Abstract
This article presents the detailed SWOT analysis of Nykaa. The in-depth strategic analysis provides a holistic view of company’s internal and external environment. In light of latest facts and figures, the article highlights Nykaa’s key strengths, weaknesses, opportunities, and threats.
Business researchers, strategic management teachers and students, and marketing practitioners can read this article to gain information about Nykaa’s competitive positioning, business performance and overall business environment. Article also provides latest insights into the trends shaping Indian cosmetics ecommerce industry.
1. Introduction
The success story of Nykaa began in 2012, when Falguni Nayar established Nykaa with only a limited knowledge of technology and retail industry. In 2022, Nysa was ranked # 3 in Indian food and personal care market.
This article conducts Nykaa SWOT analysis to highlight the factors that positively or negatively contributed to the company’s success.
2. Company overview
| Company name | Nykaa e-retail PVT Ltd. |
| Year founded | 2012 |
| Headquarters | Mumbai, India |
| CEO | Falguni Nayar |
| Industry | Ecommerce cosmetic retail |
| Number of employees 2022 | +2000 |
| Number of stores 2023 | 141 |
| Nykaa revenue 2022 | Rs. 32 billion |
| Nykaa market capitalization 2023 | $5.24 billion |
| Nykaa key competitors | Amazon, Flipkart, Myntra and Purplle |
3. FAQs about Nykaa Company
i. Is Nykaa Indian Company?
Nykaa is an Indian company, headquartered in Mumbai.
ii. What is the Nykaa Pro?
It is an exclusive membership program for makeup artists, salons and independent beauticians
iii. What is Nykaa Prive program?
It is a loyalty program that offers special benefits to the Prive members.
iv. What is Nykaa’s unique selling proposition and competitive advantage?
To know Nykaa’s USP, click here.
4. Nykaa SWOT Analysis
4.1. Nykaa Strengths
4.1.1. Consistent revenue growth
Nykaa achieved consistent year-on-year revenue growth from 2018 to 2022, as shown in following graph:
Source: Statista
Consistent revenue growth reflects the company’s growing popularity in Indian ecommerce cosmetics industry.
Nykaa holds 38% market share in competitive Indian fashion ecommerce industry, as depicted in following graph:
Source: Statista
The graph shows Nykaa dominates the market, and leads Amazon and Flipkart with a visible margin.
4.1.3. Wide variety
Nykaa is a fashion house of more than 15,000 brands, and has more than 1.8 million products across five consumer segments-women, kids, men, home and tech. Wide variety gives a strong boost to the Nykaa’s revenue.
4.1.4. Wide market reach
Nykaa’s extensive distribution network and effective marketing strategies have broadened the company’s reach to the target market. Its resilient distribution network enables the company to offer hyperlocal delivery. As of 2022, Nykaa has 40 fulfillment centers spread over 1.3 million sq. ft. in 18 cities.
4.1.5. Expanding offline network
Nykaa is successfully expanding its offline network. In 2023, Nykaa expanded its retail footprint in 56 cities with 141 stores- reports Business Today.
4.1.6. Nykaa business model
Nykaa follows an inventory based business model. The model allows the high profit margins with product damage responsibility lying with the Nykaa.
4.1.7. Improving global ranking
Nykaa holds a strong brand image at national and international stage. In 2022, Nykaa global ranking improved from 4,166 to 3,785
4.1.8. Partnerships and collaborations
Nykaa has developed valuable partnerships to expand the retail footprint. In 2022, Nykaa partnered with three homegrown brands-Onesto, Kica, and Earth Rhythm to expand the offline presence in Indian fashion industry.
Nykaa holds strong presence over social media. By partnering with credible influencers, Nykaa enhances the customer trust and engagement.
• Facebook (3.4 million)
• Instagram (2.3 million)
• YouTube (1.4 million)
4.2. Nykaa Weaknesses
In 2023, Nykaa stock value has fallen by 51.8%. The key reason behind falling share value is the resignation of five senior executives, which created an environment of uncertainty.
4.2.2. Ineffective waste management
Despite the recycling efforts, Nykaa receives criticism for its poor waste management practices. The company causes too much plastic waste because it has multiple storage and distribution centers.
Here is a picture of Nykaa’s plastic packaging, shared by a dissatisfied, environment conscious customer:
Source: Reddit.com
4.2.3. Poor customer service
Nykaa’s customers frequently complain about poor customer service and return request problems. Nykaa ranks 850th based on its customer service in list of cosmetics sites.
Here is a glimpse of Nykaa’s customer service ranking based on 238 customer reviews:
Source: SiteJabber.com
4.2.4. Poor brand recall
Although, Nykaa has a network of 3,055 influencers that spread positive e-WOM about Nykaa, but a recent report suggests that compared to competitors like Amazon, Flipkart and Myntra, Nykaa has poor brand recall.
4.2.5. Declining net profit
In 2023, Nykaa suffered a loss of Rs. 2 crore, and its net profit dropped by 49% compared to last year. Following graph shows how Nykaa’s operating expenses have increased, and profit has decreased in 2023 compared to 2022:
Source: Inc42.com
4.2.6. Inability to cross-sell products
As per Business Today, poor brand recall and inability to cross-sell the fashion products are two chief problems currently faced by Nykaa.
4.2.7. Disadvantage of being late comer
Being the late comer in the Indian cosmetics industry, Nykaa needs to develop a compelling value proposition. However, Nykaa fails to offer an excellent and differentiated online shopping experience.
