Nykaa Business Model 2024 | How does Nykaa Make Money?

Contents

Founded in 2012 by Falguni Nayar, Nykaa is an Indian e-commerce company focused on beauty, fashion and lifestyle products. Headquartered in Mumbai, Nykaa operates an online marketplace, retail stores, and its own brands. The company aims to provide a comprehensive omnichannel experience to customers through its website, mobile apps, and 80+ offline stores across India.

Nykaa has emerged as one of the leading online destinations for beauty and wellness products in India. As per Inc42, Nykaa commanded close to 33% market share in the online beauty segment in India in 2018. The brand offers over 200,000 products from more than 3000 brands, covering makeup, skincare, haircare, bath and body, fragrances, grooming appliances and more. The product assortment spans luxury, premium and mass segments.

Nykaa’s core values are centered around being customer-focused, passion-driven and promoting inclusive beauty. The company aims to inspire Indian women to explore and discover their individual beauty preferences. Under the leadership of Falguni Nayar, the company has witnessed phenomenal growth and profitability.

Nykaa – Founders and Team

Nykaa was founded in 2012 by Falguni Nayar, a former investment banker and business consultant. She identified a gap in the online retail market for beauty and wellness products in India.

The founding team included Falguni’s husband Sanjay Nayar, Girish Sivanand, Rekha Sheth and Akshay Tanna. In addition to the founders, Nykaa’s management team includes:

Adwaita Nayar – CEO
Anchit Nayar – CEO, Retail
Anirudh Bansal – CFO
Hariom Parekh – CMO
Nihir Parikh – Chief Business Officer
Arvind Aggrawal – COO
Prasad Patil – Chief Technology Officer

Nykaa has built a strong tech and business team combining professionals from FMCG and tech backgrounds. The company employs over 2700 people across different functions including technology, marketing, operations, finance and content creation.

Nykaa – Mission and Vision

Mission

Democratize beauty across India by providing access to global brands
Inspire Indian women to explore their beauty preferences
Offer a comprehensive selection of beauty, personal care and fashion products

Vision

Be India’s leading omnichannel lifestyle retailer
Be the destination of choice for beauty and fashion needs
Empower Indian women with knowledge and product options to make informed beauty choices

Core Values

Customer obsession
Passion
Think Pink – Promoting inclusive beauty

Nykaa aims to make the expansive world of beauty accessible to women across the diverse Indian market. Through its educational and engaging content, wide array of brand options, and omnichannel presence, Nykaa seeks to be every Indian woman’s guiding light in this space.

Nykaa – Industry Overview

The beauty, cosmetics and grooming industry has been growing steadily in India on account of rising disposable incomes, changing lifestyles and greater awareness of personal care. The overall market was estimated at $11 billion in 2016 and is projected to reach $26 billion by 2025.

Some key aspects of this industry:

Strong growth driven by rising middle class and aspiring millennials
Increasing demand from smaller towns boosting access to personal care
Women’s cosmetics segment estimated at $2.5 billion, growing annually at 25%
Men’s grooming products also witnessing higher growth lately
Low penetration of global brands, largely unorganized market
Online retail gaining strong momentum with increasing smartphone & internet usage

The wellness industry comprising ayurveda, organic and natural products has also been seeing heightened interest. There is a major opportunity to organize the extremely fragmented beauty and cosmetics market in India. With its diverse portfolio, omnichannel presence and innovative brand marketing, Nykaa has emerged as a leading player capitalizing on this high-potential space.

Nykaa – Products and Features

Product Categories

Nykaa offers an exhaustive range with over 200,000 products across 1000+ brands and 4500+ SKUs in the following core categories:

Makeup
Skincare
Haircare
Bath and Body
Fragrance
Men’s Grooming
Health and Wellness (Nutrition, Ayurveda, Organic)
Accessories and Fashion

This expansive selection covers luxury, premium, professional and mass segments across domestic and international brands. The portfolio includes beauty staples as well as niche, luxury makeup and skincare items.

