This week we talk retail in our news bulletin. Nykaa is gearing up for a $3 Billion IPO. We decode their story. We also take a look at the latest in the world of retail and what retailers learned from 2020. And finally a look at how the Future Group is faring after SEBI clears deal with RIL. Check out today’s highlights now!
In a year when every business seemed to be rushing in to create pivot strategies to maintain those top lines and bottom lines, reports that a beauty company like Nykaa might be ringing in a $3 Billion IPO sounds mad.
And why not? According to a Ken article, “The Indian beauty and personal care market stands at $13 billion to $14 billion and is growing at 12–14% annually, according to retail consultancy firm Technopak Advisors. The online market is just a fraction of sales, but is growing rapidly. Nykaa alone has seen revenues more than double year on year. And the prospect of higher consumer spending on personal care — especially high-margin cosmetics — is driving retailers across the board.”
So what’s the story behind Nykaa’s meteoric rise? Especially keeping in mind the reports about a less than friendly work culture, et al? Find out in this story. Or read our synopsis below!
Why is this relevant to you, the MBA student?
Well. for starters, this is almost a business case study, how Nykaa managed to stay profitable throughout. No matter what domain you’re specialising in, this is something you can take away from Nykaa’s success story! So let’s dive in.
If you ever read Malcolm Gladwell’s Outliers, you’ll know that success is not just a result of hard work and dedication. Timing matters! Gladwell shares stories of American Billionaires who made their fortunes when the American Railroad was being laid out. He points out how these people struck gold because of the time they ventured into business at. Nykaa’s story is somewhat similar. With a huge market potential for the beauty industry online, India was ready for a digital beauty shop. Enter Nykaa. At the perfect time, when Indian consumers were going global, but local shops had not caught up, Nykaa fulfilled a need and offered a tangible promise.
Apart from this, ask any lady (or anyone interested in self-care and beauty products really), and they’ll tell you it is difficult to find affordable, good quality stuff even in shops. Hence the so-called Beauty Centers were a place that thrived. They were few such stores that offered the same variety, diversity and quality of products. And traveling to these was not really an option for many makeup buffs, beauty conscious, and health-conscious customers. Nykaa made global, exclusive and a range of products accessible to everyone, no matter their location, in the country. This highlights how the company grabbed the opportunity and used it to its full potential.
Finally, there’s the positioning. Nykaa brought many international brands to the fore. But how do you convince consumers to pay upwards of 1500 INR for a small jar of eye cream? Nykaa managed to position various products intelligently. If you look at most products on Nykaa, you’ll find community generated reviews. Honest reviews - the good, the bad, the successes, the failures. These community generated and organic referrals go a long way in creating a trust for the service. Nykaa managed to achieve all this and then moved on to opening stores in select locations. They offer consumers a holistic experience of trying products and then purchasing them online. This omnichannel strategy also works well for the company. So well, in fact, that they have also diversified into Nykaa Fashion. But that’s another discussion.
For today, all these aspects show that the company stands a width apart. A 3 Bn IPO might just be on the cards. But can they sustain this momentum? Do you think the company should also solve internal problems first, before getting to an IPO? What is your take on a Nykaa IPO? Do you think this is another example of a monopoly in the making? Share your thoughts and recommendations in the comments section below!
In Other News:
“The pandemic has changed the way we consume and relate to the world around us. It has spurred a makeover of retail businesses. Retail in India which is sized around USD 854 bn continues to be one of the country’s largest industries that makes up for over 10% of the GDP. Shopping habits have been largely affected during the pandemic, with safety now taking priority over price, range, variety, and convenience. In India, large stores and shopping centers witnessed lower footfall during the lockdown, with most sectors including apparel, accessories, and jewellery facing a lack of demand. Essential category players also faced challenges, albeit of a different kind – dealing with huge spikes in demand, coping with supply chain challenges, ensuring liquidity, modifying and managing store operations to maintain safety standards, taking care of employee health, and grappling with a shortage of staff.”
- Kumar Rajagopalan, CEO - Retailers’ Association of India, shares his take on retail in 2020-21 here.
Shares of Future Retail and Future Enterprises rose nearly 5% and hit upper circuit limits after Sebi cleared Future Group's proposed multi-billion dollar deal with Reliance Industries Ltd. On the BSE, Future Retail shares hit the upper circuit of ₹81.35, 5% up over the previous close. Check out the details here.