Nykaa becomes the only profitable unicorn to go public | Falguni Nayar's journey from an idea to IPO

Admit it, we all need beauty products. It's just that sometimes getting the best skin care products or cosmetics can be a pain in the neck. Nykaa knows this better than anyone else. That is why it has created one of the most engaging and user-friendly platforms for women to discover their favorite beauty brands both online and offline. The Indian beauty and cosmetics industry is one of the world's fastest-growing and most lucrative. It's also one of the most competitive and cutthroat in the world. The story of Nykaa is the story of a dream that became an obsession, then turned into a passion, and now has become a way of life.

Founded in 2012 by Falguni Nayar and her husband Sanjay Nayar, Nykaa is the go-to destination for all beauty products. With over 1 million fashion products across categories like beauty & cosmetics, skincare, haircare, fragrances, wellness products, and more, Nykaa offers the widest range of beauty products on the e-commerce platform. With a vision of empowering Indian women to feel good in their own bodies, Nykaa has created a unique model that has given it the flexibility to experiment and create a range of innovative products that have made its consumers, the brand and the shareholders win.

While the other start-ups are complaining about margin pressures and how they don't have enough cash flow, Nykaa is growing at double digits and has a healthy cash flow. The beauty e-commerce business recently became the only public offering unicorn to register its initial public offering. The word Nykaa has been derived from the Sanskrit word nayaka, meaning 'one in the spotlight', and the female founder, Falguni Nayar, is not far from achieving such a title of 'beauty nayaka.'

The story behind the beauty saga

Being an entrepreneur was a childhood dream for 57-year old Nayar. The Mumbai resident, founder, and CEO of beauty business Nykaa is a graduate of IIM Ahmedabad, India. Before giving Naykaa its shape, Falguni Nayar was a former Managing Director at Kotak Mahindra Capital Co. The banker cum founder quit her 18-year-old job to live her dream as an entrepreneur. She observed that there was a huge gap in the Indian beauty line market. The demand was far way greater than the available resources to buy beauty essentials in the country. She seized the opportunity and hence founded the Internet company Nykaa.com, a woman-centered business, with a multi-brand retail format fashion vertical in the beauty and wellness space. The journey became more exciting and meaningful when her daughter Adwaita (HBS MBA 2013) joined her. 

Nykaa generated a turnover of about USD 39 million in the first 5 years of its business. The company generated its business funding of about USD 40 million from various investors, and its revenue increased to nearly 400% in the last 2 years of business. Nykaa follows a content-based marketing strategy and inventory-based business model. Parallelly, Nykaa managed to raise INR 166 crore from Steadview Capital as their primary investment. The primary funding stands at a valuation of INR 9,100 crore (USD 1.2 billion) that catapulted the eight-year-old venture to unicorn status, a startup worth USD 1 billion. Apart from this, it is a well-known fact that the products Nykaa sells are directly sourced from the original brand/label. In fact, Nykaa recently attempted to enter the apparel segment with the launch of lingerie and undergarments as well.

The power of Nykaa: Katrina Kaif joins hand

The beauty market in the country has traditionally been dominated by beauty biggies like Lakme and L’Oréal. However, in the new era, entrepreneurs have been coming up with new products and ideas to make it convenient for consumers to buy beauty products. Nykaa, the niche beauty enterprise has managed to position itself as an important player in the beauty market. 

While saying no to big brands like Amazon India and Flipkart, Katrina Kaif and her company 'Kay Beauty' partnered with Nykaa and never looked back at her decision. Investing an undisclosed amount in the company in 2019, Kaif said,

"I have been a part of the entire process; be it brand building, product decisions, creative calls as well as the marketing strategy surrounding the launch of Kay Beauty and its ongoing journey. Having worked closely with Nykaa over the past few years, I became aware of its growing brand equity. Becoming an investor seemed to be the next obvious step."

In a few short years, Nykaa has become India’s leading beauty marketplace with a wide selection of over 1,500 brands and has over 8 million customers. Nykaa’s authenticity and commitment to customer experience have drawn over 8 million customers, and 16 million unique visitors a month, ready to purchase over 1,50,000 products. At the same time, while other players in the beauty space have relied on discounting to compete, Nykaa has built a loyal customer base by steadily maintaining an honest, transparent, and engaged relationship with its consumers.

Know the business strategy

In a market where every player is getting more and more competitive and aggressive, it is extremely difficult to stand out, especially for brands that are new on the block. They have to figure out a way to get people to notice them and look further than the packaging. 

Flipkart understood that the Indian audience is comfortable with Cash On Delivery and tweaked their marketing strategies for the customers. In the same vein, Nykaa offers what no other platform does. They have gotten their hands on a vast number of international brands that Indians never dreamed of obtaining so easily for instance Huda Beauty, Becca, Charlotte Tilbury, Wet n Wild, Olaplex, Too Faced, etc.

From the beginning, Nykaa was innovative in its marketing. They used social media effectively and even drove traffic to their website via Instagram and YouTube.  

Image source: Graphics by Rahul Sharma

Nykaa, the popular e-commerce beauty business, has always wanted to cater to as many people as possible. This is the reason behind their massive marketing campaign. They are involved in a lot of different ways to spread awareness. Nykaa’s marketing strategy targets everything from beauty experts to potential customers, all at the same time.

This is a revolutionary innovation in the cosmetics industry. Nykaa realized that everyone has different skin types and complexions, but people have one thing in common: they all want to look good. So, Nykaa designed their products for anyone who wants a flawless face - and the target audience is practically limitless! Through its digital marketing strategy, Nykaa targeted every demographic, regardless of age and interests.

Everyone is a part of #Nykaafamily

There is no doubt that Nykaa has the best beauty products in the country, and the best part is that all these products are available at the click of a button. What more could one ask for?

A lot of people get confused with the idea of building trust because it is something that happens gradually. But in reality, it is quite simple. You need to be honest with your customers. Nykaa has been true to its customers that find it hard to leave. 

The reason for this being that Nykaa takes care of each and every one of its customers. There is no particular demographic that is more important than the other. Everyone is treated with the same amount of devotion and care. The Nykaa team knows how to make sure that customers feel at home. And when customers feel at home, they return. And they tell their friends and family to return as well.

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