Business model of Nykaa

Introduction

Nykaa is a market leader in the online beauty and personal care market (BPC) operated by FSN E-Commerce Ventures. The Business model of Nykaa involves its business plan, revenue model, its competitors, SWOT Analysis and many more.

Nykaa is a true powerhouse in the beauty business, the brand’s omni-channel presence, including an easy to navigate website, kiosks and pop-up stores, and dedicated offline stores also help cement it’s position in the market.  Nykaa is one of the largest e-platform for all your beauty needs.

Business Plan

Nykaa purchases products directly from manufacturers and stores it in their warehouses in New Delhi, Mumbai and Bangalore. Then, Products are sold either on Nykaa’s website or through its three offline store formats; Nykaa Luxe, Nykaa On Trend and Nykaa Kiosks.  Nykaa’s portfolio includes domestic and international brands and its brands. Nykaa utilizes the direct-to-customer (D2C) strategy. This eliminates the middlemen, as the company directly provides buyers with products that suit their lifestyle.

Nykaa helped fill this gap by providing a wide assortment of beauty products. The company raised consumer awareness and educated consumers on the use and benefits of each beauty product. Nykaa business model centers on merchandise that enhances customers’ living. However, it also provides high-quality services for a satisfactory customer experience.

Nykaa has followed top-notch virtual advertising and marketing techniques to target all styles of audiences in each demographic having internet access i.e girls and women, college students, and professionals.

Revenue model

Thanks to the inventory-model, Nykaa was able to break-even in 2017, only 5 years after they started operations. Nykaa’s take rate is 8% which is reasonably lower than other players like Amazon and Flipkart, who have a take rate of 10-15% (Take rate is the commission charged by the marketplace to the seller for facilitating the transaction on its platform). Nykaa app has revolutionized the cosmetic industry and made an exceptional person base within a quick period.

Under marketplace service company receives a commission from sellers who sell products through Nykaa, which primarily consists of the fashion business. Market support revenue is revenue earned from advertising brands on the Nykaa Platform. Other operating income primarily includes shipping and delivery charges collected by Nykaa. Nykaa has experienced growth in all the above segments.

Competitors

Although Nykaa has revolutionized the cosmetic industry, there are some of the prominent competitors of Nykaa:

  • Purplle
  • FabAlley
  • Fabindia
  • LimeRoad
  • Craftsvilla
  • Plum
  • Scentials

SWOT Analysis

Strengths

  • Innovation: The company is constantly adding innovations to its product range and offerings to capture the attention of customers and meet the dynamic business environment.
  • Strong Social Media Interaction: Nykaa is able to attract many social media users as potential customers with regular online campaigns, contests, magazines, and web series.
  • Wide Range of Products: Showcasing a wide product range on both its online and offline stores to avoid customers shift from their brand due to lack of stock.
  • Geographical Presence: Geographic presence in different regions can be one of the company’s greatest strengths. It determines the reach of the company in the target market and ensures easy accessibility.
  • Strong Financials: A strong financial position and health can allow the company to invest further.
  • Less Charging Suppliers: Access to suppliers that offer raw materials at a lower cost can improve the overall efficiency of the business.
  • Quality Range of Products: Nykaa is constantly increasing its offering from beauty items to clothing, health & safety, baby care, and accessories.
  • Property Rights: A company may own various intellectual property rights that can make the product offering unique and exclusive, making it difficult for competitors to imitate.

Weaknesses

  • Waste Management: The company has been criticized by environmentalists for its poor waste management and inability to integrate sustainability into its business operations.
  • R&D: Low spending on research and development activities may weaken the company’s performance due to a lack of local/international market knowledge.
  • Marketing Budget: An inadequate budget for marketing and advertising activities weakens the ability of businesses to expand their customer base and encourage repeat purchases.
  • Delivery Charges: It offers free delivery for orders above Rs. 700, which excludes some of the aspiring buyers.
  • Customers Care: They are still not good at handling customer complaints which can affect the growth of their business.
  • Decision Making: Decision-making at Nykaa com A Passion for Beauty takes too much time, leading to costly delays in bringing new products to market.
  • Employee Satisfaction: Lack of organizational commitment and high employee turnover can increase hiring costs and decrease organizational productivity.

Opportunities 

  • Population: The exponential growth of the population and especially the existing or potential customer segments is a great growth opportunity for the company.
  • E-Commerce & Networking: The emergence of e-commerce and social media networking as a trend can be a great opportunity for Nykaa com A Passion for Beauty if it can ensure a strong online presence on various social networks.
  • Government Incentives: Government-provided subsidies and other measures that make the business environment friendlier are a positive external environmental factor for Nykaa com A Passion for Beauty.
  • The lifestyle of Customers: Improving customers’ lifestyles and standards means more consumption of consumer goods and services and more opportunities to encourage purchases.
  • Business Model: Nykaa’s business model is climbing a new ladder to increase its international reach and boost profits.
  • Technology: The development of new technologies to support the production and delivery process of products/services can be used to integrate innovation into business operations. Advanced technology integration can reduce costs, improve efficiency, and lead to the rapid adoption of innovative products.
  • Following Trends: The changing needs, tastes, and preferences of customers can be an opportunity if the company has good market knowledge.

Threats 

  • E-Commerce Regulations: The changing legal framework and the introduction of new, stricter regulations pose a major threat to Nykaa com A Passion for Beauty. They make compliance with legal standards more complex and a challenge for the company. Inability to comply with the changing regulations increases the risk of costly litigation.
  • Rise in Competitors: The increasing number of direct and/or indirect competitors affects the company’s ability to maintain and expand its customer base.
  • Health Concerns Regarding Chemical Products:  The growing trends towards environmental sustainability pose a great danger if the products/services offered are not environmentally friendly. They attract negative publicity and criticism from environmentalists and affect the brand image in a competitive market.
  • Economic Conditions Due To Pandemic: Deteriorating economic conditions affect business performance when they directly influence customers’ spending habits and purchasing power.

Conclusion

Nykaa is India’s biggest lifestyle and fashion portal with a collection of cosmetics, skincare, haircare, fragrances, bath and body, personal care, and wellness products for both women and men.