Nykaa.com; Beauty at the click of a mouse

Nykaa.com, brainchild of Falguni Nayar, former Managing Director Of Kotak Mahindra Capital Company, is an attempt to give the beauty and cosmetics industry, quite literally, a new face. With a combination of exclusive launches, product innovation and CSR, the Nykaa team aspires to change the way the industry operates in the country. In a conversation with Saurabh Sinha, CEO, Uber Content, Nayar shares the journey of the evolution of Nykaa.com from an idea to a brand, her perception of the industry and her future plans.

Q. Can you brief us on how you came up with the idea of Nykaa? How was this business conceptualised?
A. When I was looking at various business options, one trend I noticed was that unlike other countries like Japan, France and Europe where there are stores like Harrods, Bloomingdale’s or Saks Fifth Avenue offering a number of beauty products and fragrances, India did not have many such outlets. Though there was a demand, there were no suitable retail formats in India.

This was when I also observed a US-based multi-brand retailer called Sephora which caught my attention, as it offered customers unbiased advice about multiple brands and products. I was inspired by this, and the fact that there was a large market to be catered to in this segment. I also understood that e-commerce was a more efficient way of servicing a long-tail inventory market in a large country like India.

Q. What, in your opinion, is the potential of this market?
A. There is a lot of potential. Today, the scale of consumption of beauty products in India is very small compared to others markets like the US, Korea, Taiwan and Japan. But consumption is increasing rapidly, as seen in the market for deodorants, which is witnessing aggressive growth with many companies launching new products. There is huge potential in the Indian market.

Q. Is there any particular area where you anticipate more growth?
A. E-commerce. Even in the US, the share of e-commerce in retailing is sub-10 percent and in India it stands at 1-2 percent. But many brands are witnessing very rapid growth at nearly 4 to 5 percent. The plan is to take the share of ecommerce as percentage of sales to 10 percent. Going forward, even higher.

Q. Which is the geographical area where you are witnessing great demand due to the ecommerce phenomena?
A. Our biggest market is Delhi NCR. I think it’s a big market for retailing as a whole because of the sheer mass of middle-class consumers that exist there. There is a huge demand for beauty products in both the East and the North-East. I can see a lot of demand for skin care from Kerala and Tamil Nadu, and from Punjab for makeup. So different markets have different preferences. But seen as a whole, there is very good demand in a number of states and cities.

Q. Is there anything specific you are doing to build your positioning other than that of being a retailer?
A. We are focusing on experiential marketing. We did not want to sell a clearance product to our customer. We don’t want to sell a colour of a lipstick that no one is picking up, but to recommend the right colour and sell that to them. To achieve that, we felt that we had to be inventory led. So, unlike others which have foreign ownership and hence are forced marketplaces, we have decided to stay domestic and follow the inventory-led model. On an average, each customer buys four to five items and our average ticket size is Rs 1,200, which is considered good for this category.

Q. You have focused particularly on content. What is the reason behind the same and what has been the advantage of that strategy?
A.We feel that there are three types of customers. These are one, customers who are short on time, and e-commerce is convenient. Then there is the beauty aficionado, who knows what she is going to buy. For this bracket of customers, the offering is very wide. Then there are makeup or beauty newbies who don’t know what they are looking for. Hence, we impart a lot of education on our website through our online magazine “Beauty Book”. We also have a You Tube channel called Nykaa TV on which we have a number of how-to videos.
We have videos and content on our product pages. You can now see something called Nykaa Decodes where we carry articles and also have experts answering online.

Q. What are the key milestones the venture has crossed since launch?
A. Our website is two-years old and the business was set up around nine months prior to that. We are witnessing very good momentum in terms of our sales and revenues. Our gross margins are double or triple the levels that prevail in the market. We have been very active on most digital mediums like Facebook, Google etc. We have partnered with Femina to launch Nykaa Femina Beauty Awards, an annual award show for beauty products.

Q. Any new initiatives that you are planning in the next 12 to 24 months?
A. We plan to set up two more experiential stores. We are planning to launch our own private label and there will be a couple of brands under Nykaa’s ownership, basically riding our distributorship. We believe in offering quality products at the right price, so that’s the kind of offering we will give our consumers.

We also intend to focus more on wellness, which is long-term sustainable beauty. And at some stage you do need vitamins and supplements to maintain your looks. So we are looking at an integrated approach to beauty, which is not just about hiding or enhancing something, but also long-term sustenance.

Q. What have been your key challenges in merchandising?
A. Everyone knows that fulfilment rates are very low in the beauty industry, at best at 60 percent. Also, products expire, because of which there is a large clearance market where people sell products that are near or have crossed the expiry date.
We like to stay away from all that to protect our consumer. The trust in Nykaa came in very quickly as we were inventory led and always controlled the products we were sending out to our customers.

Q. What sort of culture you are building or inculcating consciously in your employees?
A. We have very young employees, we are very ready to empower them. They have a voice and also a customer connect. The organisation is not that hierarchical. We are a very flat organisation with few layers. We give each employee independent responsibilities and authority. We ask them to watch data. All ideas are led by data. If you ask for a Fun Friday, you need to know how much extra sales it leads to. If you are going to do a CSR initiative, you should know what expectations there will be in terms of visitors and additional sales. There is a lot of accountability.

Q. Your journey started with investment banking and now you have your own venture. How has the transition been?
A. My journey began with me wanting to be an entrepreneur, and I have really enjoyed it. It has taught me what an entrepreneurial journey is all about. You need to be patient, you need conviction and should be very focused. Other big lesson, and an exciting one, is that earlier there were more corporate customers, but now it’s the consumer space. I was very focused on finance earlier, now its marketing and operations. This experience has made me a very well-rounded business manager.

Q. What’s your vision of Nykaa in the next three to four years?
A. I believe Nykaa should stand for ‘Women Empowerment’. If they want to be entrepreneurs they should be encouraged, if they want to look after kids that’s what they should do. My belief is that women should have the freedom to pursue their journey.
We also want to be a socially responsible brand and support a lot of CSR initiatives periodically. To mark Women’s Day, we donated a certain percentage of our revenues for two days to Nanhi Kali – that’s a cause we believe in, educating the girl child. Customers loved it. I saw a clear 50 percent jump in sales on those two days.
Also, Nykaa wants to bring beauty into style. I think fashion and style has dominated the Indian scene in the last five to ten years, but beauty is equally important and we want it to get its fair share.

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