Key Product Features

Huge selection of beauty, wellness and fashion essentials
Carefully curated brand mix including luxury cosmetics like Estee Lauder, Clinique and niche natural products
In-house owned brands – Nykaa Cosmetics, Nykaa Naturals
Specialty offerings like Clean Beauty, Korean Beauty, Natural products
Multi-brand discounts and promotions through beauty boxes and combo deals
Informative product pages with reviews, guides and tutorials
Virtual makeover and try-on tools for makeup, hair colours

Nykaa provides an unparalleled assortment of quality products combined with rich content to aid product discovery. Collaborations with influencers and celebrities along with social campaigns like #NykaaOnTrend further drive engagement and sales.

Nykaa – Business Model

Nykaa operates primarily as an online retailer and marketplace providing a comprehensive shopping experience for beauty, personal care and fashion products.

Omnichannel presence with website, mobile apps, 80+ offline stores
Inventory-led model with a curated brand mix
Own procurement for owned and private label brands
Marketplace for third party sellers with nearly 200 brands
Hybrid online model with presence across multiple channels
Multi-product category platform ensuring cross-selling
Strong focus on content – reviews, guides, video tutorials
Target audience of aspirational, savvy women shopping online

Nykaa adopts a hybrid approach combining both inventory and marketplace models. This ensures adequate assortment depth alongside tailored brand partnerships. Through its owned brand Nykaa Cosmetics, it competes with mass brands. The multi-channel presence allows access across metros, smaller cities and towns.

Nykaa’s business model is focused on revolutionizing the discovery and shopping experience for beauty products through a compelling brand portfolio and rich content.

Nykaa – Revenue Model

Nykaa generates revenue through the following streams:

Product sales: Main source is sale of beauty, personal care and wellness items procured directly from brands. Also sells owned Nykaa brand products.
Brand partnerships and vendor margins: Marketplace commissions and product promotion fees from sellers on Nykaa’s platform.
Advertising: Digital marketing solutions offered to brands including listings, search ads and influencer campaigns.
Store retail: Offline sales through 80+ owned stores across India. Focus on tier 2 cities.
Nykaa Network: Commission earned from sales generated by influencers and content creators.
Sponsored Content: Paid reviews, video content by KOLs to drive engagement.
Subscriptions: Options like beauty boxes that provide periodic supplies of sample products.

Nykaa also launched Nykaa Fashion in 2018 – an e-commerce platform for apparel, footwear and accessories following a similar brand-driven model. With its diversified business verticals, Nykaa registers 40-45% of GMV from non-beauty offerings.

The company has balanced its income streams by leveraging assets like its subscriber base, website traffic, brand partnerships and influencer network. This has enabled Nykaa to build a profitable, cashflow positive business.

Nykaa – Shareholding

Nykaa is incorporated as FSN E-Commerce Ventures Limited. As of Feb 2022, the shareholding pattern is as follows:

Falguni Nayar and Family – 53.9%
TPG Growth IV SF – 18.74%
Lighthouse India Fund – 11.13%
Sunil Kant Munjal – 4.17%
Harindarpal Singh Banga jointly with Indra Banga – 2.85%
Narotam Sekhsaria – 1.07%
JM Financial and Investment Consultancy Services – 0.91%
Facebook – 2.69%
Sanjay Nayar Family Trust – 1.8%
Adwaita Nayar – 1.02%
Anchit Nayar – 1.02%

Post Nykaa’s IPO in 2021, founder Falguni Nayar and her family continue to hold the majority stake. Private equity funds like TPG Growth and Lighthouse India hold minority equity positions. The shareholding pattern reflects the company’s origins as a founder-driven firm. It has since received funding from strong investor networks to fuel its expansion while retaining promoter control.

