Nykaa market analysis PDF

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INDIAN INSTITUTE Of MANAGEMENT RAIPUR

Nykaa Authors: Sai Sachin, Isha, Priya, Anurag

Company description Industry

e-commerce

Headquarters

Mumbai

Founded

2012

Founder

Falguni

Type

Pr

Products

bsite

Revenue

n

No. of employees Nykaa derived from the ayaka” meaning actress or one under the spotlight is a multi-brand bea cosmetics and wellness products. Its headquarters is located in Mumb in 2012 by Falguni Nayar, Nykaa today sells almost 850+ curated brand cts on its platform running across the length and breadth of the countr zip code using the services of leading and reliable courier compani mission “Your beauty is our passion”.

H

mpany

COPYRIGHT © 2020 CENTRE FOR DIGITAL ECONOMY, IIM RAIPUR ALL RIGHTS RESERVED

1

Nykaa: A Report

Nykaa.com is the entrepreneurial dream of Falguni Nayar, the former managing Director Of Kotak Mahindra Capital Company. Falguni saw that there was a huge opportunity in the online space and considering all the different areas she could invest in or start a company, she focused on beauty. Initially, the company raised money through multiple rounds of funding. In 2014, it raised INR 20 crore through private investors and further raised around INR 60 crore in Series B funding in 2015. Nykaa closed its last round of funding by raising INR 104.3 crores. After its launch in 2012, the first order was placed on October 24, 2012.

COMPETITION AND DYNAMICS Though fellow competitors existed in the market from Nykaa’s inc every women of India preferred ‘Nykaa’ over others. Competitors like auty, EO Products and purpulle.com seemingly created a similar plat t the lack of integration of variety of brands and stagnant customer s to sustain the business. Nykaa took 5 years to breakeven its business ce of encompassing a larger customer base and value proposition contr cess. Currently Nykaa’s valuation stands at $724 million and soon expec illion dollar company.

Porter’s five Forces Bargaining power of Supplier The suppliers are numero rket. Some of the platforms have their own inhouse brand suppliers iling has 2.9 % of the channel distribution share. HUL has the major s are and beauty products market. There are various brands in beauty a roducts and all of them are trying to increase the market share. The cele rting their own personal care brand and they are easily able to market th of the already existing brand recognition of their own beauty and they products based on the their image. This decreases the bargaining power of customers Th base of personal care and beauty products is very large. Due to many subs f these products e commerce website, customers have high bargaining power. The pro ucts are undifferentiated. The switching cost is very low. Indian shoppers are very active during festive seasons as well as some specific occasions. Customer look for the price, convenience and variety and where ever they find the best of them they go to that channel. The websites need to follow various measures to make profit. Threats of substitutes Substitutes for the online retailing are brick and mortar stores. Beauty and personal care products are one time trial products. It requires touch and feel connection to convert the customers or it require loyalty of the customer to buy the product through online retailer. 2 COPYRIGHT © 2020 CENTRE FOR DIGITAL ECONOMY, IIM RAIPUR ALL RIGHTS RESERVED

Nykaa: A Report The threat of substitutes is high and to fight with the substitutes over this matter, online retailers have adopted an omni channel strategy. Threats of new entrants Beauty product market is rising very rapidly, with the CAGR of 9% till 2023. This is because of the rising disposable income and because people are expected to have a better lifestyle. The retail stores, brand outlets as well as specialty stores are the major distribution channels for these products. The value of Ecommerce for the beauty and personal care market will increase to 33.5 % till 2023. The suppliers are many. Internet is an easily accessible and decreasing the cost of marketing and operational cost. This increases the threa of new entrants. The switching cost for customers is low. It requires a good access to the ution channel as well as transportation cost. Rivalry among existing customers The rivals are fighting based on large variety of brands that they website, price, convenience, as well as offers and discounts at the all trying to have the maximum customers and maximum prof rivals are required to be best at logistics. Participants with e variety can win many customers.

n the They are he cost. The nvenience and

Business model: Inventory Based 1. Value Proposition: With the in-de beauty products, Nykaa enables caters to all beauty needs fo products, having flexible player in India. 2. Market Segme Females age availabili for Ti 3.

g and varied information about make best choice for themselves. It dia. With being reseller of the original Nykaa has become a formidable beauty

rban cities, Tier -2, Tier-3 cities. Demographic : t customers for Nykaa are women who look for wider nformation related to product usage, that are aspirational ments. For Tier-1, it is about convenience and cost saving.

nventory based model. As middle men in the regular supply chain in the ecommerce business space, Nykaa is able to provide deeper o its customers and still make a sizable profit. This motivates more rs to purchase products on Nykaa and thus increases the economies of scale.

