Nykaa Now fuels growth in top cities as beauty giant bets on quick deliveries

Bengaluru: Nykaa Now, the express delivery arm of the beauty and personal care retailer, is gaining traction among customers and helping expand market share in the top seven cities, Nykaa’s beauty e-commerce CEO Anchit Nayar told analysts in its September quarter earnings call on Friday.

Nayar said the company’s focus on fast deliveries is aimed at improving customer experience and strengthening its position in the beauty segment.

Nykaa Now’s spotlight comes from products across all price ranges, including luxury goods, helping customers get the best luxury items delivered in 30 minutes to 2 hours. “Nykaa Now has enabled Nykaa to capture a larger piece of the pie in the personal care space, which is largely divided between horizontal players like us and flash commerce players,” Nayar said.

“We are seeing increased customer penetration of certain products on our platform, such as shampoo, conditioner and body wash, and growing very healthily, which means people are now looking at Nykaa not just as a beauty destination, but also as a personal care destination,” he added.

Offline expansion plans

The Mumbai-based company plans to double down on its offline expansion plans in the coming quarters as the physical format helps Nykaa act as efficient hubs to handle faster deliveries.

Nykaa closed the September quarter with a total of 265 physical stores in 90 cities and added 19 stores and 8 new cities during this period. The total occupied retail space of its stores reached 275,000 sq m in the quarter, up approximately 37% from the previous year. Nykaa Now is also supported by a total of 53 fast stores.

“One thing we didn’t foresee in the early days was that we would have the ability to sell luxury goods by having our retail stores become local delivery hubs and do so in a cost-effective manner. So why not allow customers to also have access to the best luxury goods with fast delivery speeds?” he said.

Nykaa’s operating income increased by 25% year-on-year ₹2,345 crore in the September quarter. Net profit increased ₹32.98 crore onwards ₹12.97 crore a year ago. The company’s total gross merchandise value (GMV) increased by 30% annually ₹4,744 crore for the three months to September. GMV is the total value of all goods sold during a period, excluding discounts and other deductions.

Premiumization, a growing trend among consumer-facing companies leading to increasingly higher average order values, is now at the core of Nykaa’s growth strategy in the beauty segment. Premium brands now account for two-thirds of Nykaa’s gross merchandise value in stores.

Revenue from Nykaa’s beauty business, the biggest driver of growth, rose 25% year-on-year. ₹2,131 crore in the September quarter. Segment profit increased ₹95 crore ₹76 crore in the same period of the previous year.

However, increased investments in the bonus strategy led to marketing costs rising to 17.5% of net sales value (NSV), compared to 13.7% in the same quarter last year. “We believe India has the lowest beauty product consumption penetration in the world and investment is required to continue to sustain this. Therefore, we have invested in customer acquisition and this is reflected in marketing and SND (selling and development) expenses as a percentage of NSV.”

NSV refers to the total value of all products sold after discounts but before returns and provides a measure of the platform’s sales performance.

Fashion strategy change

Broader macroeconomic pressures, such as slower growth and cautious consumer spending on fashion, have led Nykaa to reorient its strategy towards a multi-brand retail format and reduce focus on fashion as a category in the overall GMV mix over the past few months. The company is closing some of its large-format brick-and-mortar stores and reducing its reliance on third-party distributors.

Efforts helped touch segment ₹Operating income during the quarter was ₹200 crore; ₹166 crore in the same period of the previous year. However, net loss narrowed ₹12 crore ₹32 crore last year. Fashion now accounts for 61% of Nykaa’s house of brands; This rate decreased compared to 69% last year.

GMV of the segment increased by 37% ₹1,180 crore.

Adwaita Nayar, CEO of Nykaa Fashion, said, “I think there is a concerted strategy to close some of the non-Nykaa fashion channels. That is why we are closing most of the GT-MT (general merchandise-modern trade) large format stores and third-party distribution. We think it is a better and higher quality business to focus on Nykaa as a channel, and specifically fashion,” said Adwaita Nayar, CEO of Nykaa Fashion.