BUSINESS ENVIRONMENT - IV 2022

SVKM’s

NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES KIRIT

P. MEHTA SCHOOL OF LAW, INDORE

B.B.A. LL.B. – SEMESTER IV [2020-2025]

BUSINESS ENVIRONMENT – IV

A CASE STUDY ANALYSIS ON NYKAA’s SUCCESS

SUBMITTED TO – ANKITA P. DONERIYA

SUBMITTED BY – SHIVANSHU JHA

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Table of Contents

Chapter 1: Introduction to the Topic..........................................................................................4

Introduction to Nykaa............................................................................................................4

Literature Review...................................................................................................................5

Chapter 2: Objective and Purpose of the Research....................................................................7

Research Objective.................................................................................................................7

Research Questions................................................................................................................7

Chapter 3: Research Methodology and Analysis.......................................................................8

Research Methodology...........................................................................................................8

Nykaa’s Business Model Strategy.........................................................................................8

SWOT Analysis of Nykaa....................................................................................................10

Nykaa’s Competition in the Market.....................................................................................12

Nykaa’s CSR Activities.......................................................................................................12

Nykaa’s IPO Analysis..........................................................................................................14

Chapter 4: Suggestions, Limitations and Conclusion..............................................................15

Suggestions..........................................................................................................................15

Limitations...........................................................................................................................15

Conclusion............................................................................................................................15

Works Cited.............................................................................................................................16

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Abstract

The cosmetics sector is one of the primary businesses that have drawn a large
number of players. The cosmetics business is critical to the country's economic development.
This research is being carried out in order to better understand the beauty industry's
contribution to the country's development and to assess the strategies of these businesses.
Nykaa is one of the most well-known cosmetics firms. It brings together a variety of products
from multiple brands on a single platform. Falguni Nayar founded it in 2012.

She saw a significant opportunity in internet trading in the coming years and turned
that possibility into a major idea. Her decision was not incorrect; it resulted in the
establishment of a large-scale enterprise. It attracts clients from all around the world by
acting as an international corporation. It began by selling beauty products and has now
expanded to include fashion, skincare, and luxury items. The purpose of this study is to assess
NYKAA's plans for becoming one of the top E-Commerce organisations.

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Chapter 1: Introduction to the Topic

Introduction to Nykaa

Nykaa is a cosmetics retailer brand that sells products both online and in
offline stores. Product reviews, beauty how-to videos, expert-written articles, and even an e-
beauty magazine are all available through the company, “Nykaa”. Nykaa's customer service
line is meant to assist consumers in selecting products and services that are specific to their
needs. The goods offered by this beauty and wellness company are purchased directly from
the manufacturers, ensuring authenticity. They are also available for delivery! Nykaa
presently sends its items throughout the Indian subcontinent, as well as to Nepal, and will
soon begin worldwide shipping to a variety of nations.

Falguni Nayar, the company's founder and former managing director of

Kotak Mahindra Capital Co., was inspired by the discrepancies she saw in the cosmetic
product market. Despite significant market demand, India's beauty and cosmetics market did
not match the extent of the products as it did in other countries such as France and Japan.
Furthermore, the products were determined to be unavailable in a number of locations around
the country, prompting the development of Nykaa. Falguni Nayar founded Nykaa in the year
2012. It began as an internet company before evolving into an Omni channel strategy.

The company has a wide choice of products for both men and women, including
cosmetics, fashion, lingerie, clothes, and much more. Keep up with the latest trends and
educate your customers. It provides multiband services in over a thousand Indian cities.

It has 76 physical locations across the country. Nykaa can be accessed through
both websites and mobile applications. At the end of 2020, the company is valued at Rs.85
billion, with revenue of Rs.1860 crore. In a month, almost 55,00,000 people visit the Nykaa
websites worldwide, selling 104 products each minute, 72 percent of loyal consumers repeat
purchases within a month, and 30 beauty products per minute.

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Literature Review

(startuptalky, 2022) Nykaa is a direct-to-consumer (D2C) consumer goods e-

commerce firm with an inventory-based business model. The firm buys its products directly
from producers and stores them in specified warehouses in New Delhi, Mumbai, and
Bangalore. These items are available for purchase on Nykaa's website or in one of the
company's three offline retail formats: Nykaa Luxe, Nykaa on Trend, and Nykaa Kiosks. The
company's inventory-led business model has helped it achieve significant profit margins and
has resulted in a lucrative operation. In addition, the company assures product authenticity
and maintains competitive price.

