Demand for top-end beauty products to outpace mass segment: Nykaa

Conversely, the mass segment is expected to register a drop to 45% of the overall BPC category from 55% now, Nykaa said in its annual investor day presentation on Friday.

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The Mumbai-based company pointed out that consumer preference in the BPC category is shifting from personal care to beauty products. This, it said, is a result of growth in per capita gross domestic product (GDP).

Nykaa also said that the per-customer spend in the BPC category it has recorded for the last 12 months is around $80, significantly higher than the $15 per capita spend on BPC in India. It estimates that the national per capita spend on BPC will grow to $50 by 2030.

At the company’s March-quarter earnings call last month, Nykaa’s chief executive of e-retail Anchit Nayar, had said that one of the key focus areas for the company was “acquiring new customers and equally importantly retaining the existing loyal, premium repeat customers”.

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While Nykaa’s BPC category saw the gross merchandise value (GMV) grow by 32% year-on-year during FY23 to Rs 6,649 crore, the average order value (at maximum retail price) for the category stagnated at Rs 1,857 for FY23.It noted in its presentation that per capita spend on the BPC category also varied according to income groups. For the lower-mid income group, the per capita spend was $12 while for the mid-upper income category it was $50. For the high income category, which Nykaa said is its target customer base, the per capita expenditure on BPC products was $150.

“With currently 18 million high income and 115 million mid-upper households, and further shifts till 2030, (there is) large room for BPC consumption growth,” the company said.

Brands push

In both the BPC and fashion categories, Nykaa is looking to push its ‘house of brands’ strategy, through which it has been acquiring and organically building its own brands.

In the BPC category, Nykaa owns 12 brands, and during FY23 the company’s owned brands contributed Rs 789 crore, or roughly 12% to the segment’s GMV.

The company’s largest owned brand — Nykaa Cosmetics — clocked Rs 250 crore in GMV for the year, while Dot & Key (a brand acquired by the company) and Kay Beauty (a joint-venture with actress Katrina Kaif) have recorded annual GMV of around Rs 130 crore each.

For the fashion vertical, where it faces increased competition from new and existing rivals such as Reliance Retail, the Tata group and Flipkart group’s Myntra, Nykaa has acquired three and built 10 brands internally since FY20. Seven of these 13 brands were launched in FY23. According to the company, the largest brands in the fashion category are 20 Dresses and Nykd. While 20 Dresses has crossed Rs 150 crore annual revenue, Nykd – a women’s innerwear brand — has clocked Rs 85 crore.

The push for the company’s owned brands in the fashion segment comes at a time when the company is witnessing sluggish growth in the category. The year-on-year GMV growth for the vertical during FY23 stood at 47% – clocking Rs 2,569 crore – against 168% on-year growth the category recorded in FY22.

For the March-quarter, Nykaa’s parent FSN E-Commerce Ventures posted a 33% jump in revenue year on year to Rs 1,301 crore but saw net profit fall a steep 71.83% to Rs 2.4 crore due to rising expenses.