Falguni Nayar Curated
Founder and CEO, Nykaa
CURATED BY :
Given the current landscape, have your plans for a public listing changed?
It was always on the plan but after two years. But if you go by the financial year, we will be below our projected numbers compared to the pre-Covid-19 projections. Things will get back on track, but the 3-4 months we have lost, will be difficult to regain. But our business will grow. We are already trending to get back to the pre-lockdown of sales activity and spending.
Nykaa has raised almost Rs 170 crore in the last two months. What is the company’s capital runway post the closure of the round?
We were raising this money more for bank covenants and not for cash burn. Our cash burn tends to be very small. We wanted to raise for our capex needs which is only Rs 20 crore-Rs 30 crore. All of that money is sitting in our bank, and we need not have raised it. We don’t have any primary need to raise more capital in the calendar year 2020, unless the government institutes another countrywide lockdown for an extended period of time.
Vocal-for-Local is the new mantra. Has Nykaa made any efforts to adopt the same in its operations?
In the e-commerce digital world, a lot of domestic brands are able to become very popular, very quickly. Within a year or two, they can become very big brands and start showing up amongst the top-20-30 in Nykaa. Today, an India-owned and managed brand is able to do very well, and not from just the supply chain perspective. They could be manufactured in India, or could be imported from abroad. But Vocal-for-Local is a good initiative and we are supporting those brands on our platform.
So you expect the beauty category to get impacted?
It depends on what you bring to the consumer. Today, people are saving on other traditional expenses like holidays and commuting. We aren’t seeing any adversity in any markets.. In fact, we registered an uptick in Tier-2 and Tier-3 demand vis-a-vis Tier-1, because bigger cities are reeling under Covid-19 more where there is demand suppression because people are still scared. During the lockdown, we became 100% prepaid, and we also knew that there were capacity constraints in our warehouses. We were, therefore, allowing orders only above Rs 1,500, and that helped make a huge improvement in our Average Order Value (AOV), which has now gone up by 30% -40%, both, in our physical as well as e-commerce businesses. We are not chasing the marginal customer and are happy about where we are and can further grow the market.
Your business is dependent on consumption, which has been hit due to the macro conditions in the economy, how will the slowdown hurt Nykaa?
I’m not seeing this on the ground. That makes us think that maybe India is different. Global brands will want to come into India now, because India and China are the last frontiers of consumption and growth, compared to the rest of the world. We are seeing in beauty, international brands have been calling us throughout the lockdown period, and stating that they want to list as early as possible - Maybe by September, October or November. Even in fashion, while a lot of brands are going slow on new launches, customers are looking to buy something new rather than buying for the sake of buying.
How has Covid-19 impacted your overall strategy?
We won’t change our strategy. During the early days (of the lockdown), we were getting asked why we weren’t selling vegetable baskets on our website? But we stood clear of that. We did what made sense to us - Masks, PPE kits, and sanitisers. We have a very good understanding of what our business is, and what we are good at. And we are not good at delivering open veg baskets to local areas in a metro. The kind of businesses a BigBasket or a Grofers are building is very different from Nykaa, and we are not chasing that.
Covid-19 has forced companies to adopt new business models. You’re doing hyperlocal deliveries from your stores. Tell us about that.
Hyperlocal has worked at a time like this because of the challenges surrounding the supply chain and procurement of inventory. We could do so much, because we were sitting on large amounts of inventory, since we are an inventory-led retailer. Our stores became our mini-warehouses. Hyperlocal is more efficient on inventory and supply chain costs. We saw our supply chain costs coming down. But it is not, one versus the other. It is all an integrated business.
Where do things stand with Nykaa’s physical or offline retail business, given that you had ambitious expansion plans?
We had plans to set up about 40 new stores this year. In February, 90% of our stores were Ebitda-positive and we were feeling so good about it. Our offline retail turnover was stretching to be almost 10-15% of our overall sales, and we were hoping it was going to be 20% by next year. The company was profitable for the year ended March 2020, and we believe that we will be back to business as usual, and profitable by July or August.
While you have a robust e-commerce play, in the last two years you also pushed physical stores- a part of the business which has struggled far more due to stores shuttering?
We have been an omni-channel retailer, and are reaping the benefits of the investments that made to push this strategy. Over the last two years of our retail momentum, 85%-90% of our customers were registered in our database. We have been able to cater to them through hyperlocal, and in some cases by taking orders over the phone as well.
How has the recovery been for online and offline since the lifting of the strict lockdown over the past one month?
