Business Research Methods -Project Report

Nykaa-FSN E-Commerce Ventures Ltd (FSNECO)

Submitted by Submitted to
Kanika Sachan Mohit Pandey Mr Mohit Maurya
NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

ABOUT THE COMPANY:

Incorporated in 2012, FSN E-Commerce Ventures, more commonly known as Nykaa, is a consumer technology
platform, delivering a content-led, lifestyle retail experience to consumers through its diverse portfolio of beauty,
personal care & fashion products including their own brand products.

• The company boasts of 256,149 SKUs from 2644 brands in beauty & personal care segment and around 2.8
million SKUs across 1,434 brands in the fashion segment

• GMV - 90% is from online platform; 80 physical outlets in operation till date

Nykaa

Type Public

Traded as NSE: NYKAA

BSE: 543384

Industry E-commerce
Cosmetics
Retail

Founded April 2012; 10 years ago

Founder Falguni Nayar

Headquarters Mumbai, Maharashtra, India

Area served India

Key people Falguni Nayar (CEO); Anchit Nayar (CEO - E-commerce & Beauty);
Adwaita Nayar (CEO - Fashion)[1]

Revenue ₹3,773 crore (US$500 million) (FY22)[2]

Net income ₹41 crore (US$5.4 million) (FY22)[2]

Owner Falguni Nayar (53.5%)[3]

Number of employees 2,000+ (2021)

Parent FSN E-Commerce Ventures Ltd

Website www.nykaa.com
NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

Falguni Nayar (CEO)

KEY HIGHLIGHTS:

• Nykaa is the largest specialty beauty and personal care platform in India in terms of value of products sold in
FY21 and one of the fastest growing fashion platforms in India based on growth in GMV

• The company has the highest average order value (AOV) among leading online beauty and personal care
platforms in India. The company carries a large number of leading luxury and prestige beauty and personal care
brands making it the customer’s retail destination of choice in India

• It is a capital efficient business with strong growth and profitability. Its capital turnover ratio improved from 3.1x
in FY19 to 4.2x in FY21

• The company values its brand relationships and has a team of brand managers who work closely with brands to
strategize and execute growth and brand-building strategies

COMPANY BACKGROUND

Nykaa is a digitally native consumer technology platform, delivering a content-led, lifestyle retail experience to
consumers through a diverse portfolio of beauty, personal care and fashion products, including their own brand
products manufactured by company itself. Consumers are offered an Omnichannel experience with an endeavour
to cater to their preferences and convenience:

• Online: The company’s online channels include mobile applications, websites and mobile sites. As of August 31,
2021, Nykaa had cumulative downloads of 55.8 million across all its mobile applications and during the five months
ended August 31, 2021, 88.2% of company’s online GMV came through the mobile applications. According to the
RedSeer Report which has been exclusively commissioned and paid for by Nykaa in connection with the offer, the
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company had one of the highest share of mobile application-led transactions, among the leading online retail
platforms in India during FY21 and the five months ended August 31, 2021.

• Offline: The company’s offline channel comprises 80 physical stores across 40 cities in India over three different
store formats as of August 31, 2021. Physical stores offer a select offering of products as well as a seamless
experience across the physical and digital worlds. The company’s lifestyle portfolio ranges from beauty, personal
care to fashion products. The belief that consumers have different journeys for different lifestyle needs has led the
company to build business vertical-specific mobile applications, websites and physical stores. These independent
channels allow it to tailor the content and curate optimally for the convenience of consumers and to cater to the
different consumer journeys that exist in these business verticals:

• Nykaa: Beauty and personal care

• Nykaa Fashion: Apparel and accessories

FY21 REVENUE BREAK-UP BY CATEGORY (CRORE, %)

BPC, 33,804, 84% Fashion, 6,656, 16% ₹ Million ICICI Securities

NYKAA’S VALUE PROPOSITION

The company’s business has been built iteratively while innovating for consumer satisfaction as well as optimising
for purchase behaviour. The company believes that the consumer journey for product selection often includes a
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significant amount of time spent exploring. It endeavours to understand the process of decision making and
provide for the critical moments across the different stages of a consumer’s journey on its platform. Through
integration across touchpoints, Nykaa targets consumers and designs personalised browsing and purchase
experiences to meet their diverse needs. Its business model is rooted in value proposition, separating it from the
otherwise predominantly transactional e-commerce industry.

