The Rise & Fall? of Nykaa: A Case Study on Disrupting Traditional Retail in India

7 min readApr 8, 2023

Nykaa is an Indian e-commerce company that sells beauty and wellness products online. Founded in 2012 by Falguni Nayar, a former investment banker, Nykaa has quickly become one of the most popular online beauty destinations in India. The company offers a wide range of beauty products from over 1,500 brands across various categories such as makeup, skincare, haircare, fragrances, and more.

Business Model & Strategy

Nykaa operates on an inventory-based model where it procures products from various brands and sells them on its platform. The company also has its own private label range of products under the brand name ‘Nykaa’ which has become quite popular among customers. Nykaa also operates a chain of offline retail stores across India, which enables it to reach out to a wider customer base.

Online marketplace: Nykaa’s online marketplace allows customers to browse and purchase a wide range of beauty and personal care products from various brands and sellers. The company offers features such as user reviews, product recommendations, and loyalty rewards to enhance the customer experience and drive repeat purchases.
Offline stores: Nykaa has also established a network of offline stores, which serve as experiential and fulfillment centers for customers. The stores offer services such as makeup consultations, beauty workshops, and product trials, which help build brand awareness and loyalty.
Private label products: Nykaa has launched a range of private label products, including cosmetics, skincare, and fragrances, which offer high quality at affordable prices. The company has also collaborated with popular influencers and celebrities to create exclusive collections, which help differentiate its products from those of competitors.
Marketing and branding: Nykaa has invested heavily in marketing and branding, using a mix of digital and traditional media channels to create awareness and engagement among its target audience. The company’s campaigns, which often feature popular Bollywood celebrities and social media influencers, have helped build a strong brand identity and customer loyalty.
Logistics and supply chain: Nykaa has built a robust logistics and supply chain infrastructure, which allows it to offer fast and reliable delivery to customers across India. The company has also invested in technology and automation to optimize its warehouse operations and reduce fulfillment costs.

Market Overview

The beauty and personal care market in India is one of the fastest-growing markets in the world. According to a report by Euromonitor International, the Indian beauty and personal care market is estimated to be worth around $12 billion and is expected to grow at a CAGR of 5.3% from 2020 to 2025. With the growing popularity of online shopping, the e-commerce beauty and personal care market in India is also expected to grow rapidly.

However, Nykaa faces challenges such as intense competition from players such as Amazon India, Flipkart, and Purplle, and managing logistics as the company expands. Logistics is a critical part of the e-commerce business and can significantly impact customer experience. As Nykaa expands, managing logistics may become a challenge.

Financials

Nykaa generates revenue through various channels, including:

Sales of beauty and wellness products through its e-commerce platform and brick-and-mortar stores.
Commission-based income from brands that sell their products on Nykaa’s platform.
Advertising and promotional campaigns on its platform, such as sponsored content and brand collaborations.
Nykaa’s private label products, which offer a higher profit margin compared to other products.

Some insights:

Nykaa has a high market capitalization of ₹116,301.16 Crore.
The company’s enterprise value is slightly lower at ₹114,025.70 Crore.
The revenue for the last twelve months (TTM) is ₹4,509.16 Crore, with a revenue per share of ₹40.58.
Nykaa has a negative EBITDA of ₹-205.91 Crore, with an EBITDA margin of -4.57%.
The net income for the TTM period is also negative at ₹-438.24 Crore, resulting in negative earnings per share (EPS) of ₹-3.94.
The P/E ratio is not applicable as the company has negative earnings.
The P/S ratio, which measures a company’s market capitalization relative to its revenue, is relatively high at 25.80.
The P/B ratio, which compares a company’s market capitalization to its book value, is 5.29.
The ROE is negative, indicating that the company is not generating positive returns for its shareholders.
Nykaa does not have any debt as of the last reported quarter.