For e-commerce, we came out at about 20% of the business as usual in April, and about 65% of the business as usual in May and for June, we should record upwards of 85%..We are hoping that the same momentum continues and hope to get the full business back by July. For the physical retail part of our business, we had to shut our stores in March itself. But by phase-3 of the lockdown, we could open our high-street stores in certain states, such as Bangalore, where we have now been doing 80% of the business as usual, since reopening. We have been happy with our progress so far but the physical retail business is about a couple of months behind e-commerce. We ended May at 20% of business compared to February while in June, we think it will be at 50% and by July, we hope to be at 70%-75% of the business as usual. To be honest, it is hard to predict physical retail as different cities and different geographies behave very differently.
How have you dealt with the Covid-19 led lockdown and the impact it had on the business..
We have been operational right from phase-1 of the lockdown because we sell essentials on our website. The government defines essentials to include shampoos skincare, like moisturisers, and we have a lot of personal care, skincare and haircare products, which are considered everyday essentials. We converted our website to sell these products and through that process, we began phase-1, where we recorded some turnover, which was 10%-15% of our business as usual. We now have 70 stores in 30 cities across the country. We basically pivoted our website to also do hyperlocal deliveries for essential products, but only from our stores. By the end of phase-3, we actually did a ‘Nykaa-turns-Eight’ celebration, and nudged customers to buy essentials and a few non-essentials as well and by phase-4, we added more zip codes.
Share your journey, learning & Memorable memories that you had in your corporate career & the different roles that you played taht got you to the point of entrepreneurship ?
How was your childhood and formative years & you watched your father business and did it give you insights into entrepreneurship specially when you reflect back now?
And what about your plans to take Nykaa public?
I am building Nykaa to have a life of its own. I have also taken other people’s money, so I have to give them exits, right? IPO (initial public offering) is a plan, but next year IPO, no. It’s too early. I have done more IPOs than anyone else. I was in investment banking and my speciality was IPOs. So, I believe that companies should have a net profit of at least Rs100 crore before they do an IPO, with a Rs200 crore gross profit.
What are your fund-raising plans?
We are adequately funded for the next one year. And we are saying we will be EBITDA (earnings before interest, tax, depreciation and amortisation))-positive so, if you can say “aapke muh mein ghee shakkar" then we won’t need to raise money. But yes, physical stores, we definitely need to spend Rs30 lakh per store to do them up. Then we need deposits and we need inventory for them. So you need working capital; it’s a very working capital-intensive business.
With both private label and luxury brands, how are you growing Nykaa?
My whole starting point was that you have to give consumers what they want. The customer is using a lot of brands. I think a lot of e-commerce companies have gone wrong. From multi-brand they have become private label because they think margins are high in that business. But pricing and being a good retailer come first. We want to be a good retailer, we want to be a multi-brand retailer, we want to be the best beauty destination. Now if you look at the experience of similar companies in the world like Sephora or Boots, they all have private labels. When a consumer is willing to trust a retailer, she is also willing to trust the retailer’s own brand. I used to buy at Sephora and they never pushed their brand. Still I ended up buying them. If I go looking for a Laura Mercier foundation or a Tarte foundation, I would buy. But when I am less certain, I may buy Sephora also, because I know Sephora as a brand.
Of your total expenditure, how much goes into technology and inventory management?
Technology is big, we have an 80-person team on tech. These businesses are all about tech. We have 350 people and the tech team is 80. However, the tech team’s salary cost is 65% of total salary cost. They’re more expensive; many are from IIT (Indian Institute of Technology) Delhi, some from IIT Bombay and other institutes.
What is the average purchase on Nykaa.com?
In the beauty category, in a market like India, our average ticket size is Rs1,250-1,500, the same as the US. In India most other e-commerce websites in the beauty category do as little as Rs350-650, which is the price at which personal care products sell. So average ticket size can be Rs2,000 for Flipkart and others, but it is thanks to all the appliances and electronics that they sell. Most customers put 3.5-4 items in a cart at Nykaa. And that has stayed constant for the last three years.
Are you largely doing your communication online?
Mostly online, yes. I would say 80-90%. We have the Nykaa Femina awards and we do some magazine ads, but mostly online.
What is your customer acquisition cost?
It has slowly and steadily come down to sub-Rs200 levels. The industry is somewhere between Rs650-2,000. When we started, our costs were obviously much higher—at around Rs650-1,000.
How do you keep customers coming back?
We have a lot of repeat customers. But repeat and new is a growth strategy. We now have more than 10 million visitors a month, and we try to ensure that at least 50% of those customers are new. See, I can choose to be 100% repeat today especially since every new customer costs you money and a repeat customer doesn’t cost you as much money. But we believe that 2 million people have bought on Nykaa, and we believe that number should be bigger over time. We should be at 10-15 million, so we will continue to acquire more customers.