Nykaa – Funding

Nykaa has received funding from reputed private equity and venture capital firms over multiple rounds to support its growth plans:

2012: Nykaa raises seed funding from family and friends of founders
2014: $1 million in angel funding from TVS Capital
2015: Steadview Capital invests $5 million
2017: Raised ~$10 million from existing investors TVS Capital and Steadview Capital
2018: $10.6 million from Lighthouse India Fund
2020: $13 million from Steadview Capital
2020: Raised $27.6 million from UK’s development finance institute CDC Group
2020: $11.2 million from TPG Growth IV SF
2021: Pre-IPO funding of $52 million from TPG Growth, Lighthouse India Fund, JM Financial and Sunil Kant Munjal

In total, Nykaa has raised nearly $140 million in capital prior to its IPO. The company achieved profitability and scaled rapidly prior to tapping external equity. Top-tier VCs have shown consistent confidence in Nykaa’s growth trajectory.

Nykaa – Partnerships

Nykaa has forged partnerships with leading brands, influencers and platforms:

Brand Partnerships:

Exclusive luxury brand partnerships with names like Huda Beauty, Charlotte Tilbury, Manish Malhotra
Co-create products with celebrity names like Katrina Kaif, Alia Bhatt, Disha Patani
Celebrity-curated stores like Anushka Sharma’s Nush Collection
Handpicked brand stores like Kacey Store, Masaba Store

Influencer Programs:

Nykaa Affiliate Program for content creators to drive sales and earn incentives
Nykaa Influencers – a cohort of ambassadors creating beauty content and reviews
Nykaa’s own influencer handle ‘The Nykaa Network’
Campaigns like #NykaaOnTrend to drive influencer generated content

Platform Partnerships:

Integration with Facebook, Google and Instagram for digital marketing
Logistics partnerships with Delhivery, Shadowfax, Ecom Express and others
Technology solutions from partners like Salesforce, AWS

Nykaa’s brand partnerships provide exclusive product access while influencer associations drive engagement and trust. Platform associations enhance customer targeting and strengthen fulfillment. These mutually beneficial partnerships amplify Nykaa’s reach and offering.

Nykaa – Growth

Nykaa has charted an impressive growth trajectory:

Revenue grew from ₹1,200 crore in 2019 to ₹2,400 crore in 2020 to ₹3,149 crore in 2021
Net Profit jumped from ₹61.9 crore in 2020 to ₹62.5 crore in 2021
GMV or gross merchandise value stands at $454 million in 2021, 100% growth over 2020
Monthly active users grew from 1.6 million in 2018 to 7.2 million in 2021
Assortment expanded from 3000 brands in 2018 to 4500+ brands in 2022
Store count increased from 22 offline stores in 2018 to 80+ in 2022
Nykaa Fashion GMV rose from ₹367 crore in 2019 to ₹1,860 crore in 2022

Key drivers of Nykaa’s growth:

Strong brand partnerships and exclusive launches
Investment in owned brands & private labels
Influencer marketing and educational content
Rapid expansion to tier 2/3 cities and towns
High lifetime value and retention of customers
Leveraging data and analytics for targeting
Increasing contribution from fashion vertical

Nykaa’s ability to scale while retaining fundamentals has allowed it to grow sustainably and outpace competitors.

Nykaa – Competitive Strategy

Nykaa employs the following competitive strategies:

Curated brand portfolio instead of endless inventory. Carefully selected brands based on demand and gaps
Owned brand Nykaa Cosmetics fills white spaces in mass segment
Investments in content – guides, reviews, videos – to gain trust and SEO
Leveraging data and insights for personalization and recommendation engine
Targeted social media engagement through influencers, celebrities to drive discovery
Quick delivery with advanced supply chain to 85,000 pin codes across India
Multi-channel model providing convenience of stores with online assortment
Strategic brand partnerships including exclusives and celebrity collaborations
Private labels and specialty offerings in clean beauty, Ayurveda
Nykaa Fashion launched as second growth engine targeting apparel and accessories

Instead of discounts and promotions, Nykaa focuses on building loyalty through brand relationships, content-driven discovery and omnichannel convenience. This leads to profitable and sustainable growth.

Nykaa – Competitors

Nykaa operates in a competitive landscape with both online and offline players.

