November 11, 2019

Nykaa ramps up offline push in tier 2 cities

Nykaa is ramping up its offline push in tier-two cities, as the online retailer of beauty products looks to tap customer demand from beyond the metros, a top executive said

The company’s strategy to spread its offline stores beyond the top cities is driven also by increased sales coming from these markets.

“Cities like Bhubaneshwar are one of our biggest markets now,” said Anchit Nayar, the chief executive of Nykaa Retail that operates the offline stores. The company is set to open its 55th offline store in Raipur, Chattisgarh. The outlet, offering luxury products, is aimed at its top of the pyramid customers, Nayar said.

Nykaa has broken its sales channels into four – web, kiosks, Nykaa Luxe and Nykaa on Trend.

Beauty is a fast-growing category and ecommerce companies like Amazon, Flipkart and Myntra have realised that Indian customers are far more open to trying out products online. In fact, even the likes of BigBasket have started to list beauty products. For Nykaa, Nayar said, it was all about giving customers access to brands they typically wouldn’t get in their towns.

“A few products, like foundation, can only be purchased by looking at them in person. This (opening an offline store) helps in product and brand discovery,” he said, adding that these customers would then use the website to top up once the product runs out. And when the trust is built, customers wouldn’t typically step away from its platform.

In an omni-channel approach, experts say, there is a problem when it comes to pricing. In a mall, for example, the company will have to price its products keeping in mind overheads such as rent and salaries. Online, the economies of scale kick in and the technology and freight cost decreases over large order numbers.

Nayar argued that for Nykaa, the product mix ensured that it didn’t lose money selling offline. Also rents in tier-2 cities are low, which don’t add too much to the base costs and if a customer does manage to find a deal online, he added.

He also said the firm didn’t feel any threat from Myntra or Amazon, both of which had been making steady inroads into beauty and fashion over the past six months.

For Myntra, according to executives at the company, beauty forms a very small part of the annual revenue but the growth in the segment had been close to 70% month-on-month. Myntra currently has more than 400 beauty brands in its portfolio. To battle the growing influence of offline channels, Myntra has used technology to help customers virtually try out certain products, such as foundations.

Despite competition heating up, Nykaa isn’t worried, said Nayar. “We help brands make a connect with the customer. We can assure brand loyalty, I don’t know if Myntra can do that,” he said. “For certain brands, we package the products differently, even if it costs us more because we want to give customers the brand experience,” he said, asking: “Can the other retailers to that?”

Nayar said he was confident that Nykaa would top the year-earlier gross sales of Rs 85 crore at its bi-annual sale at the end of the month. Tier 2 cities will play a huge part in it, he added.

(As published in 11 Nov 2019 )

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