• Nykaa Outlets: As of August 31, 2021, the company operated 80 physical stores in 40 cities of India across
three formats. During FY20, the physical stores registered one of the highest sales per square feet figures
across multi-brand specialty beauty and personal care platforms in India. The stores are broadly present
in three formats:
o Nykaa Luxe: The Nykaa Luxe store format offers a luxury beauty experience. The format
showcases prestige and luxury international and domestic brands.
o Nykaa On-Trend: The Nykaa on-trend stores offer a differentiated experience for consumers with
the current best-selling products chosen across beauty and personal care brands.
o Nykaa Kiosks: The Nykaa kiosks are free standing units usually in the atriums of shopping malls.
The company predominantly sells owned brands through these kiosks.

SUPPLY CHAIN

As of August 31, 2021, The company had an integrated supply chain comprising 20 warehouses (of which two are
outsourced) across India, with a total capacity of 665,371 sq ft, supported by 80 physical stores.
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INVESTMENT RATIONALE

ONE OF LEADING LIFESTYLE FOCUSED CONSUMER TECHNOLOG Y PLATFORM

Nykaa is one of the preferred choices for consumers not only for engaging, personalised shopping experiences but
also to understand latest trends in beauty, grooming and fashion in India. Nykaa is the largest specialty beauty and
personal care platform in India in terms of value of products sold in FY21 and one of the fastest growing fashion
platforms in India based on growth in GMV in FY20-21. Brand affinity built with consumers, helps the company to
attract them to engage on its platform, increase consumer traffic, increase the number of transactions on its
platform. Leveraging its brand strength, the company has been able to and expects to continue to add more
lifestyle verticals and adjacencies which is expected to further increase its consumer base. The company’s sizeable
volume of content drives increased organic traffic and retention on its platform, which, in turn, drives higher
engagement and better experience, helping the company create more content and further drive consumer
experience and transactions. The company believes it has gained significant prominence not only as a lifestyle
retail platform but also a leading lifestyle brand and influencer.

Nykaa’s constantly rising GMV

PREFERRED DESTINATION FOR LUXURY & PRIVATE PRODUCTS I N INDIA

As per RedSeer Report, the company has the highest average order value (AOV) among the leading online beauty
and personal care platforms in India and are the largest luxury beauty and personal care platform in India. The
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company carries a large number of leading luxury and prestige beauty and personal care brands under its roof,
making it the customer’s retail destination of choice in India. The company has tailored specific capabilities across
marketing, technology, supply chain, fulfilment, and consumer service to create a differentiated ecosystem for
such brands and its consumers. Further, while the company’s warehouses generally have segregated areas for such
brands, shipments to consumers from such warehouses are also packed in premium packaging to enhance the
luxury shopping experience for the consumers. In case of certain international prestige brands, the company
knows that physical stores play an important role in brand building. Hence, its ability to offer an integrated omni-
channel retail strategy to these brands is a key strength for it. As a result of these bespoke services, many global
luxury brands have chosen Nykaa to import, launch and sell their products to consumers in India. In the fashion
business too company enables customisation for luxury and made-to-order products. Consumers can work with
the company’s stylists to identify their customisation requirements while the company works with the brands to
deliver such customised products. As a result, the company has seen a surge in the number of unique visitors and
website visits and has been successful in attracting them.

NUMBER OF VISTORS GROW AT CAGR OF 32% FOR BPC DURING FY19 -21
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NUMBER OF UNIQUE VISITORS GROW AT CAGR OF 22% IN BPC SEGMENT

Capital efficient business with strong growth and profitability The company has built a business with scale that has
strong growth and profitability. In FY21, the GMV was | 4045.9 crore with revenue from operations of | 2440.8
crore and a 6.61% EBITDA margin. Revenue from operations grew 38.10% in FY21 as compared to FY20 despite the
adverse impact of Covid-19 on the business. The company’s capital turnover ratio improved from 3.1x in FY19 to
4.2x in FY21. The company focused on capital efficiency and unit economics while simultaneously building for scale
and growth. It has been able to achieve this scale with only | 577.7 crore primary investments into the company as
of March 31, 2021.