E-commerce competitors:

Amazon – Large beauty & personal care marketplace
Flipkart – Big Bazaar brands, limited premium cosmetics
Myntra – Strong in fashion, entrada in beauty
Purplle – 100% online cosmetics shop with discounts
Limese – Budget beauty marketplace model

Brick-and-mortar competitors:

Brand exclusive stores – L’Oreal, MAC, Inglot etc.
Department stores – Shoppers Stop, Lifestyle, Pantaloons
Retail chains – Health & Glow, Apollo Pharmacy, Guardian Pharmacy
Beauty Salons & Make-up studios
Supermarkets & Hypermarkets – Star Bazaar, More.

Nykaa’s differentiated positioning as an authority in multi-brand beauty products combined with strong online-first DNA sets it apart from traditional retailers. It offers far more depth and breadth than niche e-commerce rivals. Nykaa’s brand relationships, content and community also make it a preferred destination versus marketplaces.

Nykaa – SWOT Analysis

Strengths:

Strong brand recognition and trust in beauty domain
Curated multi-brand assortment across price points
Hybrid online-offline model
Celeb collaborations and influencer network
High repeat purchase rate and customer loyalty
Profitable operations due to inventory model
Superior customer experience and service

Weaknesses:

Limited presence in mens grooming segment
Catalog skewed towards premium mass brands
Dependence on beauty category for bulk of revenues
Challenges in tier 2, 3 city fulfillment and experience

Opportunities:

Growing beauty, cosmetics and apparel market
Demand from smaller towns and cities
New customer acquisition through influencers
Product development through celebrity associations
Entry into new segments like athleisure, kids, home

Threats:

Potential entry of large horizontal e-commerce firms
Changing algorithms of platforms like Google, Facebook, Instagram affecting marketing
Aggressive discount-led pricing from online competitors
Strong negotiation leverage of brands
Continued offline dominance of general trade stores

Nykaa has built up core strengths but needs to continue enhancing its portfolio and expanding use cases to retain its edge. The growth outlook remains strong backed by its execution capabilities.

Nykaa – Marketing Strategy

Nykaa has pioneered digital marketing in the beauty industry. Key aspects of its marketing strategy:

Influencer marketing network to drive discovery through reviews, hauls. #NykaaOnTrend campaigns encourage UGC.
Engaging social media presence with tutorials, live sessions using Nykaa’s own handles.
Online digital marketing through Facebook, Google Shopping, programmatic ads. Retargeting to nudge purchases.
Omnichannel model allows combined reach of online and offline stores.
Email marketing with personalization, product recommendations and cross-sell prompts.
Promotions like first-time discounts, cashback offers, beauty boxes, and combos. But discounted pricing is not the core strategy.
Celebrity associations, brand collaborations and exclusive product launches act as awareness drivers.
Content-driven approach with guides, tips, advice across channels acting as organic acquisition.
Experiential marketing through physical stores with make-up trials, nail stations, perfume stations.

Instead of discount-led customer acquisition, Nykaa focuses on building authority, trust and emotional connection with customers. This allows it to retain high customer LTV.

Nykaa – Innovations and Initiatives

Nykaa Beauty Advisors – Trained beauty advisors provide free consultations both online and offline on makeup, skin and haircare as per individual needs.
Virtual Try-on – Nykaa’s app allows users to virtually try on makeup products through augmented reality. Lipsticks, eyeliners, eyeshadows and foundations can be tested.
Nykaa Network – Influencer program that provides creators their own sites and tools to drive engagement.
Nykaa Man – Separate platform focused on male grooming segment in India. Offers education via style guides.
Nykaa Fashion – Expansion into fashion e-commerce covering apparel, footwear and accessories.
Nykaa Private Labels – Owned brands like Nykaa Naturals, Nykaa Cosmetics that fill white spaces.
Same Day Delivery – Through store network and dark stores, Nykaa offers ultra-fast delivery in metros.
WhatsApp for Business – Leverages WhatsApp messaging for order and delivery updates.
Interactive Brand Stores – Curated by celebrities, influencers. Personalized recommendations.

Nykaa is leveraging technology, content and data analytics to drive personalization and differentiated shopping experiences. The innovations enhance consumer engagement across the purchase journey.

