“The industry is developing in a manner…where quick commerce is taking demand from traditional neighbourhood stores,” she said in a virtual interview with ET, ahead of launching the second edition of Nykaaland, the company’s beauty and lifestyle festival where it collaborates with brands for new launches.
Nayar’s comment on the fast-growing quick-commerce channel comes at a time when various retail formats — including ecommerce — is impacted by the rapid rise of platforms like Blinkit, Zepto and Swiggy Instamart besides new entrants such as Flipkart Minutes, offering deliveries as fast as in 10 minutes.
Beauty is one of the fastest growing segments on quick commerce, but Nayar said her focus remains on enhancing speed across the country through her own network. “Quick commerce can cater to specific needs, but our focus remains on a more extensive network across the country, not just a few cities,” she said, adding that the jury is still out on the quick commerce model on its sustainability at a unit economics level beyond the revenue being generated on these platforms.
Nykaa, which doesn’t sell its owned brands on Blinkit, Zepto or Instamart, is running a 10-minute delivery pilot in Mumbai’s Borivali suburb, ET reported on October 9.
“The reality for us is that we will not get into additional categories for the sake of quick commerce and what we will do well is in our category where we have long-term interest and a long-term position to play,” she said.
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A note from Elara Securities earlier this week said distributors are unable to recover arrears from kirana stores because of the high negative impact caused by digital platforms. “…emergence of quick-commerce companies could make a bigger dent (on kirana stores), as buying for impulse verticals and products may see strong growth via quick-commerce platforms, moving away from kirana stores,” the note said.Nayar reiterated that Nykaa would address consumer demand on delivery once there is a certain size and scale, and that the networks are built in a certain way to enable even a much faster delivery.
Nykaa has been offering same-day delivery for orders placed before 12 pm and next day deliveries are done for those made after 12 pm in four metros. As much as 85-90% of orders on Nykaa get delivered the next day, while 10-15% are done the same day, ET reported earlier this month.
“Most companies start with a vision they want to fulfil, and our vision is to build the beauty and fashion lifestyle in the country and that’s what we are doing; and quick commerce could be one of the small channels, but it cannot be the only…it does not have a major impact on our mission,” Nayar said.
“In the top 110 cities, 60-70% of our orders are delivered by the next day. The speed of delivery on our entire delivery network has improved by 45% over the last year. We are improving our network and are now setting up warehouses in top 30 cities to further enhance our speed,” she said, underscoring the importance of faster delivery across the country. She said 25 million customers buy beauty products from Nykaa and the platform service all the 19,000 zip codes in India.
All said, Nykaa’s own offline stores continue to drive sales. It has around 200 outlets and plans to expand to 350 stores.
“The size and scale of the industry is growing so much that physical retail stores are expanding rather than reducing. The penetration in cities is also increasing. We had seven or eight stores in Delhi; we are now looking at 20,” she said.
According to Nykaa’s investor presentation for the April-June period, the company had 44 warehouses servicing 98% of India’s pin codes.
The company’s warehouse footprint expanded rapidly after Covid, Nayar said.
“Post Covid, we started increasing the number of warehouses. So, for example, earlier we serviced Uttar Pradesh from Delhi, but now we have a warehouse in Lucknow…and this was done pre-quick-commerce age,” Nayar said. “When the economy started coming out of Covid…we realised that we had a size and scale to afford regional warehouses. So, work continues…we may decide to set up warehouses in Punjab and Kashmir too.”
Festive demand
According to Nayar, the ongoing festive season has lifted sales, especially in the fashion business. “The festive season picked up nicely this year, especially as we had a slower start in the first two quarters (in fashion). With the festive season ending early this year, we’re looking at wedding consumption trends to continue this momentum beyond Diwali,” she said.
“Consumption (in the fashion category) has witnessed subdued demand in the first half of this financial year, but industry expects to see gradual revival during the second half, driven by the festive and wedding season,” Nykaa said in a regulatory filing on October 7.
Echoing her views, a senior ecommerce industry executive said fashion sales had seen a rise during the current festive season.
Online marketplaces sold goods worth $6.5 billion, or almost Rs 55,000 crore, in the first week of the festive sales, a jump of 26% from last year, ET reported on October 11. Smartphones, electronics, consumer durables, home and general merchandise accounted for three-fourths of the total sales.
Nykaaland
The company, which went public in 2021, last year launched Nykaaland — a three-day live event through which it aims to improve awareness on beauty as a category while allowing scores of brands a platform to engage with customers.
It launched the second edition of the event Friday in Mumbai.
“Nykaa started in 2012, when the beauty consumption in India was $6 per capita and today we are at $15 per capita and all of that consumption growth is coming from what we call ‘beauty education and discovery’. We also call it ‘aspiration’ where customers aspire to buy global brands in India. So, Nykaa has always pursued education of consumers,” Nayar told ET.
“We call all of this an up-funnel activity with a kind of view to grow and bring new consumers to the industry besides, of course, cater to enthusiasts who discover more at these events,” she said, adding that this year’s Nykaaland will also feature fashion products and brands.
Fashion is Nykaa’s second biggest business category after beauty and personal care.
