Nykaa’s Business Model – Beauty Salon At Your Fingertips

From top-of-the-line apparel and beauty products to fashion advice, find out how the Nykaa business model managed to outwit a crowded market to become a $2 billion USD success story.

Nykaa 2 Billion dollar Newspaper headline

If there’s one company that’s making waves in the digital fashion marketplace, it’s Nykaa. The $2 billion USD valued company has migrated from just another online store to capture the over-crowded physical market in the fashion industry, and has done so remarkably well. With already established competitors like Myntra and Ajio.com in the mix, you’d think Nykaa – despite its vast number of physical stores – would face a bit of a hurdle like so many other tried and failed online stores. But the fashion giant has beat all expectations to become one of the most trusted marketplaces in the online fashion industry in such a short duration. And its physical footprints around the country are no exception.

Nykaa offers just about everyone a whole banquet of skin care items such as makeup, bath and body care, hair care, fragrances, and luxury products – all from well-acquainted brands inside as well as outside the country. And all of these items come at affordable and competitive prices, just how the online audience likes it. But most of these things are commonplace amongst Nykaa’s competitors, so what exactly does Nykaa do differently that makes it such a great go-to place for everything fashion and beauty? In this article, we’re attempting to find out just that – how Nykaa works, its target audience, the numbers, and Nykaa’s business model. So let’s get started.

About Nykaa

A little bit about Nykaa before we dive deep into how it works, and how the numbers stack up. The company was founded in 2012 by Falguni Nayar (more about this superwoman in a bit). What started as an online marketplace for lipstick and makeup is now home to a destination of 104 products sold per minute. To quote Mr. Chandler Bing, bullets have left guns slower.

Nykaa Growth Details

Screenshot Source – Nykaa Website

All the products offered by Nykaa are 100% authorized by distributors and brands, so you know you’re not getting any inauthentic items. This goes a long way in building trust, which is a crucial factor in the skincare industry. Taking this pleasant user experience a bit further, you also get free beauty assistance and advice by beauty experts available at the click of a button. You even have access to beauty vlogs, tutorials and a whole guidebook of a blog to learn how to use your products effectively.

Simply put, Nykaa is your one-stop destination for all things fashion. And there is one person sitting at the top of Nykaa’s 46 physical outlets and the massive online business in IndiaFalguni Nayar.

About The Founder

Falguni_Nayar - Profile PicFalguni Nayar is the founder and present CEO of Nykaa, one of India’s biggest online fashion portals today. After working at Kotak Mahindra Capital for close to 20 years, Falguni decided to finally part ways with the company in 2012 to launch her dream store, Nykaa.

A smart and hardworking lady, she is a standing example to women all over the country that age is just a number, for despite being 55, she’s leading the fashion giant towards a $2 billion USD IPO in the coming years, and it’s only getting bigger from there.

Falguni is eyeing for a revolutionary company that helps millions of people get out there and feel their best selves. Nykaa’s business model and its efforts to help people understand what looks and feels good on them through valuable tutorials and guided self-help tips are testament to that vision of its founder. And this dream is being achieved as we speak, through the ultimate weapon that is Nykaa’s marketing strategy. Let’s talk about that for a moment.

Marketing Strategy

Nykaa’s main business is its plethora of beauty and wellness products. But beauty products are complicated items to sell. People will not buy them if they don’t trust the label on the package. And building trust isn’t easy, especially when something is going to affect your skin. What helps the $500 billion beauty industry? Marketing!

Nykaa, like every other company out there, uses tried and tested marketing strategies – Advertising their products on fashion shows, through various blog posts, websites, influencers, all the stuff. Their collaboration with Femina in 2014 is what really started their effective marketing, however. And there’s nothing wrong with using tried and tested methods. Not everyone needs to go out of their way to make an impression. If it works, don’t fix it. Nykaa’s marketing strategy is nothing new or any different than Nykaa’s competitors, but it has worked wonders for the company, so sticking with it seems like a good option.