Nykaa – Awards and Recognitions

ET Iconic Brands of India – Economic Times – 2021
Hurun Research Institute’s Top 100 Unicorns, 2021
Fortune India’s Top 50 Most Powerful Women in Business – Falguni Nayar – 2021
Business Today’s Most Powerful Women – Falguni Nayar – 2019, 2020
Fortune’s Top 50 Most Powerful Women International 2019 – Falguni Nayar – 2019
Beauty Launchpad’s Fastest Growing Beauty Brands – Nykaa- 2018
Nykaa rated one of India’s Buzziest Brands by Industry Intelligence Group – 2018
Vogue Beauty Awards – Multiple categories – 2018 – 2020
Global Brands Magazine Beauty Awards – Multiple categories – 2018 – 2020

The multiple awards validating Nykaa’s business success and brand equity are a testament to its industry leadership, marketing excellence, and influential founder Falguni Nayar.

Nykaa – Investments

In addition to raising $140 million in capital, Nykaa has made strategic investments in niche beauty and fashion brands to expand its portfolio.

Investments:

Dot & Key – Premium beauty brand focused on skincare. Nykaa owns 75% stake.
Twenty Dresses – Western wear e-commerce brand. Nykaa has majority stake.
Kica – Organic skin and hair care brand. Nykaa took majority stake in 2021.
Pipa Bella – Fashion jewelry brand. Nykaa holds 67% stake.
RSVP – Occasion wear brand. Nykaa invested ₹55 crores for minority stake in 2019.

These investments strengthen Nykaa’s play in the premium beauty segment, fashion jewelry category and give it greater control over supplier brands. The company is targeting both horizontal and vertical growth opportunities.

Nykaa – Mergers and Acquisitions

Nykaa has fuelled its expansion through acquisitions of strategic and competing firms.

Key acquisitions include:

20Stores – Omnichannel platform acquired in 2020 to enable offline retailers sell online.
Nearbuy – hyperlocal startup acquired in 2021 to boost Nykaa’s omnichannel presence.
Pahadi Local – D2C jewellery brand acquired in 2022 to improve fashion vertical play.
Cherry Internet – Online lingerie retailer acquired in 2022. Entry into innerwear segment.
Iluminar – Luxury beauty brand acquired in 2022. Strengthens premium cosmetics portfolio.

The acquisitions demonstrate Nykaa’s intent to diversify into new segments like lingerie, jewellery, enter tier-2 towns, and strengthen its brand portfolio.

Nykaa – Controversies

Nykaa has faced some controversies during its growth journey:

In 2015, a case was filed alleging Nykaa sold used, expired cosmetics. However lab tests disproved the accusations.
In 2018, Nykaa faced backlash for posting insensitive photo about acid attack survivors. The post was deleted and company apologized.
In 2020, allegations surfaced about Nykaa promoting fairness and skin lightening products. The site was reviewed to ensure compliance.
In late 2021, a case was filed against Nykaa and promoter Falguni Nayar for irregularities in IPO pricing and projection data. Nykaa denies any wrongdoing.

While Nykaa has attracted some negative PR, the company has been quick to respond to controversies through remedial actions. Overall, it has built a reputation for professionalism and high quality standards.

Nykaa – Challenges Faced

Nykaa has navigated some key challenges:

Intense competition from large horizontal players like Amazon, Flipkart entering the beauty space
Complex fulfillment and customer experience issues as it expands to smaller towns
Managing relationships with brands who prefer to sell directly via own sites
Pressure to provide discounts and deals to acquire customers unlike pure marketplaces
Shortage of local language, technology talent to support regional language rollouts
Potential conflicts from being both a retailer and marketplace for brands
Raising external capital to fund growth while remaining founder-led

However, Nykaa has retained its competitive edge through its brand curation,owned labels, content, superior technology and hybrid model. Its profitability and strong customer retention also provide stability to counter challenges.

