Nykaa witnessed a stellar IPO performance. Shares of Nykaa made an amazing debut in the Indian stock markets this month. The stock begin its trading at a premium of about 82% compared to its IPO issue price of ₹1,125 per share. The market capitalization for Nykaa post Listing crossed ₹1 lakh crore in early deals. At the first day market close stock gained further over 10% higher at ₹2,208 per share on the BSE.
We may not remember but when all the startups were in news for not the right reason like cutting jobs due to losses incurred etc, one unicorn was in the making. Nykaa has even managed to raise a fresh round of funding, raising its valuation to $1.2bn. Among the top reasons that made Nykaa the star, few of them are listed as follows.
- Sourcing from manufacturers: With no other middlemen who can take away their cut of profits, leading to better margins. Also, due to their first mover advantage Nykaa is strongly placed to be able to bargain the deals they get from the manufacturers as well.
- Addressing the biggest customer pain-point in shopping for cosmetics/fashion goods online, that of first copy products. One of the biggest apprehensions one has when buying cosmetics and fashion items online is about duplicate products. Their inventory model and sourcing directly from the makers ensured that such fears were alleviated making the purchase decision that much easier
- Beauty and Fashion was and is a Higher margin industry that has always commanded higher margins, and Nykaa with their early mover advantage has an upper hand in the category
- Operating in quite a niche segment, for a much deserved category: Nykaa started out by targeting the fashion oriented corporate women, a segment that had significant buying power but less time in their hands to visit their popular stylist, or to go through a barrage of unrelated items online in the hunt for what she wanted
- Discounts offered often come from the manufacturers: The 30-50% off sales offered generally are not funded by Nykaa but on the basis of their bargain with the manufacturers, while reducing their share of the margin, not profits
- Inventory based model: While most other ecommerce platforms were creating marketplaces Nykaa went ahead with an inventory model. This ensures that they have tighter control over quality, a prerogative for this industry as we will see later.
- Customer centric growth & expansion plans with true omnichannel experience: Nykaa realised that new launches weren’t selling well on the platform, as a solution they introduced a VR system that assist customer to zero in on the products. Further they also branched out to physical stores which offer the higher end brand and the latest new launches for you to try out
- Strategic expansion and acquisition of adjacent markets: their foray into fashion by the acquisition of 20dresses which caters to a similar audience with a different product offering helped with the customer stickiness Taking a large share of a pie that they’re dedicated to growing: the birth Nykaa brought with it a new age of fashion and beauty vloggers, an asset base nykaa uses to date to promote their brands. They also tend to prefer using these everyday girls, their Nykaa Army, in their commercials and promotions, making the brand at the same time aspirational(because if they could do why not us) and accessible. Even the celebrity endorsement they received was from Jahnvi Kapoor the actress who rose to fame playing the girl next door
- Intelligent use of data: with all the various customer purchase data they were ready to launch their own private label, which took off quite well adding to their bottom lines
- No direct competitor, while Purplle comes close second they tend to cater to different peronas. Purplle has a user base that is younger new to fashion and on a tighter budget
So while everyone fears that the luxury items or non essential segment will see the slowest and possibly the most painful recovery, I am guessing that Nykaa will be there leading the way.
The biggest learning from Nykaa has been that, whenever you do something that goes against popular belief and conventional wisdom the Naysayers will be all around to discourage you. But if you believe in yourself and have a solid strategy to get you where you want to be it doesn’t matter what others say. After all you can’t be everything to everyone. True winners are those who are exactly what someone is looking for!