So do you have a lot of customer engagement in terms of what they do when they’re on the website?
Yeah, we have become a unique website. We have a very unique customer who really loves our brand and that goodwill is now extending to the Nykaa private label. Building a brand is everyone’s desire, but when you finally build one, it feels good, you know. And that is what is unique to our business model compared to other e-commerce where I don’t think they succeeded in creating a brand destination.
How are you planning your physical Nykaa stores?
We have already said that we will have 30 Luxe stores by 2020. But now we’re considering... we believe that in India you cannot support more than 30 Luxe stores. Because at the end of the day, that price point—Rs3,000 for a foundation—not many people will buy it. The catchment area is limited. Now we’re coming up with a new format which will sell a product mix very similar to that of our online store. If it is successful, we may set up a hundred stores. I say we are like Sephora, but Sephora never sells Neutrogena, or Nivea, but we don’t want to give up on that; we want to sell that because in India those things are important.
Why start with luxury first?
We wanted to be a destination store. We didn’t want to be the neighbourhood store. We don’t want to be like Health & Glow or New U. We wanted to be like Sephora. So then you need luxury brands. And initially luxury brands say that we won’t sit next to brands like L’Oreal; they want only luxury brands in the store. But now we’ve been able to convince them on a new format where we will have a mix like we have in our e-commerce store. So in e-commerce also we had to give them a special thing : Luxe. When you go to ‘Skin’, for example, they don’t want Estee Lauder to be next to Pond’s face wash. Digitally it was easier to do, because you can only get luxury brands with this tab. Soon they began wanting to have all luxury brands within Luxe.
You have made news for two things: being the go-to online store for cosmetics, and for staying away from foreign funds.
To be able to legally, legitimately do the inventory model, we stayed away from foreign money and we raised only domestic funding. We have a very differentiated business model and we truly believe in it. In beauty you need to be inventory-led. You need to make sure you have genuine products sourced directly from the brands, fresh products from your warehouse, and when customers buy you should be able to sell them. Also beauty as a category is very on-trend. I’d rather sell the right colour of a lipstick to a customer at the right price than sell the wrong colour at a discounted price. I believe that discounting doesn’t work so much in beauty. We do give special prices but they are always for brands that want to give discounts. So our entire sales strategy is brand-supported.
What about when you actually work for yourself, and you are not used to all the cushy life that a corporate job actually gives you. At any point did you actually feel like what have I done?
Before we let you go, we would like to know during your optimistic journey so far has there been a point or a story that you want to narrate where you felt unsure about what you were doing but nevertheless carried on with it and it turned out on a good note? Something that can inspire someone.
Could you shed some light on the new launches by Nykaa in the coming March and April that you have talked about earlier?
Would you be comfortable in sharing your revenue figures?
What has been the most fascinating insights for you ever since you have launched Nykaa in terms of consumer behaviour?
But you have also acquired Twenty Dresses.com now, you are expanding into the apparel business. Can you give us a picture from the Founder point of view of where do you see the Nykaa Empire?
Does it bother you that other major e-com players are now looking at the beauty sector with a lot more focus?
Can you please explain to us the inventory-based model of Nykaa?
How do you ensure customer loyalty towards Nykaa when the loyalty mostly remains towards the cosmetics brand rather than which e-com platform I am buying from?
So, would you say that both for online and offline, when you are seeing new customers coming in, is it really coming from the smaller cities which is where you seemed to be focused in opening stores?
How would you look at what's happening in the western world with all the major retailers mainly offline retailers who had then built online presence all really struggling in the height of shutdown their flagship stores?
We understand when you say that a touch and feel is required at points but the opportunity cost in terms having and setting up an offline store, the costing is quite significant. Do the means justify the end?
There was no need for you to get into any real offline stores when as per you the industry is small and the opportunity for growth is high. There was also need for you to get into expansion or build your own in-house. What was the need for you to do all these things when there was a high opportunity of growth with what you just had?
When you look at personal care and cosmetics, when did you see the traction coming in this window of 2012 to 2019 when you saw the traffic on Nykaa going up significantly?
When you entered in 2012, what could have been the size of the industry then and where does it stands today?
When you first started, did you see many people buying make-up and cosmetics online?
If we may ask, apart from Make-up and cosmetics was there any other industry, categories or possibilities in your mind when you were starting?
So, why cosmetics? Are you a person who has always loved beauty and cosmetics?
Let's go back in time when you used to be a very successful Banker but you left it all at the age of 50 to become an entrepreneur which was a risky thing to do. So, what was going inside your mind that helped you take this leap of faith?
What does the future of Nykka look like?
