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Nykaa: How does it stack up against peers


Nykaa, commonly known as a company selling beauty products, actually has a lot more to offer. Founded in 2012 by Falguni Nayar, Nykaa offers a comprehensive selection of makeup, skincare, haircare, fragrances, personal care, luxury, and wellness products for women and men. The company is also ramping up its presence in the fashion space.

But did you know that the company also sells gadgets and tech accessories, essential home care products, and pet care products?

We have written about Nykaa’s business model and evaluated the Nykaa IPO here: Nykaa IPO: All you need to know before investing

In this post, we compare the products offered by Nykaa with the competition.

Though the Nykaa app’s landing page is focused on beauty products, the company offers products in categories like laundry, breakfast options, dry fruits, consumer electronics, baby care, pet care, home decor, and others. The company has a total of 20 listed categories on its app.

Nykaa: How does it stack up against peers

Though the product offerings are limited, given the number of ratings and reviews, it appears that Nykaa has connected with its customers even beyond beauty. For instance, under ‘COVID & Home Essentials’, the company offers only 865 products. The most reviewed product is a combination of Savlon wet wipes, sanitiser, and disinfectant spray. It has nearly 4,200 reviews. Even products like Harpic toilet cleaner, Vim liquid, and Lizol floor cleaner have 1000+ reviews. The company also offers its own in-house floor cleaner, vegetable cleaner, and disinfectant sprays.

Also, a review of the most rated products under each category in the Nykaa app shows that along with beauty products, even the non-beauty products have gained traction.

The product offerings related to categories – clothing & more, men’s store, kids’ wear – are higher in Nykaa Fashion and Nykaa Man apps than the Nykaa Beauty app.

Price comparison of non-beauty products

Not all the products available on the Nykaa apps are comparable with other offerings from e-commerce players. However, we have tried to compare the electronics, home care, pet care categories, and other products.

We compared electronic items to Amazon and Flipkart. Though the number of SKUs offered by Nykaa is lower compared to other competing platforms, the pricing is competitive. In fact, the overall discount offered by Nykaa on the basket below is marginally higher than peers.

In electronics, Nykaa had better pricing for JBL wireless in-ear headphones and Saregama Carvaan. Nykaa also offers a few Amazon products at similar pricing, fire TV stick, echo dot, and kindle.

Nykaa was not the best in the home care category, but it was not the worst, to our surprise. Grofers offered the lowest discounts in our sample basket. Nykaa’s was the second-lowest. Obviously, the highest discounts were offered by JioMart, DMart Ready, and Amazon.

Nykaa: How does it stack up against peers

Nykaa and BigBasket do not offer discounts in the pet care division, while Flipkart and Amazon offer 12% and 18% discounts.

In a few other non-beauty products that we found on the app, Nykaa’s discounts were lower than Amazon.

Price comparison of beauty products

In beauty products, a large number of products are sold in small quantities. This, coupled with diverse user behaviour, creating a sample basket proves to be difficult. Also, price comparison across platforms becomes complex as discounts vary over time and within the same brand products. For instance, in the case of lipsticks, for different shades of the same lipstick brand, discounts were different.

However, we tried to create a sample basket of products across various reviewed and rated the most. There is no one leader in pricing across all the categories.

  • In beauty products related to skin, Purplle offers the highest discount.
  • In beauty products related to eyes, lips, and nails, Myntra offers the highest discount.
  • In skin and hair care products, Amazon offers the highest discount.

Nykaa: How does it stack up against peers

The company also has its own make-up & skincare products under Nykaa Cosmetics, Nykaa Naturals, Kay Beauty, and Dot & Key. The revenue contribution of these in-house brands is not much, but the products are highly reviewed and rated on the website.

Consumers may opt for Nykaa over peers lured by its wide range of products, guaranteed product authenticity, overall experience, etc. – but affordability will not be one of the factors. Nykaa’s prices are competitive but not the cheapest.

Nykaa can potentially leverage its presence in its core online beauty and personal care space to expand to other categories. The product review and ratings on the non-core portfolio seem to suggest user interest. It will need to ensure price competitiveness to make a dent in a space hotly contested by the likes of Amazon and Flipkart.

View on IPO

Excerpt from Nykaa IPO: All you need to know before you invest [Premium]

There’s a lot to like about Nykaa as a business. Given the increasing market size, the company can grow 20% CAGR to reach ~4300 Cr of revenue by FY24. 

The Gross margins look sustainable at 40%. As the company achieves scale, the EBITDA margins will improve from 6.6% to 9-10%. The PAT margins will also expand from 2.5% to 6-7%, achieving an estimated PAT of ~300 Cr by FY24.

Nykaa IPO: All you need to know before investing

The problem is current valuations build in no room for error. Neither in the future potential of the space itself nor for any execution hiccups that can impact growth even in the short-term.

Long-term investors do not need to jump on the IPO. Wait for the company to execute for 2-3 quarters before deciding to wade in.

Read the detailed analysis of Nykaa’s business here: Nykaa IPO: All you need to know before investing [Premium]

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