NYKAA’S CAPITAL TURNOVER RATIO

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DEEP SYMBIOTIC RELATIONSHIP WITH BRANDS

The company values its brand relationships and has a team of brand managers who work closely with brands to
strategise and execute growth and brand building strategies. It views itself as a brand custodian and applies a
client-servicing mindset to its interactions with brands to ensure it is building long-term strategic relationships. The
company has leading domestic and international brands in its beauty and personal care portfolio such as Clinique,
Dermalogica, Dove, Estee Lauder, Faces Canada, Forest Essentials, Herbal Essences, Innisfree, Lakme, MAC,
Makeup Revolution, Mamaearth, Maybelline New York, Mcaffeine, Nautica, Plum, Smashbox and Wella
Professional. In its fashion portfolio it has And, Bulchee, Caratlane, Fablestreet, Forever New, Gaya, House of
Masaba, Hidesign, Triumph, Miss Chase, Shaurya Sanadhya, Tribe by Amrapali and Wacoal. Nykaa offer brands
involvement and integration in several aspects of its brand marketing strategy, from building marketing plans and
promotions for their products to ensuring their standards in supply chain and fulfilment. For example, the
company advises its brands on pricing and commercial strategies including discounting, sampling, gifting and
couponing to meet consumer demand while respecting the brand’s desired positioning in the market. The
company also offers advertising space on its online channels and its physical stores to brands.

NYKAA’S VALUE PROPOSITION -BRANDS ASSOCIATIONS

NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

FOCUS ON STRATEGIC ACQUISITIONS & EXPANSION

The company is actively involved in any strategic acquisitions that help company expand as a whole. It has
acquired various brands recently like ‘20 dresses’, ‘Pipa Bella’, RSVP. The recent acquisition of ‘Dot & Key’ in the
newest addition in company’s brand portfolio. Apart from this, the company also launches and promotes its own
brands like Nykd, Nykaa Cosmetics & tie-up brand Kay. Overall the company offers a wide range of assortments on
its platform and carefully devises its brand acquisition and promotion strategy.

KEY RISKS & CONCERNS

FAILURE TO RETAIN OR ATTRACT NEW BRANDS, DISTRIBUTORS AND SELLERS

The company earns a substantial portion of revenue from commission or margins on the sale of products of its
brand relationships. Accordingly, it depends on its ability to attract and retain domestic and global brands that
offer a range of products to its consumers. The company experiences attrition in its relationships with brands,
manufacturers, distributors, and sellers due to various reasons. A large part of its success is dependent on its
ability to offer certain key brands within certain categories to its consumers and operate with such brand
relationships. Any significant relationship attrition with brands, manufacturers, distributors or sellers, and fail to
attract new relationships, the quantity and variety of products that are offered through its platforms could decline,
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which can adversely impact the business. Also, the company does not contractually require such parties to sell
exclusively on its platform. Accordingly, they may choose to offer products through other channels at any time,
which may impact the company’s sales.

DEPENDENCE ON KEY EXTERNAL BRANDS, SELLERS & SUPPLIERS

The company’s revenue depends on the continued demand for the types of beauty and personal care and fashion
products that its brand relationships, sellers and suppliers offer on its platforms, alongside demand and expansion
of its owned brand products. The success is dependent on the ability of the company’s sellers and brand
relationships. The dependency on some popular brands may make the business vulnerable to these brand
relationships changing their sales strategy, shifting focus to some other channel or multibrand retailer. Any
deterioration in the relationships with these brand relationships may lead to loss of sales.

INTENSE COMPETITION IN INDUSTRY

The industry in which the company operates is highly competitive. It expects that competition to continue to
increase. Its competitors include a number of online marketplaces, retailers with physical stores and brands that
take a direct-to-consumer approach, effectively removing company from the distribution and sales process.
Consumers who purchase goods and services through the company have other alternatives and sellers have other
channels to reach consumers. The company expects competition to continue to intensify.

RESEARCH METHODOLOGY

OBJECTIVES:

1) To study and analyse the online consumer buying behaviour.

2) To assess the behavioural level of customers of different age group.

3) To understand the factors influencing the consumer buying behaviour with respect to Nykaa.

HYPOTHESIS FORMULATION:

1) H0: Age has no significant effect on consumer buying behaviour. Ha: Age has significant effect on consumer
buying behaviour.

2) H0: Price has no significant impact on consumer buying behaviour. Ha: Price has significant impact on consumer
buying behaviour.

3) H0: Quality has no significant impact on consumer buying behaviour. Ha: Quality has significant impact on
consumer buying behaviour.

4) H0: Availability of brands have no significant impact on consumer buying behaviour. Ha: Availability of brands
have significant impact on consumer buying behaviour.
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5) H0: Social media/social media influencers have no significant impact on consumer buying behaviour. Ha: Social
media/social media influencers have significant impact on consumer buying behaviour.