Nykaa – Future Plans & Aspirations

In recent public comments and interviews, founder Falguni Nayar has indicated the following priorities:

Continue the focus on beauty and personal care as core category
Expand fashion business across apparel, footwear and accessories
Drive penetration in smaller towns – target 50% sales outside metros
Grow Nykaa’s owned brands to fill portfolio gaps
Develop more celebrity and influencer collaborations
Ramp up offline stores rollout – aim for 300+ stores in 3-5 years
Drive margins and cost structure via private labels
Build personalized engagement through data analytics
Evaluate new segments like athleisure, kids, home
Pursue international expansion in Middle East and Southeast Asian markets

Nykaa is well-poised to achieve a market cap of $10 billion and gross sales of $2 billion by 2025. The company aims to deliver 25-30% growth and sustained profitability year-on-year.

FAQs About Nykaa Business Model

What is Unique about Nykaa?

Nykaa stands out through its brand curation, educational content, omnichannel presence, technology innovation and marketing success in a fragmented industry. It’s pioneering status as an online beauty retailer gives it a first mover advantage.

How Does Nykaa Work?

Nykaa operates as both an online retailer and marketplace. It sells its own inventory as well direct procurement from brands. It also offers a platform for third party sellers. Customers can shop across web, mobile apps and offline stores.

How Does Nykaa Make Money?

Nykaa earns revenues primarily through product sales, commissions from marketplace sellers, advertising and brand partnerships. It operates a hybrid model with own + third party inventory.

Will Nykaa Be Profitable?

Yes, Nykaa has been EBITDA profitable since FY2020, with revenue growth of over 50% year-on-year. Its unit economics ensures healthy margins. As scale improves, Nykaa is poised to deliver sustainable profitability alongside revenue growth.

What type of business model is Nykaa?

Nykaa operates a hybrid business model combining inventory-led e-commerce and marketplace services. It is both a retailer and platform.

What made Nykaa successful?

Exclusive brand tie-ups, influencer marketing, educational content, omnichannel presence, technology, and a stellar customer experience contributed to Nykaa’s success.

What makes Nykaa different from its competitors?

Curated portfolio, community engagement, content-driven discovery, superior branding and execution differentiate Nykaa versus competition.

Does Nykaa make profit?

Yes, Nykaa has been profitable since FY2020 and registered a net profit of ₹62.5 crore in FY2021.

What are the 3 C’s of Nykaa?

Content, Community and Curation are considered the 3 C’s central to Nykaa’s business model.

Who is the competitor of Nykaa?

Major competitors are other online retailers like Amazon, Flipkart, Purplle, Myntra and brick-and-mortar stores like Shoppers Stop.

What is unique about Nykaa?

Nykaa pioneered an online model for multi-brand beauty in India combining curation, community engagement and technology.

What is the unique selling proposition of Nykaa?

Wide assortment of authentic products, engaging content, smooth purchase experience and omni-channel access differentiate Nykaa.

How did Nykaa become profitable?

Controlled customer acquisition costs, owned inventory, superior retention and cross-selling made Nykaa profitable.

Is Nykaa a B2B?

No, Nykaa is primarily a B2C company selling directly to end consumers. But it has some B2B revenue streams.

What is the marketing mix of Nykaa?

Nykaa focuses on community engagement, influencer collaborations, content, personalized outreach and omnichannel presence.

What is the slogan of Nykaa?

Nykaa’s slogan is “Celebrate You”.

Who is the lady behind Nykaa?

Falguni Nayar is the founder and driving force behind Nykaa.

Who are the key investors in Nykaa?

Top investors are TPG Growth, Lighthouse India Fund, Steadview Capital, Sunil Munjal and others.

What is the format of Nykaa retail stores?

Nykaa has a premium retail store format with luxury beauty experiential across 300-500 sq ft areas.

What is the brand personality of Nykaa?

Nykaa has a premium yet vibrant, chic, bold and empowering brand image.

What are the future plans of Nykaa?

Nykaa plans to expand fashion, grow offline stores, build owned brands, personalization and enter new segments.

How does Nykaa manage its inventory?

Nykaa uses data analytics for demand planning. Its owned fulfilment centres and dark stores ensure quick delivery.

Also Read: Myntra Business Model 2024 – How does Myntra Make money?