Building a Brand Like Nykaa | Nykaa's Start-Up Story

I’m sure you or at least someone you know must have ordered from Nykaa at some point.

Nykaa, founded in 2012, is one of India’s leading beauty and wellness e-commerce platforms.

Initially, it made only 60 sales, but today, it’s the first Indian female-led unicorn worth Rs 602.14 billion!

Over the years, it has grown into a household name, offering a vast range of beauty, fashion, and wellness products.

What started as an online platform has now expanded into a significant player in the beauty industry, both online and offline, with multiple retail stores across the country.

Nykaa's strategic positioning in the Indian market is evident from its massive customer base, which is drawn to the brand's diverse product offerings and its commitment to quality and authenticity.

Today, it’s an established company with a strong brand presence pan-India. But how exactly did it get there?

Let’s look at their start-up journey!

About the Founder

Falguni Nayar, the visionary behind Nykaa, has a rich background in finance. Before venturing into the beauty industry, she had a successful career as the Managing Director at Kotak Mahindra Capital Company for 2 decades.

However, in 2012, she quit her comfortable and bright job at 49 years of age to pursue entrepreneurship.

She recognized that there was a growing demand for global beauty products among Indian consumers, yet the market was underserved.

This insight, combined with her entrepreneurial spirit, led her to create a platform that not only offered a wide range of beauty products but also educated consumers on their use.

Nykaa also brought foreign brands and Korean beauty to India, making it accessible to Indian consumers.

Nayar’s vision was to create a brand that would empower women by giving them the tools to express themselves confidently, and Nykaa has certainly achieved that.

Business Model

Inventory-Based Model:

Nykaa's business model is based on the inventory-based e-commerce model.

By maintaining an inventory for high-demand products and acting as a marketplace for other brands, Nykaa is able to control quality while offering a wide range of choices to its customers.

This approach also gives Nykaa the flexibility to introduce new and trending products quickly, keeping pace with consumer demands.

The inventory-based model allows Nykaa to purchase products directly from manufacturers, ensuring they are genuine and meet the brand’s quality standards.

These products are stored in Nykaa's warehouses and sold directly to customers, which is particularly important for high-end luxury items where authenticity is non-negotiable.

This dual approach is key to Nykaa’s ability to scale rapidly while maintaining trust among its customer base.

Private Label:

In addition to selling products from other brands, Nykaa has successfully developed its own line of private label products, which has become a significant contributor to its revenue.

These private label products, marketed under names like Nykaa Cosmetics, Nykaa Naturals, and Nykaa Fashion, cater to a wide range of beauty needs, from makeup and skincare to wellness products.

By offering high-quality products at competitive prices, Nykaa's private labels have gained a loyal following, allowing the brand to capture higher margins compared to third-party products.

This strategy not only enhances profitability but also strengthens Nykaa’s brand identity in the crowded beauty market.

Omni-channel Presence:

While Nykaa started as an online-only platform, it quickly recognized the importance of having a physical presence to reach a broader audience and enhance customer experience.

Today, Nykaa operates 187 physical stores across 68 cities in India, including Nykaa Luxe and Nykaa On Trend, which offer customers the opportunity to experience products firsthand before making a purchase.

These stores are strategically located in high-footfall areas, bridging the gap between online and offline shopping experiences.

Category Expansion:

While beauty remains Nykaa's core business, the brand has diversified its offerings through the launch of Nykaa Fashion.

This expansion into the fashion industry is a strategic move that complements its beauty business by appealing to a broader demographic and catering to the lifestyle needs of its customers.

Nykaa Fashion offers a curated selection of apparel, accessories, and footwear, bringing the same commitment to quality and style that customers expect from its beauty products.

The addition of Nykaa Fashion to the portfolio allows the brand to leverage its existing customer base while also attracting new shoppers who might be drawn in by the fashion offerings.

This category expansion is a clear indication of Nykaa's ambition to become a one-stop-shop for all things beauty and lifestyle, further solidifying its position as a leader in the Indian e-commerce market.

Initial Challenges and How Nykaa Navigated Them

Scaling Operations:

As Nykaa began to expand, managing logistics and the supply chain at scale became a significant challenge.

The sheer variety of products - spanning thousands of SKUs across multiple beauty and wellness categories - required a robust and efficient system to ensure timely deliveries and stock management.

Nykaa addressed this challenge by forging strategic partnerships with reliable logistics providers and investing in its own warehouses.

This allowed the company to maintain control over inventory and streamline operations.

Marketing in a Crowded Market:

Entering the crowded beauty market in India, Nykaa faced stiff competition from both established brands and emerging e-commerce platforms.

Acquiring customers in such a competitive landscape was no small feat. However, Nykaa’s marketing strategies were both innovative and highly effective.

The brand leveraged content marketing by creating engaging tutorials, product reviews, and beauty guides, which not only attracted customers but also educated them.

Nykaa’s use of influencers and social media campaigns helped it connect with a younger audience, while targeted advertising ensured that the brand reached potential customers at various touchpoints.

By positioning itself as a trusted beauty advisor rather than just another online store, Nykaa was able to carve out a niche for itself and grow a loyal customer base.

Funding Rounds:

Nykaa's journey began with seed funding of Rs 42 lakh from friends and family. Falguni Nayar, Omprakash Nayar, and Rashmi Mehta, the lead investors, played a crucial role in helping Nykaa get off the ground.

At the time, it’s post-money valuation was 0.

As Nykaa’s customer base grew, so did its need for capital to fuel expansion.

Series A funding, led by Indra Banga and Harindarpal Singh banga, funded Rs 20 Cr to Nykaa with a post-money valuation of Rs 120 Cr in 2014.

With Series E3 round that raised Rs 166.6 Cr and a post-money valuation of Rs 10,140 Cr in 2020 - this is when the brand became a Unicorn!

One of the most significant milestones in Nykaa’s journey was its Initial Public Offering (IPO) in November 2021, raising over $640 million, at a valuation of $7.4 billion! but it also marked a historic moment for the Indian startup ecosystem.

This successful listing on the stock market made Falguni Nayar one of India’s wealthiest self-made women and further cemented Nykaa’s status as a leading player in the beauty and wellness industry.

Current Status:

Dominance in Beauty & Fashion:

Ranked #1 among active competitors, Nykaa has firmly established itself as a leader in the Indian beauty and fashion sectors.

As of now, it is one of the most recognized and trusted brands in the beauty industry, offering over 4,000 brands and more than 3 lakh products on its platform.

The company’s ability to continuously innovate and expand its offerings has helped it maintain a strong market position, making it a go-to destination for beauty and fashion needs.

Financial Health:

Nykaa’s financial health reflects its market leadership and continued growth.

In the fiscal year 2024, Nykaa reported a revenue of ₹6,385 Cr, marking a 24% increase from the previous year.

The brand's gross merchandise value (GMV) also saw a 32% growth, driven by its beauty and personal care segment, which remains the largest contributor to its overall revenue.

International Markets:

While Nykaa has predominantly focused on the Indian market, it has begun to explore opportunities for global expansion.

Through ‘The Global Store’, the brand has already made international brands available in India, catering to the growing demand for global beauty products among Indian consumers.

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