6) H0: Brand name has no significant impact on consumer buying behaviour. Ha: Brand name has a significant
impact on consumer buying behaviour.

RESEARCH DESIGN:

The research design applied was descriptive design. This design helps to describe a population, situation or a
phenomenon. This was mainly used to answer the questions like what, when, where, when and how.

RESEARCH METHOD:

Quantitative approach is the method used in the research. This method helps to analyse the data statistically or we
can say that numerical analysis is done through questionnaires and surveys. Quantitative method focuses more on
gathering numerical data and generalising it across groups of respondents or to explain a particular phenomenon.

PRIMARY DATA: Primary data was collected through an online questionnaire to a set of respondents who are
believed to have desired information.

SECONDARY DATA: Various published articles regarding consumer buying behaviour and about the company Nykaa
were referred for the secondary data collection.

SAMPLING DESIGN: Convenient sampling was adopted in selecting the respondents to collect the data. Data has
been collected from a sample of 146 respondents.

STATISTICAL ANALYSIS OF DATA: The collected data were carefully analysed and evaluated. Statistical tools such as
chi-square test and multilinear regression analysis were applied to interpret the data to draw meaningful results.

DATA ANALYSIS

1) Gender classification of the respondents.

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Interpretation: It is seen from the above pie chart and the table 1.1, that the males constitute 33.10% and
females constitute 66.90%. Here it is evident that female play the major role.

2)Age wise classification of the respondents.

Figure 2.

Interpretation:
NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

From the above table 1.2, we can see that 77.2% of the respondents fall under the age group of 20-25, 14.5%
of the respondents fall under the age group of 25-30, 3.4% of the respondents fall under the age group of 15-
20, 2.8% & 2.1% under 30-40 and 40 & above respectively.

3) Classification of the respondents based on their purchase of beauty products.

Figure 3.
NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

4) Classification of the online platform selection of the 77.2% respondents.

Figure 4

Interpretation:
NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

From the table 1.4, it is clearly seen that 60% of the respondents from 77.2% chooseNykaa as their online
shopping platform for buying beauty products which is a huge number. And the rest are the 17.2%
respondents who choose other platforms over Nykaa.

5) Classification of type of customer of the 60% of respondents who chose Nykaa as their platform.

Figure 5.

Interpretation:

From the above table 1.5, we can see that 18.62% respondents are impulsive customers, 15.17% are discount
customers, 13.10% are the loyal customers, 7.59% are the new customers and 5.52% are the potential
customers. These sum up to that 60% of the customers who chose Nykaa as their platform. 22.76% of
respondents who do not purchase beauty products online and the rest are the 17.24% who purchase beauty
products online but do not choose Nykaa as their platform to purchase. These two sum up to the 40% of the
respondents who fall under the option “did not opt” as shown in the table.

6) Classification of the 60% of respondents who choose Nykaa based on their reliability on the brand.
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FIGURE 6
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Interpretation: As we can see from the above table 1.6, 19.31% of the respondents are highly reliable and
26.90% of them are reliable from the total of 60% of the respondents who choose Nykaa. 13.10% of the
respondents are neutral about the reliability.

7) Classification based on satisfaction levels about the brand.

FIGURE 7

8)

Interpretation: From the above table 1.7, we can see that 20.7% are strongly satisfied with the brand, 30.3%
are satisfied and 9.0% are neutral about the satisfactory level.

9) Classification of the 60% of respondents who chose Nykaa based on choosing any other brand which is
similar to Nykaa.

FIGURE 8
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Interpretation:

As we can see from the above table 1.8, that 13.8% of the respondents from the 60% of the respondents who
chose Nykaa have responded “no” when asked if they would choose any other platform similar to Nykaa.
30.3% have responded “maybe” which means they do not have a clarity about it. 15.9% have responded that
they would choose. 10) Classification of the 22.76% of the respondents who do not purchase beauty products
based on their reasons for not purchasing.

FIGURE 9
NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

Interpretation:

As we can see from the table 1.9, amongst the 22.76% of the respondents who do not purchase beauty
products online, 10.3% of the respondents said that they never got the need to buy. 4.8% of the respondents
said that they are not interested in beauty products and 7.6% of the respondents said that they prefer offline
shopping over online as offline gives more personalized experience.
NYKAA-FSN E-Commerce Ventures Ltd (FSNECO)

FINDINGS OF THE STUDY

• From the study, it was found that the males constitute 33.10% and females constitute 66.90%. Here it is evident
that female play the major role.