4. G owth Model: Segment Focus and improving the reach. Nykaa is broadening its product portfolio with a focus on women segment only creating a niche category. They are becoming exclusive launch platform for products like Kay by Katrina, Kareena Kapoor Collection by Lakme. In order to improve their reach they are opening more retail stores in Tier 2 and Tier 3 cities because the economies of scale in logistics are higher, they aim to bring that down by shipping to the customers in these cities directly from these stores. 3 COPYRIGHT © 2020 CENTRE FOR DIGITAL ECONOMY, IIM RAIPUR ALL RIGHTS RESERVED

Nykaa: A Report

VARIM Framework for Profitability:

Value – Yes Variety of products,

discounts, information on product usage, authentic reseller

Rare - Yes New Concept, not common to have women centric ecommerce business India

Monet Yes

Adaptable - Yes

N

r eing low nomies of

To cater for more customers, faster shipping they are setting up offline stores

Inimitable No Products are from wellknown brands, other competitors can develop similar model and thus it is imitable.

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Nykaa: A Report

Multi-Sided Platform •

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•

Nykaa creates a seamless platforms connecting the sellers with the customers. Primarily, they offer a robust technology platform (i.e., their app and website) with a well-connected logistics service Nykaa satisfies the MSP (multisided platform) criteria by offering Sellers : A single integrated platform and a logistics supports Customers : Offer 9000+ products in a single platform with discounts and fa very Here, Nykaa integrates several types of sellers like – the brands, indep rs across the country and its own in house brand ‘Nykaa’ products.

Power of MSP •

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Nykaa has helped KAY beauty products by Katrina Kaif m customer reach at very less time. It pushed the products by g them as the replacement of searches made by the customers. KAY products are showcased along with Nyka which decreases the chances of becoming the exclusive. Here cus st over the brand and the price and discounts. The value created with the help of va akme, Loreal, M.A.C etc., Nykaa leveraged it for selling it’s own inho trying to increase it’s brand equity .

Challenges: Since, Nykaa is integra especially with pricin •

Since myria This ma also.

of sellers, it may lead to potential conflicts – anagement. volved, customers encountering fake products is inevitable. se credibility not only towards Nykaa but the brand purchased

5 COPYRIGHT © 2020 CENTRE FOR DIGITAL ECONOMY, IIM RAIPUR ALL RIGHTS RESERVED

Nykaa: A Report

•

Also, post 2017 after its launch of inhouse products under the same name ‘Nykaa’, chances of Nykaa optimizing the screen space could be possible. For example, when a customer’s searches “Victoria Secret”, due to unavailability of the item, Nykaa displays its own in house products despite there are other equivalent brands to Victoria Secret available.

•

Nykaa cannot entirely eliminate the independent vendors (due to the adulteration of fake products) and source from the product manufacturers alone, as this will make the operations more complex. Because, multiple vendors across the country paves way to fetch the items from the nearest vendor to the customer – this reduces the lead time, transportation cost and warehousing cost too. 6 COPYRIGHT © 2020 CENTRE FOR DIGITAL ECONOMY, IIM RAIPUR ALL RIGHTS RESERVED

Nykaa: A Report

Imitabilit

High

Teece Model

Low

Nykaa (Highest bargai pro Strategy

Freely Available

Held

ssets

Imitability: Low Nykaa has differentiate rs by creating a mutual beneficial relationship with both its suppliers a with a huge variety of brands, Nykaa offers premium products only ava form like ‘Kay Beauty’ by actress Katrina Kaif. Partnership with such pr tracts and retain customers. These partnerships benefit suppliers a products are differentiated from other brands because of exclusiv s because of the increased demand and buyers find a variety of prem ne place. self as multi-brand beauty retailer selling cosmetic and wellness products. Un nline retailers which integrates vertically, Nykaa is vertically integrated which is spe ly for cosmetic and wellness products. Fashion enthusiasts find These unique attributes associated with Nykaa makes imitability risk low and recreating them requires network of both suppliers and buyers and a good relationship with them •

Complementary assets: Tightly Held As the assets are unique for Nykaa only and it doesn’t depend on someone else to build these relationships, they are tightly held by the company. These assets offer the right customer value and solidifies Nykaa’s relative positioning. The assets make high contribution to the customer value and are difficult to imitate. 7 COPYRIGHT © 2020 CENTRE FOR DIGITAL ECONOMY, IIM RAIPUR ALL RIGHTS RESERVED

Nykaa: A Report

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Strategy: Block Best way to defend the market share in this situation is to block other competitors. This requires further addition to the network of suppliers and maintaining a good relationship in the future. Further addition solidifies Nykaa’s position of exclusivity which brings more suppliers on board, hence creating positive network effect on the same side of MSP. More exclusive brands bring more customers on boards, hence creating positive network effect on both sides.

Can Nykaa make money here? As Nkyaa offers both exclusive and nonexclusive products bargaining pow supplier to supplier. Nykaa has higher bargaining power when launching provides good platform and an enthusiastic customer base which is read whereas established brands may command equal bargaining pow customer base. Such conditions make the shifts the overall bargai side. According to the Teece Model, low imitability and tigh beneficial for the party with higher bargaining power

om cts r own s Nykaa’s

entary assets are

8 COPYRIGHT © 2020 CENTRE FOR DIGITAL ECONOMY, IIM RAIPUR ALL RIGHTS RESERVED...