(Suchitra, 2021)1 We all know that the majority of items and services
have moved from the offline to the internet market. Many enterprises have numerous options
to reach out directly to their clients and offer items at competitive prices by avoiding the costs
of intermediaries. Nykaa took advantage of these prospects and entered the E-retail market in
2012, selling products from a variety of brands on a single platform. It ensures that clients
always prefer a brand that provides the highest degree of quality and satisfaction. Many firms
suffered significant losses as a result of COVID-19, whereas Nykaa reported a 20 percent to
70 percent increase in business as usual. As a result, the analysis provided in-depth
information about Nykaa's business strategies and how they contributed to their success.

(GHOSH, 2021) Its founder Nayar—who was placed No. 20 on Fortune

India's Most Powerful Women in Business list in March last year—isn't easily ruffled by
setbacks, as she demonstrated in March last year. For example, she is aware of competition
from major e-commerce businesses like Amazon and Walmart-owned Flipkart and Myntra,
but she is unconcerned. "We've created our own ecology and clientele." I used to be afraid
about irrational competition when we were a tiny firm. Someone comes in and throws a lot of
cash at the problem in order to get consumers. But now I don't," Nayar explains.

1
Suchitra & Pai, Ramesh, (2021). NYKAA: A Comprehensive Analysis of a Leading Indian E-Commerce
Cosmetic Company. International Journal of Case Studies in Business, IT, and Education (IJCSBE), 5(2), 354-
365.

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(Seth, 2021) Natasha Aggarwal, a small-time retail investor, opened a bottle
of bubbly at 11 a.m. on November 10. Despite the fact that it was early in the day, the
occasion demanded a celebration. Nykaa, the go-to e-commerce portal for all beauty needs
among advertising professionals, had made a smashing launch on the stock exchange. The
stock increased by 89% to Rs 2,129. Aggarwal was ecstatic about her monetary gains after
being given "a good number of shares" at the IPO price of Rs 1,125. She raised a glass to
Falguni Nayar, Nykaa's 58-year-old Founder and CEO, who made it possible for many
people like her to profit from the firm as both a consumer and an investment. With a net
worth of about $7.4 billion, Nayar became India's wealthiest self-made woman entrepreneur
as Nykaa's valuation surged to nearly $13 billion. "She is an inspiration," Aggarwal
exclaimed. But it took a lot of guts.

(The Success Story of Nykaa, 2021) The most important aspect is to

promote companies and products across different platforms, including social media, websites,
and blog pages. It uses digital marketing to reach customers in all parts of the country. Over
the previous few years, the firm has teamed with Femina to host Femina Miss India in order
to directly target the relevant audience. Its capacity to provide relevant, interesting, and
relatable content for its audience is another key to its success. The goal is to connect with
beauty lovers via their YouTube and Instagram accounts. The company's ability to establish
itself as a legitimate voice in beauty and, increasingly, fashion discussions on social media.

(Sai Sachin, 2020) As Nkyaa offers both exclusive and nonexclusive

products bargaining power differs from supplier to supplier. Nykaa has higher bargaining
power when launching new products as it provides good platform and an enthusiastic
customer base which is ready to try new products whereas established brands may command
equal bargaining power because of their own customer base. Such conditions make the shifts
the overall bargaining power towards Nykaa’s side.

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Chapter 2: Objective and Purpose of the Research

Research Objective

- To research the business strategy of the company.

- To find out whom NYKAA's rivals are, as well as their products and services.
- Examine the firm's marketing plan

Research Questions

- How Nykaa became so much successful in its IPO?

- What are the marketing strategies of Nykaa?

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Chapter 3: Research Methodology and Analysis

Research Methodology

This research is entirely based on secondary information. This paper discusses

Nykaa Company's marketing strategy and development goals. Material obtained from various
academic publications, media, web, and company websites, including Nykaa Company's
website, are used to provide detailed analysis.