• 77.2% of the respondents fall under the age group of 20-25, 14.5% of the respondents fall under the age group
of 25-30, 3.4% of the respondents fall under the age group of 15-20, 2.8% & 2.1% under 30-40 and 40 & above
respectively.

• 77.2% of the respondents have said that they buy beauty products online and 22.7% have said that they do not
purchase cosmetic products online. This statement helps in proving the first objective of the study i.e. to study and
analyse the online consumer buying behaviour.

• 60% of the respondents from 77.2% choose Nykaa as their online shopping platform for buying beauty products
which is a huge number. And the rest are the 17.2% respondents who choose other platforms over Nykaa.

• 18.62% respondents are impulsive customers, 15.17% are discount customers, 13.10% are the loyal customers,
7.59% are the new customers and 5.52% are the potential customers. These sum up to that 60% of the customers
who chose Nykaa as their platform. 22.76% of respondents who do not purchase beauty products online and the
rest are the 17.24% who purchase beauty products online but do not choose Nykaa as their platform to purchase.
These two sum up to the 40% of the respondents who fall under the option “did not opt.”

• 19.31% of the respondents are highly reliable and 26.90% of them are reliable from the total of 60% of the
respondents who choose Nykaa. 13.10% of the respondents are neutral about the reliability.

• 20.7% are strongly satisfied with the brand, 30.3% are satisfied and 9.0% are neutral about the satisfactory level.

• 13.8% of the respondents from the 60% of the respondents who chose Nykaa have responded “no” when asked
if they would choose any other platform similar to Nykaa. 30.3% have responded “maybe” which means they do
not have a clarity about it. 15.9% have responded that they would choose.

• Amongst the 22.76% of the respondents who do not purchase beauty products online, 10.3% of the respondents
said that they never got the need to buy. 4.8% of the respondents said that they are not interested in beauty
products and 7.6% of the respondents said that they prefer offline shopping over online as offline gives more
personalized experience.

• The significant value of the reliability test is 0.867 which is greater than 0.7, this signifies that the data is reliable.

• The significant value of the chi-square is 0.708 i.e. the value is greater than 0.05. So we accept the null
hypothesis, that age has no significant effect on consumer buying behaviour and we reject the alternate
hypothesis, that the age has significant effect on consumer buying behaviour.

• It was found that significant values of availability of brands, price, social media/social media influencers and
brand name are 0.007, 0.045, 0.001 & 0.001 respectively. These values are smaller than 0.05. So we accept the
alternate hypothesis for each of the following factors i.e. availability of brands, price, social media/social media
influencers and brand name have a significant impact on the consumer buying behaviour. Therefore, we reject the
null hypothesis for the same.
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• It was also found that quality has significant value greater than 0.05 which is 0.195, we accept the null
hypothesis for the following i.e. quality has no significant effect on consumer buying behaviour and we reject the
alternate hypothesis i.e. quality has a significant effect on consumer buying behaviour.

RECOMMENDATIONS

• The company Nykaa can pitch its beauty products for men which apparently do not have a great reach amongst
the consumers.

• As people are being more conscious about their skin, they are shifting to herbal products. Nykaa can promote its
herbal products in order to increase its consumption which leads to increase in sales.

• The company can avail gift vouchers to its potential customers and new customers so that they can attract them
to repeat their purchase.

LIMITATIONS OF THE STUDY

• The study is geographically restricted to Pune city only, and so the result cannot be extrapolated to other places.
Also the result may differ from location to location.

• Sample size of the study was taken as 146 respondents taking time constraint as an important factor in mind.

• Findings of the study are based on the data collected from the sample respondents. There is a chance of false
data due to lack of seriousness of the respondents while filling the survey.

• This study measures only the online buying behaviour of the consumers and does not measure the offline
buying.

CONCLUSION

• As per the specified objectives and hypothesis, the study was accomplished successfully.It is concluded that the
mentioned factors in the research have good influence on the consumer buying behaviour.

REFERENCES
Anjana, A study on factors influencing cosmetic buying behaviour of consumers.

International Journal of Pure and Applied Mathematics, 118(9), pp.453-459. Bhatt, S. and Bhatt, A., 2012. Factors influencing online shopping:
an empirical study in Ahmedabad.

Factors influencing online buying behavior of college students: A qualitative analysis. The Qualitative Report p.1. Sharma, A., Bhola, S., Malyan,
S. and Patni, N., 2013.

A Study of Indian Online Consumers & Their Buying Behaviour. International Research Journal
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