At 58, when most professionals are in the twilight of their career, Nykaa founder, Falguni Nayar, has scripted a new success story — the company’s stellar IPO has made her one of the richest Indians with a net worth of $7.48 billion. At a market cap of $13.99 billion, Nykaa is valued higher than legacy firms such as Coal India, Godrej group and even Bharat Petroleum.
India’s online beauty and personal care penetration being as low as 8%, Nykaa, the market leader, has a vast opportunity to grow. But analysts and industry observers consider its fashion business the greatest distraction. Having entered the business in 2018, Nykaa is clearly a late comer. It will have to battle it out with the likes of Myntra and Ajio, which have already made considerable inroads. It will also need to create a USP in fashion. Many customers, according to analysts, say they are not aware that Nykaa has fashion offerings, or that there is anything different that the unicorn offers in fashion that others don’t. Reliance’s Ajio, for instance, has leading global fashion brands as well as Indian designer brands such as Tarun Tahiliani and Ritu Kumar in its kitty. It is tying up with premium brands to add to its margins. Moreover, unlike premium beauty, mass fashion is a low-margin business and that could put pressure on Nykaa’s profitability.
The other dampener, if not managed well, could be the 73 physical stores. They are capital and cost guzzlers and their proliferation will have an impact on Nykaa’s margins. Analysts are also unsure whether the company’s brick-and-mortar strategy would yield returns in the long run. In fact, Nykaa’s competitor Purplle.com’s physical store strategy backfired and the company had to exit the space.
Fashion: The Stumbling Block
This story is from the December 2021 edition of Fortune India.
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This story is from the December 2021 edition of Fortune India.
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