Nykaa’s Business Model Strategy

The field of industrial organization has seen a significant shift. Simple and general theories in
analysing behaviour in concentrated markets constitute the business strategy.

a) Production strategy: Nykaa is a marketplace where diverse manufacturers can sell

their wares to end users. Nykaa has a line of products that they make under the Nykaa
brand and sell to their customers at a low price. It's a huge success. Initially, the
company's activities were limited to cosmetic items, with a focus on women between
the ages of 22 and 35. However, they have now included fashion, healthcare, and
wellness products, as well as segmenting their market into men's products. The output
is divided into three categories: demographic, socioeconomic, and environmental.

b) Marketing strategies: One of the most crucial departments of a firm is marketing,

which is responsible for determining what customers want and then manufacturing or
changing items to fulfil those needs. Nykaa is growing in the cosmetics industry
thanks to its strong marketing strategy. Nykaa's marketing strategy revolves around
digital marketing. Nykaa pitches its customers via a digital marketing strategy.
Customers from all parts of the city are targeted by the brand. Let's take a closer look
at Nykaa's marketing strategy to discover how it reaches out to its target market.

(i) Social Media Marketing: The company's marketing strategy heavily relies on
social media channels. Nykaa offers its own platform for product promotion.

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The company employs a variety of social media platforms to promote its
brand. Nykaa employs social media influencer marketing to get out to its
customers. On its social media pages, the firm also distributes content created
by influencers who try out Nykaa's products accounts.

(ii) YouTube Marketing: Nykaa has a well-thought-out YouTube marketing

approach. Nykaa's YouTube channel focuses on offering consumable content
such as beauty, personal care tips, makeup hacks, and more to its target
audience. In addition, each of its accounts has a certain role. Nykaa's YouTube
playlist includes a variety of topics such as beauty horoscopes, bridal makeup
techniques, celebrity beauty secrets, and more. In addition, the company
advertises on YouTube to reach out to its target audience. Nykaa's YouTube
marketing is jam-packed with high-quality material that keeps viewers
engaged.

(iii) Content Marketing: One of Nykaa's most efficient methods for gaining
clients is content marketing. Nykaa uses a variety of digestible material to turn
its viewers into consumers. Nykaa's website, "Nykaa beauty book," features
information on beauty, cosmetics, and personal care. In addition, the company
produces video content such as makeup tips, DIY projects, and more.

(iv) Event Marketing: Event marketing is a great way to reach out to the right
customers at the right time and in the right place. Nykaa has sponsored the
prestigious "Femina Miss India" contest for the previous three years. Nykaa's
brand value has increased as a result of its sponsorship of one of India's
biggest beauty events.

(v) Stepping in Brick and Mortar: It began as an e-commerce company, but as

time went on, it moved into the physical and brick-and-mortar world to deliver
an Omni channel experience to its customers. Nykaa opened brick-and-mortar
stores across the country because most customers can't try products before
buying them online. Nykaa maintains its offline presence by having 76
physical outlets across India.

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(vi) Brand endorsements and collaborations: After developing a brand, Nykaa

entered the world of brand endorsements and collaborations to promote its
business. the company's public image and brand. Nykaa's new brand
spokesperson is Jhanvi Kapoor. Masaba has collaborated with Nykaa to
produce the "Nykaa by Masaba" range. Nykaa product packaging, designed
and printed by Masaba.

(vii) Seasonal discounts and offers: Various promotions and discounts are
available to users of the e-commerce platform. Nykaa's biggest event is the
Pink Friday sale, which offers huge discounts on a variety of products in order
to attract more customers and boost the company's sales and user base. In
addition, the Black Friday sale offers a variety of discounts on a variety of
products. Hot Pink is having a 50% off deal on a variety of items. Customers
can also enter a contest called Spin the Wheel for a chance to win rewards. To
make customers even happier with their purchases, the company also provides
free gifts with exceptional orders. It's an excellent customer retention strategy
for the business.

c) Inventory strategy: Nykaa's business plan is built on a sequence of strategic business

operations that culminate in the delivery of the final order as a product to the
customer. The three fundamental components of its business strategy are the
inventory model, displaying inventory as selling products, and order fulfilment.

SWOT Analysis of Nykaa

1. Strengths:
 They are leaders in keeping appropriate inventory for order fulfilment due to
their inventory methodology, and they have different product selections on
both their online and physical storefronts to avoid customers switching brands
due to a lack of availability.