What led you to grow from online to offline?
What does beauty retail in India hinge upon?
Whats is her mantra that she believes?
She believes in the mantra ‘retail is all about detail’ and is often heard propagating it. Assisting Nayar is a driven team of enthusiastic professionals drawn from a myriad fields, all united in their common goal of changing the face of beauty in India. Through exclusive launches, product innovation, sharp communication and appealing design elements, the Nykaa team aspires to reach new heights in their vision. At the heart of Nykaa’s growth are its people, young men and women committed to bringing the magic and delight of beauty to the consumers’ doorstep. Falguni Nayar believes in the mantra ‘retail is all about detail’ and is often heard propagating it. Assisting her is a driven team of enthusiastic professionals drawn from a myriad fields
What are the other areas of her interest beyond business?
Nayar’s interests span beyond business. She is a founding member of the Asia Society in India. She is on several corporate boards, including the Aviva Insurance Board and Dabur India. She serves as an independent member on the board of Tata Motors. In addition to being a successful career woman and home-maker, Nayar is a source of inspiration to every member of her young and ever- growing team. Her attention to detail, involvement in every aspect of her firm and passion for business are qualities that make her a great leader.
What was Nykaa's profit in the 2018-19 financial year?
Nykaa has been a front runner in bringing international luxury brands to India, giving Indian customers a wide range of products and services to choose from. Nykaa’s valuation has reportedly touched a whopping $743 million and it made a profit of Rs 2.31 crores in the 2018-19 financial year.
What was Falguni Nayar's Dream ?
Falguni Nayar changed track in mid-life to pursue a dream and did not rest till she had achieved it. The ecommerce platform she floated after a successful career as an investment banker spanning two decades, turned profitable in the 2018-19 financial year. The online beauty and wellness platform, Nykaa, was launched in 2012. Today it is among India’s largest online fashion and lifestyle portals. After serving 20 years as an investment banker and broker with Kotak Mahindra, Nayar announced her departure to pursue her dream. Sensing a scope for marketing beauty products online, she created Nykaa, a platform that has now created history in the world of lifestyle and wellness.
It would be great if you could share which are the things that you carry in your bag.
Please share some interesting facts about yourself.
What advice would you like to give to people who wish to start their own business?
How Indian consumers have involved over the years?
Tell us one beauty secretes that you have learned over the years.
What is your skin care routine?
Do you prefer using skin care products over makeups?
Do you personally use a lot of makeup products?
What are some of the challenges that you faced as a women entrepreneur?
What’s the next big dream after this immense success?
Now that you have attained so much, do you pause and give yourself a pat for this success?
How did you get that courage to take a step ahead towards your dream, irrespective of all that demotivation?
Did you have any naysayers around you when you had this idea and were considering to give up on your banking job?
Is Nykaa a dream that you had for yourself?
When you say, you want to stand for women who want to look beautiful for themselves, not for other men or women. How does it translate it into you doing business?
Is it true that until last year you were handling customer orders by yourself?
What keeps you up at night? How has things changed for you after Nykaa?
Take us through your marketing executions at Nykaa.
What is the average shopping experience at Nykaa?
Who is a Nykaa customer? Is it women at mass or of a certian profile that you wish to focus on?
Indian consumers are highly price sensitive but in beauty is it about price or value?
How does the ratio of domestic to international brand demands stack up?
What do you think will help Nykaa maintain the lead in the beauty e-commerce business in India?
Tell us about the dream and vision of Nykaa.
Walk us through your initial business pland and how you saw the trajectory shaping up.
How difficult was it for you to organise the beauty industry in India?
Tell us about your initial learnings and hiccups that you had when you started Nykaa.
Men’s beauty is a boom business currently. Are you ever going to consider it?
You must be having large overheads, given that you are looking to expand physically too. How do you manage all this?
Your mother daughter duo is highly applauded in the industry for Nykaa’s sucess. Tell us as to how this bond creates magic in your business.
Did your banking skills come really handing while planning your financials and fun-raising?
While you try to create your online presence you tend to educate your customers very actively but big brands like Vogue and Cosmoplitan tend to actively resort to helping out people seeking beauty assistance too. Is it a concern?
You started with merely 5 employees. Where do you stand now?
Tell us something about your expansion plans.
How successful is your Nykaa private label? Is that something that you would continue to focus on?
What are some of the challenges that you are facing and what’s your ambition for Nykaa?
You are an e-commerce platform but we see you trying to create that physical space. Why is it so?
Why did you choose to enter into the beauty industry?
How difficult was it to give up your successful career to take up the challenge of being an entrepreneur?
You were an investment banker, how did entrepreneurship happen to you?