4.2.8. High prices
Although, Nykaa offers various discounts, but generally, its prices remain higher than its competitors. Click here to compare the Nykaa’s prices with key competitors.
4.2.9. Lawsuits
Recently, Nykaa settled a long-pending lawsuit with L’Oréal by paying legal fee of ₹2.87 million. This reputation damaging lawsuit caused heavy losses to the Nykaa stock.
4.3. Nykaa Opportunities
4.3.1. Indian ecommerce industry growth
Indian ecommerce industry is expected to grow from $46.2 billion to $350 billion by 2030, as shown in following graph:
Source: IBEF
As per Indian retailer, beauty and cosmetics segment is driving the overall Indian ecommerce industry growth, achieving 143% y-o-y growth in volume. Considering the industry growth, Nykaa can penetrate deeper into the Indian ecommerce market.
4.3.2. Growing organic cosmetics market
A study by Statista revealed that Indian cosmetic consumers are increasingly preferring organic and cruelty free cosmetics. The organic cosmetic market is growing with 3.41% per annum. It presents an opportunity to Nykaa to expand the presence in organic and natural product market.
4.3.3. Shift to online shopping
As per Nykaa CEO, the shift from offline to online shopping is a long-term trend. The beauty and fashion industry itself is experiencing a healthy growth trend. Within this category, online businesses are growing with 35% annual growth.
Following graph shows the growing shift to the online shopping in India:
Source: Statista
The shift to online shopping is a positive trend for Nykaa.
4.3.4. Emerging digital technologies
The use of augmented and virtual reality is growing in the Asian cosmetics and beauty segments. The AR/VR segment will grow with 25.5% CAGR from 2022 to 2027, with China and India being the fastest growing countries. Nykaa should take it as an opportunity, and invest on AR/VR technology to optimize the online shopping experience.
4.3.5. Government initiatives
Indian government has launched various programs (like Digital India, Start-up India and Innovation fund) to expand the e-commerce industry. Such initiatives create a favorable environment for ecommerce companies like Nykaa.
As per India Times, Indian social media users will surpass 1 billion by 2030. This expanding social media network presents attractive growth opportunities to ecommerce companies like Nykaa.
4.3.7. Expanding total addressable market
Nykaa is eyeing on expanding total addressable market of $180 billion by 2027- reports CNBC. Nykaa expects Indian premium fashion market will grow 3.5 times by 2030.
4.3.8. Expanding international ecommerce market
International ecommerce industry will grow by 56% over next three years, reaching around $8.1 trillion by 2026, as shown in following graph:
Source: Statista
Nykaa can capture this market trend by expanding the presence at international stage. Recently, Nykaa is expanding the Rs. 100 crore investment to launch the private-label brands internationally. Nykaa is also planning to expand the operations into Europe and Middle East.
4.4. Nykaa Threats
This section discusses the key challenges faced by Nykaa due to challenging external environment:
4.4.1. Shrinking consumer spending
PwC India reports that in 2023, 63% of the Indian consumers are cutting non-essential spending. As per Economics Times, Nykaa’s growth has subdued due to shrinking consumer spending and tightening wallets.
4.4.2. Intense competition
The competition in Indian ecommerce industry is getting intense with time. As per analysts, next ecommerce venture of Tata can directly threaten the Nykaa’s competitive positioning in the market. Nykaa is also facing stiff competition from organized as well as unorganized retailers like Amazon and Flipkart.
4.4.3. E-commerce regulations
In India, the regulatory measures like-banning the flash sales, a compulsion to show made-in-India products alongside foreign products, and stricter actions against anti-competitive business practices are making regulatory environment challenging for Nykaa.
4.4.4. Cyber security threats
Indian ecommerce industry is currently struggling with cybersecurity challenges. Following graph shows the growth of cybersecurity attacks from 2012 to 2021 in India:
Source: Statista
A report by CISCO that only 24% companies in India are prepared to defend the cybersecurity threats. Nykaa must enhance its preparedness against growing cyberattacks to provide a safe and secure online shopping experience to its customers.
4.4.5. Counterfeit products
Indian cosmetic customers are increasingly getting concerned about the counterfeit products. A survey with Indian consumers showed that around 1 in 3 customers received the counterfeit products from e-commerce websites.
Source: Scroll.in
The above graph shows that fashion/cosmetic industry is the second most affected sector by counterfeit products in India. Rise of counterfeit products affects Nykaa by hampering the customers’ trust over the website.
Based on SWOT analysis of Nykaa, the article proposes following recommendations:
5. Recommendations based on Nykaa SWOT Analysis
• Improve the waste management practices by integrating sustainability into business practices
• Train the employees to give excellent customer service, and effectively handle the return request problems
• Enhance the brand recall by improving marketing and communication strategies
• Focus on cross-selling cosmetic products to boost the revenue
• Invest on AR/VR to offer differentiated online shopping experience
• Expand the presence in organic cosmetic market
• Address privacy and security related issues to give safe and secure online shopping experience
6. Conclusion
To sum up, Nykaa has various business strengths (wide market reach, product variety, market share, strategic partnerships and offline presence) that help company in overcoming the challenges imposed by external environment. However, Nykaa needs to improve its marketing and communication strategies to enhance the brand recall, provide better customer service, and offer a differentiated experience.
Click here to know about the Nykaa marketing strategy.
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