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 Regular online advertising allows you to convert a large number of social
media users into potential clients.
 Nykaa is constantly expanding its product line, which now includes everything
from cosmetics to clothing, as well as health and safety, infant care, and
accessories, and it continues to innovate its product line and offerings in order
to capture customers' attention and compete in today's fast-paced business
environment.

2. Weakness:
 They still don't do a good job of resolving client concerns, which stifles their
business's growth;
 They still don't do a good job of resolving client concerns, which disqualifies
some potential purchasers; and
 They still don't do a good job of resolving client concerns, which stifles their
business's growth.
 Nykaa levies a flat fee of Rs 100 on all orders under Rs 1000, which is
excessive and hinders online buyers from purchasing a low-cost item;
 They spend in R&D insufficiently, limiting their potential to compete.

3. Opportunities:
 Nykaa's business strategy is to reach new heights in terms of worldwide reach
and profit.
 The company is always implementing new technology advancements into its
business processes.
 Nykaa benefits greatly from the shift from offline to online purchasing.

4. Threats:
 The number of rivals has increased.
 Government-imposed restrictions on corporate activity. Customers' spending
habits have changed, resulting in lower revenue.

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Nykaa’s Competition in the Market

Nykaa faces stiff competition from competitor corporations as the leading

company in the e-commerce industry and a global player. Some of the immediate competitors
of Nykaa are Purple.com, Plum, Myglamm, Scentials, FabAlley, Fabindia, Limeroad, etc.

Nykaa’s CSR Activities

Companies have taken a huge stride toward accepting and embracing societal obligations in
order to form the creative interaction with society. Companies are attempting to go beyond
compliance to be socially responsible in the eyes of society by investing more in human
capital, the environment, and stakeholder relations. Companies play a vital role in the
development of the country through CSR.

In this area, the Nykaa has also implemented a number of plans and programmes aimed at
raising the country's residents' level of living. Nykaa partners and participates with a variety
of governments, farmers, non-governmental organisations, and distributors to address
society's many challenges. Nykaas' CSR projects include the following:

1) Nykaa's Sparsh initiative: The cancer diagnostic and referral facilities at SPARSH
Rural Hospital in Maharashtra's Osmanabad and Later districts run outreach
programmes and early detection cancer awareness activities in 48 villages. The
women who have been diagnosed are then linked to a variety of government
programmes that will assist them in receiving the treatment they require at the Nargis
Dutt Foundation Cancer Hospital.

2) CARE: Care has been involved in various initiatives in the areas of health, education,
livelihoods, and disaster preparedness and response for the past 60 years. The purpose
is to assist underprivileged and marginalised women and girls in developing skills and
locating new sources of income. It includes Nykaa.

3) Milaap: Milaap was founded in 2010 by three young entrepreneurs with one goal: to
transform the world. People's feelings on giving. Milaap wants "giving" to be a more
personal, honest, and long-term experience. Milaap, a crowd-sourcing loan platform,
allows urban, global citizens to make a tiny but accountable contribution to social

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challenges. You can make a reimbursable donation to help someone them. Nykaa is
one of the participants.

4) Nanhi: Nanhi initiative is carried out with the help of high-quality educational
resources and support. The campaign includes academic help, material support
(school bags, books, shoes, and uniforms), and social support (encouraging parents
and communities to actively participate in their daughters' education). Nykaa is
committed to educating young women and providing them with opportunity to attain
their goals. They make a difference in the lives of over 100,000 Nanhi Kali-supported
girls as a result of their collaboration. On Women's Day, Nykaa's CSR project made a
difference in the lives of young Indian girls who will grow up to be responsible
citizens.

5) MSWC: MSWC is a non-governmental organisation located in Maharashtra that

assists poor women and children. The Council tackles the complex social and medical
needs of marginalised women and children through rescue, rehabilitation, and
restoration programmes that emphasise education, vocational training, and cultural
activities. It has impacted the lives of 150,000 people.

6) P.R.I.D.E.: Indians help people in rural areas to survive. Each year, Pride reaches out
to approximately 175,000 people with a child-centered mission focusing on health,
education, and employment. Nykaa arranged a CSR initiative to generate donations
for Sparsh in honour of Mother's Day. In India, the Beauty and Wellness Course gives
rural women, particularly girls who have dropped out of school, work opportunities.
So far, 180 rural women have received basic and advanced beautician training. Nykaa
supported P.R.I.D.E.'s work by contributing money to Beauty and Wellness Co.
during the Joy of Giving Week.

