Indian beauty company Nykaa looks to physical retail expansion to meet consumer demand for offline sales

While Nykaa started as an e-commerce platform, founder and CEO Falguni Nayar is a “big believer” in physical retail and said there is demand from consumers.

“The last two years have been very much impacted by Covid-19 and what it does to physical retail. However, we do believe that if you look at the math and statistics, e-commerce penetration is only 8%,” Nayar said on CNBC’s “Street Signs Asia” on Thursday.

“A lot of beauty is sold offline and Nykaa has become such a big brand that we cannot ignore our offline channel as well as offline consumers. There will be greater emphasis on stores, but I think we will continue to be a dominant e-commerce player.”

Nykaa, which sells cosmetics, grooming and fashion products, currently has 100 retail stores in India, with its latest opening just last week. The company had a blockbuster debut in November hitting a valuation of almost $14 billion – making it India’s first woman-led unicorn listing.

In its most recent quarterly report, however, the company reported a 58% plunge in net profits.

Other newly public Indian companies have come under pressure as the halo of their high-profile IPOs fades and valuations come under scrutiny. Earlier this week, Reuters reported that India will probe companies hoping to IPO about valuation metrics.

While these companies largely had stellar debuts, many are now trading well below their IPO price –including Nykaa, Paytm, Zomato and CarTrade.

Nayar said tech valuations would see “some adjustment” due to high inflation globally and rising interest rates. For Nykaa, she said the latest round of coronavirus restrictions in major Chinese cities will likely present supply chain challenges.