Business Model

Nykaa’s business model is not a well-kept secret. In fact, it’s a dead giveaway because the first thing you see when you land on the Nykaa website is Jhanvi Kapoor dining a dashing eye liner from the company.

Nykaa’s business model makes use of big-time influencers in the fashion and beauty industry, appealing to the millions of fans of these influencers. And influencer marketing has really taken off with the skyrocketing popularity of social media channels like Youtube, Instagram, and TikTok. Obviously this makes a lot of revenue for the company, but that is not all.

Nykaa also does collaborations with other competitors (similar to the Femina collaboration we mentioned earlier), creating a win-win deal for both parties. This has emerged as a big trend in recent years, but it’s safe to say that Nykaa was one of the early adopters of the method, and being the early bird has paid off big time.

Revenue model

Now that you understand how Nykaa works, it’s fair to assume that it is a very simple business to put together, although taking it to the level that it is today is a whole other ball game. The company makes roughly INR 1159.32 crores in revenue each year, and this number only seems to grow each day. Where exactly does this money come from, however? Let’s take a look.

Online Store

No doubt here, Nykaa’s online store makes the major part of its revenue, selling products from every reputable brand out there possible. It’s a one stop shop that you know you’ll be getting value out of, so it’s no doubt Nykaa makes a ton of money from this. The company says its user’s average cart size is between INR 1250 – INR 1550, which is not a hefty amount, but it sure isn’t cheap either. Multiply this number with the average of 10,000 daily orders placed on Nykaa across all of its platforms, and you know why the fashion giant is sitting where it is today.

Offline Stores

Nykaa Physical Store Front image

Image Source – LBB

Nykaa has over 65 physical outlets around the country, under the tags Nykaa Luxe and Nykaa On Trend. The physical stores offer everything the online store does, added with the physical catering to the shopping experience. Beauty tips, advice, and more in-depth understanding of the customer are just some of the benefits that come at the menial extra cost of setting up a physical store. And it has paid off huge in terms of brand recognition and scaling power, which is part of the reason for Nykaa’s IPO

Nykaa Network

Nykaa Network Image Description

The Nykaa Network is one of Nykaa’s recent centuries, allowing customers to login to a personal space for sharing their own personal healthcare routines and products that they would recommend – sort of like a Facebook community for beauty products. While this is not exactly a revenue model, we wanted to add this here because it has been a crucial factor in Nykaa’s trust-building exercises. By allowing their customers to openly speak about themselves, and how using Nykaa’s products made them feel, they are building trust in potential customers about their products. And it has worked magic for them.

Growth and Future Prospects

In 2019, the online beauty products industry faced a bit of a slowdown, resulting in many cutbacks to revenue, but Nykaa still managed to secure $14 million USD from TGP Growth Capital, to expand its offline footprint from 35 stores. Since then, even in the midst of a global pandemic, Nykaa has bloomed into a bigger, far better company, with over 68 offline stores. This is startup growth at its finest, and it has no plans to stop. The company has been striving to expand its offline presence by eyeing around 180 stores before 2024. If all goes well, their $2 billion USD vaulted IPO should serve as a base for this expansion.

The company had a growth of 78% in fiscal 2019, and we only predict it to go up from there. Not everything’s rainbows and sunshine however, as laying down physical stores in the middle of a pandemic could pose a serious problem. Nykaa could halt their expansion project for a while and focus entirely on its online store for 2021, but that will be a task on its own.

Closing Thoughts

All that said, this is a very smart company we’re talking about. Nykaa’s business model is driven by smart people at the helm who know what they’re doing, so we trust them to be successful in building their huge empire into something bigger in the coming decade. Their venture Nykaa Network serves as a pillar for auto-content creation – a really smart move that is essential in these times of untrustworthy claims and misleading campaigns. Nykaa has helped scratch an itch that many customers didn’t know they had, and now that they know it, they only want to scratch it harder. And that is how Nykaa makes money.