Nykaa Acquisitions

Nykaa has been actively acquiring companies to expand its product offerings and strengthen its position in the market. Here are some of the key acquisitions made by Nykaa:

Pipa Bella: In August 2021, Nykaa acquired Pipa Bella, a fashion jewelry brand, for an undisclosed amount. The acquisition will help Nykaa expand its fashion jewelry offerings.
Lovely Lifestyle: In April 2021, Nykaa acquired Lovely Lifestyle, an online marketplace for natural and organic products, for an undisclosed amount. The acquisition will help Nykaa strengthen its presence in the natural and organic beauty segment.
20Dresses: In November 2020, Nykaa acquired 20Dresses, a fashion and lifestyle personal styling platform, for an undisclosed amount. The acquisition will help Nykaa enhance its customer engagement and provide personalized styling solutions.
Pixi: In January 2020, Nykaa acquired Pixi, a UK-based skincare brand, for an undisclosed amount. The acquisition will help Nykaa expand its international product offerings.
Just Herbs: In September 2019, Nykaa acquired Just Herbs, an Ayurvedic skincare brand, for an undisclosed amount. The acquisition will help Nykaa expand its offerings in the natural and Ayurvedic skincare segment.

SWOT Analysis

Website Traffic Report

Here are some engagement metrics for Nykaa’s website as of March 2023:

Average visit duration: 4:25 minutes
Pages per visit: 4.1
Bounce rate: 43.8%
Returning visitors: 25.9%

Google Search: Nykaa ranks in the top position for various relevant keywords, such as “buy cosmetics online”, “online makeup store”, and “buy beauty products online”.

Social Media Presence

Nykaa has a strong presence on various social media platforms such as Facebook, Instagram, Twitter, and YouTube. Here are some key statistics:

Facebook: 4+ million followers, with a high engagement rate on posts.
Instagram: 5.8 million followers, with a high engagement rate on posts.
Twitter: 276,000 followers, with regular updates and engagement with customers.
YouTube: 1.5 million subscribers, with a variety of beauty and makeup tutorials, product reviews, and brand collaborations.

Nykaa’s Contreversy

In March 2021, it was reported that a former employee of Nykaa had accused the company and its founder of discrimination and harassment. The employee alleged that she had been fired after taking maternity leave, and that she had faced discrimination and harassment due to her gender and pregnancy.

Nykaa denied the allegations, stating that the employee had been terminated due to poor performance. The company also said that it had a strong anti-discrimination policy in place and that it was committed to creating a safe and inclusive workplace.

The controversy sparked a wider conversation in India about the issue of workplace discrimination and harassment, particularly against women. Several other companies were also accused of similar practices, leading to calls for greater accountability and transparency in corporate culture.

In response to the allegations, Nykaa launched an internal investigation and committed to reviewing its policies and practices to ensure that they were in line with best practices. The company also said that it would work to create a more supportive and inclusive work environment for all employees.

Nykaa’s Path to Profitability

Nykaa’s path to profitability has been driven by a combination of factors, including strong revenue growth, a focus on efficiency and cost optimization, strategic investments and partnerships, and a strong digital presence.

One of the key drivers of Nykaa’s path to profitability has been its consistent revenue growth over the years. The company has been able to grow its revenue by expanding its product offerings, launching new brands, and expanding its distribution network.

At the same time, Nykaa has focused on optimizing its costs and improving its efficiency. This has been achieved by investing in technology and automation, streamlining its supply chain and logistics operations, and improving its customer service.

Nykaa has also made strategic investments and partnerships to fuel its growth and drive profitability. For example, the company has partnered with fashion brands like Masaba and H&M to launch exclusive product lines, and has made strategic investments in companies like Pipa Bella and Cult Beauty to expand its product offerings and reach new customers.

Finally, Nykaa’s strong digital presence has been a key factor in its path to profitability. The company has leveraged digital marketing and social media to build its brand and reach new customers, while also investing in technology to create a seamless online shopping experience.

Overall, Nykaa’s path to profitability has been driven by a combination of revenue growth, cost optimization, strategic investments and partnerships, and a strong digital presence. The company’s focus on innovation and customer experience has allowed it to establish a leading position in the beauty and fashion industry in India, and position itself for long-term growth and success.