Nykaa: From 5 years of consecutive losses to a unicorn!

Nykaa: From 5 years of consecutive losses to a unicorn!

Credit: Entrackr

About Nykaa

• Nykaa was founded in 2012 by Falguni Nayar, who before establishing Nykaa was an investment banker, which has helped Nykaa become a unicorn.

• It specializes in facilitating an extensive collection of cosmetics, skincare, haircare, fragrances bath and body, luxury, and wellness products for both women and men.

• It has over 15 million registered users, 70+ stores across India, over 2000 brands, and 2,00,000 products available via its website, app, and stores.

Business Model and Strategies

• The platform follows an inventory-led business model, where it pre-orders products products from manufacturers, stores them in warehouses, and sells them directly to customers through its website or offline stores. This allows Nykaa for high-profit margins and competitive pricing.

• It has a non-discounting policy where it avoids discounting any of the products unless the brand itself is offering discounts or offers. This has helped the platform to strengthen its relationships with global brand partners who are not too comfortable displaying their premium cosmetic products for sale on an e-commerce platform.

• Nykaa started as an e-commerce brand to reduce operating expenses and generate high net profit margins as opposed to the cosmetics industry which, though generate huge gross profit margins but net margins are cut down due to high operating expenses

• It collaborates with various brands to sell its products on its platform to avoid the problem of duplication of products and risk involved in usage, thereby also earning the trust of customers regarding the quality of products sold.

Nykaa's Horizontal Expansion

• To attract maximum customers and have a wider presence in the market, Nykaa has opened brick & mortar stores in addition to its e-commerce store.

• Its various horizontal segments are
NYKAA LUXE- The Luxury arm
NYKAA ON TREND- Trending fashionable products
NYKAA FASHION- The Fashion arm
NYKD BY NYKAA- Lingerie specific arm
NYKAA MAN- Men's Grooming
NYKAA NATURALS- Organic products

Journey to the Unicorn Club

• After reporting losses for about 5 consecutive years, Nykaa turned profitable in 2019 when revenue increased to Rs 1,159.32 crores, and profits were posted at Rs 2.3 crore.

• In parallel, between March and April last year, Nykaa managed to raise Rs 166 crore from Steadview Capital with a valuation of Rs 9100 crore ($1.2 billion) that converted the eight-year-old venture to unicorn status.

• Over time, Nykaa has raised a total of over $70 million in primary funding. "We are a frugal company which has gone large scale", says Nayar.

• The company is gearing up for its IPO from which it plans to raise Rs 4000 crore Rs 525 crore via fresh equity and an OFS of up to 43 million shares.