Nykaa Case Study: SWOT Analysis, Business Model and Marketing Strategy

Nykaa is an Indian brand of beauty and cosmetic products. It was founded by Falguni Nayyar in 2012. Since then, it has evolved into a lifestyle brand offering a curated selection of 1900+ brands and 1 lakh+ products across skincare, makeup, fragrance, health, haircare, etc.

It is a dominant player in the market and is continuously trying to adapt and innovate itself to align with consumer preferences. Its omnichannel approach, curated product selection, and focus on building a loyal community position it for sustained growth in the years to come.

Nykaa is a public company that was initially incorporated as FSN E-Commerce Ventures Private Limited and was listed on the stock exchange in 2021. Nykaa’s shareholding pattern as of September 2023:

Nykaa’s USP includes first-mover advantage, strong brand identity in the cosmetics industry, and a data-driven approach with personalised recommendations for customers. Nykaa’s target audience is primarily women aged 18–50 and beauty influencers. Nykaa has extensively used brand marketing and social media reach to build its customers’ base. The phrase “Be Bold and Be Good” drives Nykaa and the company is still working towards its goals.

Nykaa is a D2C brand of consumer products with 145 BPC stores and 9 fashion stores across 60 cities that work on an inventory-based model, i.e., the company buys the products from the manufacturers and stores them in warehouses. Products are sold either through online apps or in offline stores.

Nykaa also has a series of in-house brands in fashion and beauty. Some of them are Nykaa Cosmetics, Kay Beauty, and Nykaa Naturals. Nykaa Fashion: 20 Dresses, Nykd by Nykaa. The apparel and accessories verticals consist of 1,350 brands.

Source-Nykaa.com

The beauty brand Nykaa faces tough competition from Purplle, Myntra, Ajio, etc. As of December 2023, Nykaa’s valuation stood at $5.94 billion. In this blog, we will be analysing strengths, weaknesses, opportunities, and threats along with Nykaa’s marketing strategy.

SWOT Analysis

Strengths

1. Nykaa captures a significant market share when it comes to online beauty. It created a strong customer base and brand loyalty, which gives the company’s first mover advantage.

2. Unlike generic e-commerce platforms, Nykaa offers a carefully curated range of authentic beauty and wellness products catering to diverse needs and preferences.

3. Nykaa’s engaging content, user-friendly interface, and social media presence fascinate the young generation of India.

4. Nykaa offers its customers a wide variety of products in various categories.

5. Nykaa has shown exponential and exemplary growth over the years with continuous expansion in its product lines.

Weakness

1. Maintaining inventory and storage of beauty products can be complex and challenging, leading to stockouts and inefficiencies. This can impact the customer shopping experience negatively.

2. Nykaa also faces tough competition from other D2C brands and this can put the company under immense pressure, thereby affecting the margins.

3. No free delivery below INR 700 can make it unattractive to customers with low budgets.

4. Nykaa hardly spends on research and development activities, which can limit its capacity to compete with other beauty brands, and as a retail business with both offline and online presence, functioning without proper R&D can lead to operational challenges.

5. Overdependence on the female demographic can affect the business.

Opportunities

1. Nykaa can tap international markets, which can help the company increase its customer base and revenue.

2. Acquisitions of niche brands can cater to the needs of customers and create a new customer base.

3. The existing loyalty programme of the brand can be enhanced and improved with some exclusive offerings, which can eventually help boost customer retention.

4. Nykaa can further invest in AI-powered solutions for product recommendations, chatbot customer service, and AR/VR beauty consultations. This can improve operational efficiency and potential customers.

Threats

1. Tough competition from other brands is a threat for Nykaa, as this can move their price-conscious customers to other websites.

2. Evolving consumer preferences and buying behaviour can be a threat to the beauty brand if it does not align with the changing trend.

3. At the time of listing, the company’s valuation stood at $15.36 billion. A significant decline can be seen in the valuation of the company post-listing. Further, as of December 2023, the company is trading at a P/E of INR 2,483, which is high as compared to its peers.

4. Evolving technologies like augmented reality (AR) and virtual reality (VR) offer try-on methods to customers. If not implemented with a seamless experience, it can be a threat to Nykaa.

Marketing Strategies of Nykaa

1. Product Strategy

Nykaa is currently offering a diverse range of 1500+ beauty and wellness products. The company has also recently launched its product brand, which is adding an extra dimension to its product basket. Nykaa aims to be a one-stop destination for people of all age groups and offers beauty products from both national and international brands with a presence across major markets like the U.A.E., Mauritius and the U.S.A.

It tries to offer curated products suitable for various skin tones and types to its customers that align with their needs and are also in trend. The brand also launches limited-edition products and collaborates with celebrities and influencers to create exclusive collections. It personalizes the product experience by offering recommendations based on individual purchase histories and reviews from other users. The brand also promotes environment-friendly packaging to promote sustainability.

Nykaa has also launched Nykaa fashion and Nykaa men. We can say that the product strategy of Nykaa is dynamic.

2. Pricing Strategy

The company generally focuses on cost-based pricing, where it analyses the cost of acquiring and distributing products and adds a markup to decide the final price, and prestige pricing, where the company has collaborated with different luxury brands like MAC, Anamoly, Aveda, etc. to justify the higher prices.

Nykaa runs promotional campaigns, discounts, and special offers during festive sales to attract customers and drive sales. It also offers diverse payment options, including cash on delivery, credit card EMI, and buy-now-pay-later schemes, making purchases accessible to a broader customer base.

3. Place / Distribution Strategy

Nykaa’s omnichannel presence has helped the company evolve over the years. The brand provides three options to customers. They can visit either Nykaa’s luxe store for a premium shopping experience or on-trend stores for budget shopping. The third option is to buy products online via Nykaa’s web and mobile app.

In recent years, the company has tried to expand its network. It has collaborated with different logistics partners to offer flexible delivery options like express delivery and scheduled delivery in some locations.

4. Promotion Strategy

Nykaa engages itself in blog posts, makeup tutorials on Youtube and articles for spreading informative content among the audience. This creates a sense of trust among the customers. The company also collaborates with influencers to promote its trendy products. It sends targeted emails to customers based on their purchase history, preferences, and interests, offering personalized recommendations and promotions.

Nykaa leverages influencers through its customised creator-focused product and program called Nykaa affiliate program, which enables external content creators to publish content on behalf of the company across several digital platforms. Further, the company continuously post deals and giveaway alerts on social sites to attract customers.

Conclusion

Nykaa’s journey from a fledgling e-commerce platform offering beauty products to a platform that innovates with vision and is adaptable as per the choices and preferences of the customer is phenomenal. The brand knows well how to capitalise on opportunities. It has carved out a significant niche in the Indian market and has the potential to further expand its business, shaping the future of the beauty market.

If you have enjoyed reading our blog, check out the related case study: Flipkart Case Study- Business Model and Marketing Strategy.

Frequently Asked Questions (FAQs)

1. Who founded Nykaa?

Ans. Nykaa was founded by Falguni Nayyar in 2012.

2. Is Nykaa target market only for females?

Ans. No, Nykaa is not only for females; it also sells grooming and personal care products for men.

3. Is Nykaa a public company?

Ans. Yes, Nykaa is a public company listed on the NSE & BSE.

4. Who are the competitors of Nykaa?

Ans. Nykaa faces tough competition from Purplle, Myntra, Ajio, etc.

5. What is the biggest sale introduced by Nykaa?

Ans. The biggest sale of Nykaa is the “Nykaa Pink Friday sale”.

Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.