Case Study: How Falguni Nayar built Nykaa to

stand out from the crowd

A graduate of IIM Ahmedabad, Falguni Nayar worked with management consulting firm AF
Ferguson and Co. before joining Kotak Mahindra Capital Co. Ltd. Inspired by her businessman
father, Nayar set herself a deadline of starting a business by the age of 50. Indeed, she launched
Nykaa at 50 in 2012. She had no experience in retail, technology, beauty or fashion, but is risk-
taking by nature.

Nayar picked the beauty and wellness segment for her business venture. In 2012, customers
were wary of buying beauty products online because of counterfeit products. So, Nayar and
her team curated beauty products, sourcing high-end luxury items directly from manufacturers
to sell online. 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. During its initial days, the company got only
20 odd orders a day. Today, Nykaa receives around 70,000 orders a day and its mobile app has
seen over 55 million downloads. Around 70% of the gross merchandise value is from repeat
customers.

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.

Nayar and her team launched physical stores across the country. After beauty products, the
company expanded into fashion two years ago. ‘Nykaa Man’ sells personal care products for
men. The company also plans to adapt to retailing via video and live commerce, social
commerce and use artificial intelligence for virtual try-ons and personalization.

Nayar has said relentless focus on execution, curation of content, and beauty products has
helped Nykaa achieve scale. Being financially frugal was key, as was her focus on tech in 2012
when she started out. The company raised only around $100 million in primary capital till the
IPO and is profitable. The effort paid off as the company’s IPO received over 4.4 trillion bids,
the second highest for any IPO. On 11th November 2021, the shares hit ₹2,208.35 apiece, with
a market cap of over $13.5 billion.

Source: The Economic Times

Questions:

1. How Nykaa has spotted the opportunities in the market? What innovative approach
help company to become a successful business model?