacturers to the plenty. These could possibly be high-end merchandise to mid-tier manufacturers. The idea of a platform that was promoting multi-brand magnificence and perfume is the largest highly effective idea that made Nykaa the model it’s at the moment,” he notes.

In comparison with different mature e-commerce classes, magnificence and private care and trend have decrease on-line penetration, states a RedSeer report commissioned by Nykaa. On-line channels accounted for about 8-10% of the general BPC market in FY 2021 and the 5 months ended August 31, 2021. There’s a massive headroom forward for additional penetration in India, as steered by increased penetration within the developed markets resembling america (20-25%) and China (35-40%).

The web and offline play

So there might be room for extra progress for Nykaa. With the intention to additional strengthen buyer belief and convert fence sitters, the e-commerce platform launched its first bodily retailer in Mumbai in 2017. Presently, it operates 80 bodily shops throughout 40 cities in India over three totally different retailer codecs as of 31 August, 2021. It gives roughly 3.1 million SKUs from 4,078 nationwide and worldwide manufacturers. It additionally operates its personal non-public label which additional provides to its profitability.

The offline presence added an enormous advertising increase because it catered to the bigger client notion that branded shops solely promote genuine merchandise on this class, explains Prasad.

“Establishing a daring offline presence was a sensible transfer and supplied the boldness to fence sitters searching for unique merchandise and that acted as a robust reinforcement.,” says Prasad. Magnificence and Perfume, as a class, has superior margins in comparison with trend and electronics. “If a platform has its non-public label then it’s an especially worthwhile enterprise,” he provides.

Excessive margins means excessive advertising budgets

Magnificence and private care (BPC) is without doubt one of the highest frequency of orders classes. Though electronics has the best common order worth (AOV), it tends to have the bottom order frequency. BPC has a excessive margin base.

For example, a direct-to-consumer (D2C) participant resembling MyGlamm or Sugar Cosmetics normally has a gross margin of 60-65% meaning the price of product is all the time lower than 35-40%. A good portion of this, 60-65% margin, goes into advertising.

“…when these D2C manufacturers go to an internet magnificence platform, they’ve the power to pay increased fee charges to the web magnificence retailer. Because of this, the platform is ready to make investments increased in advertising actions to amass new prospects,” says Amit Nawka, accomplice, offers and startups at PwC India.

By way of margin profile, amongst all of the e-commerce classes, Nawka shares that BPC class is true up there with a excessive frequency of buy and an honest AOV (above Rs 500).

“Subsequently, it turns into a beautiful class to play in,” he notes.

Leveraging content material and influencer advertising

Nykaa has constructed its enterprise on the again of a strong digital neighborhood comprising manufacturers, celebrities and social media influencers.

As of August 31, 2021, Nykaa had a community of three,055 influencers, together with Era Z development setters, magnificence, trend and life-style bloggers, make-up artists and celebrities that extensively work with the platform. This military of new-age digital creators and influencers assist Nykaa attain out to India’s 300-350 million common month-to-month energetic customers on social media throughout platforms like Fb, YouTube and Instagram.

The corporate’s advertising technique closely centered on creating consciousness and curiosity by way of explainer movies, DIY (do-it-yourself) content material and make-up tutorials. Nykaa Magnificence has round 6 million followers whereas Nykaa Vogue has over a million followers throughout Fb, YouTube and Instagram.

“Our advertising methods concentrate on creating consciousness of our platform and model, constructing platform loyalty and fostering robust phrase of mouth critiques. Our methods embody participating magnificence creators, influencers and celebrities, sustaining a presence on social media platforms and throughout the peer-to-peer multimedia neighborhood,” Nykaa famous in its Purple Herring Prospectus.

Influencer advertising stays probably the most efficient and economical methods to interact with millennials and Gen Z shoppers as in comparison with extra standard platforms. In keeping with trade consultants, influencers can cost something between Rs 5-10 lakh for a video promotion, whereas much less influential influencers might cost as little as Rs 5,000.

Nykaa makes use of a mixture of each. Regardless of having actor Janhvi Kapoor as its model ambassador, Nykaa extensively makes use of influencers and content material creators for brand spanking new model launches in addition to promotion of gross sales. For example, in 2019 when Katrina Kaif launched her magnificence model Kay Magnificence, in partnership with Nykaa, the sweetness retailer had invited Instagram vloggers and bloggers for the launch and collaboration.

Other than influencer advertising, Nykaa’s advertising technique additionally includes digital advertising, offline advertising in addition to their content material platforms, together with social media channels, Nykaa community, Nykaa TV, and Discover.

In 2018, Nykaa launched Nykaa Community, an interactive magnificence platform the place subscribers can chat with different magnificence fanatics and alternate recommendation/ideas. A yr later, it launched its YouTube channel referred to as Nykaa TV which hosts quite a lot of tutorials and product critiques. The corporate additionally launched a subscription-based platform referred to as Discover, an app-only function that enables prospects to flick through all of the content material.

Its new vertical Nykaa Vogue can also be largely marketed on-line whereas competing with e-commerce platforms resembling Flipkart Vogue, Amazon Vogue, and Myntra.

“Nykaa is a standout model due to their capability to create content material with scale and do long run influencer partnerships,” says Harshil Karia, the founding father of digital company Schbang India. He tells Storyboard, “Nykaa’s 1.2 million YouTube subscribers and 5 million-odd Instagram followers are a results of treating their platform as ‘leisure’, scaling content material and releasing fast and failing quick and iterating.”