7) SNEHA: From conception to maturity, it works with women and children to break
the intergenerational cycle of illness and gender-based violence. SNEHA ensures that
these ladies have constant access to the health care they demand. These efforts have
been scaled across Maharashtra, with 20 communities in Greater Mumbai
participating in programmes.

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Nykaa’s IPO Analysis

From FY19 to FY21, Nykaa's topline grew at a remarkable 48 percent compound annual
growth rate (CAGR). The company's bottom line has also improved over this time, going
from a loss of Rs 32 crore in FY19 to a profit of Rs 62 crore in FY21. In FY21, the
corporation made a profit, as opposed to losses in previous years. It is currently one of India's
few lucrative online retailers.

Nykaa's IPO is priced at the higher end of the price range, with a PE ratio of 840 times FY21
profits per share (on a post-issue basis). Given that the company only made a minor profit in
FY21, the valuation appears to be high. Nykaa is valued at 21.5 times FY21 profits per share
on a price-to-sales ratio. Because the company has no direct listed peers, it may benefit from
a scarcity premium in India.

Investors who want to get exposure to an under-penetrated online cosmetics e-tailing business
may consider investing in this issue because of the company's market leadership status, high
top line growth, healthy outlook, and good sentiment from marquee investors and promoter
group.

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Chapter 4: Suggestions, Limitations and Conclusion

Suggestions

- Nykaa must focus on overcoming its limitations and challenges by leveraging its
strengths and possibilities. Its ability to provide branded products at reasonable costs
assures that it reaches the upper-middle-income market.
- Class can even target the lower-middle-income group by offering lower-cost products
in lesser quantity in order to be able to buy them.
- As a woman entrepreneur, you must inspire other women to start their own businesses
by providing financial support.
- Nykaa provides a platform for sellers to sell their wares.
- Nykaa primarily caters to the 22–35 age brackets, but introducing additional age
groups could help the company grow even more.

- It must engage in further promotional measures to raise product awareness among

men.
- Because most people believe Nykaa's company is only for women, this part has been
created.

Limitations

- All the data used in this research paper is secondary and no primary data was
collected for the purpose of this research paper.
- The scope of this research was limited.
- The resources were limited for this research.
- The time for making this research paper was limited.

Conclusion

We all know that the majority of items and services have moved from the
offline to the internet market. Many enterprises have numerous options to reach out directly
to their clients and offer items at competitive prices by avoiding the costs of intermediaries.

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Nykaa took advantage of these prospects and entered the E-retail market in 2012, selling
products from a variety of brands on a single platform. It ensures that clients always prefer a
brand that provides the highest degree of quality and satisfaction. Many businesses suffered
significant losses as a result of COVID-19, but ykaa reported a 20 percent to 70 percent
increase in business as usual. As a result, the analysis provided in-depth information about
Nykaa's business strategies and how they contributed to their success. Few companies
currently provide multi-brand luxury products on their websites, allowing them to dominate
the industry.

Works Cited

The Success Story of Nykaa. (2021, Sept 16). Finology.

GHOSH, D. (2021, Feb 20). The secret of Nykaa’s success. Retrieved March 11, 2022, from
FORTUNE INDIA: https://www.fortuneindia.com/enterprise/the-secret-of-nykaas-
success/105209

Sai Sachin, I. P. (2020). Nykaa: A Report. INDIAN INSTITUTE Of MANAGEMENT

RAIPUR. Raipur.

Seth, S. T. (2021, Dec 26). MPW: How Falguni Nayar Led Nykaa to a Successful IPO .
Retrieved March 11, 2022, from Business Today:
https://www.businesstoday.in/specials/most-powerful-women-in-business/story/mpw-
how-falguni-nayar-led-nykaa-to-a-successful-ipo-315192-2021-12-10

startuptalky. (2022, Feb 24). Nykaa - Story of the Top Beauty Retail Platform of India.

Suchitra, &. R. (2021). NYKAA: A Comprehensive Analysis of a Leading Indian E-

Commerce Cosmetic Company. International Journal of Case Studies in Business, IT,
and Education (IJCSBE).

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