We have been very textbook marketers: Hitesh Malhotra, Nykaa

Just six years old, but beauty e-commerce portal Nykaa has been going from strength to strength is now at par with other cosmetic brands in India offering a growing range of products – from cosmetics to skin & hair care to lingerie, jewellery and accessories, and recently entered the fragrance segment. The brand has all geared to take on bigger competitors. 

Founded by Falguni Nayar, former Managing Director of Kotak Mahindra Capital Company, Nykaa is an Indian multi-brand beauty retailer selling cosmetic and wellness product, it began as an online retailer in April 2012 and later widened its horizons with the launch of its first physical retail store at T3 Terminal, Indira Gandhi International Airport in November 2015 and stores in few Metros. 

Nykaa offers beauty and wellness products from all the leading brands, including international brands. Apart from this, it has two offline store formats – Nykaa Luxe and NykaaOn Trend. The Luxe format features Indian and international luxury beauty brands along with Nykaa Beauty, the in-house collection of beauty products. The On Trend format is the first of its kind in the market with products curated by category based on their popularity. 

Nykaa launched its collection of in-house beauty products in 2015 with nail enamels. The collection now includes lipsticks, eye & face products, bath & body and essential oils. Later in March 2016, the brand came out with private labelled products in the bath and body care category. 

In conversation with Adgully, Hitesh Malhotra, CMO, Nykaa, speaks at length about the brand’s growth in India, the ideology, marketing strategies, future plans and much more. Excerpts: 

What was the idea behind launching Nykaa? What was the need gap that you felt will be filled by such a platform?
Falguni Nayar is the Founder of Nykaa. She has shared her experiences in various forums. She has travelled a lot to several countries for business. There she noticed that one of the largest kinds of traction in any mall or airport would be the beauty products at the beauty stores because of diverse presence and great products. She saw that there was an opportunity in India because beauty products were retailed by certain big brands but not at a larger level. Moreover, e-commerce was not doing justice to the experiences with these products, which the customers actually need. After noticing this, she thought of availing this opportunity and entering into this zone because the consumer spends were only going to get higher and higher. 

Also, there were several positive reports from media, Google, Facebook that came up, defining the fact that the highest spending from consumers in the years to come would be on cosmetics and related products. Probably, at that time she might have thought that it could be the best avenue to start something like this. All the factors which we typically look at from a business point of view are new consumers coming in, the competition in the market or the hindrances or the barricades to enter the market, which was a very strong reason to step out and start a beauty portal. 

Two years back you started with your own range of beauty products. What was the strategy behind that?
I think it’s very clear that when you have a private label, then the margin structures are very favourable. When you are operating a multi-retailing margin, you can’t go too wide on the margin because you have to work on the margins that the brands are offering to their other partners. And, when you are running a company which has massive investments in technologies, then you would have to play around higher margins to operate profitably for a few years. So, the fact that we have launched private labels and these products are doing well is one of the factors that can help us reach profitability faster. 

What are the markets in India that you cater to?
We market to everybody and our customers are everywhere. 50 per cent of our customers are from Metro cities (Tier 1) and the remaining 50 per cent are from Tier 2, 3 and 4 markets. 

What’s your communication strategy for the smaller markets?
We don’t have to break communication for the smaller markets because everybody in India understands the language of beauty. We have not broken the barrier of language yet. Our communication has been only in English. We have stuck to our core belief and have not segregated on the basis of people residing in a particular city because we thought that India has become more balanced now and it’s wrong to assume that a person in Kochi cannot read or understand English. 

You have also forayed into offline with two stores. What are you future expansion plans on that?
It’s all about the touch and feel phenomenon. A lot of people start trusting you when they can touch and feel the product. We are across metros as well as smaller markets. The goal is to expand to 55 stores in the next 4 years. 

You are also offering several international brands on the portal. Is it making people use more international products?
Yes, because there are two types of users. One set of users are already buying and using international brands, while the second set is the one who gets influenced by them. So, if I’m person who is travelling to the US and buying some beauty product, then I would be influencing 40 different people in terms of the product that I have bought. 

So, I think there is a good base available now in terms of people who are now aware about international beauty products and the influence that they have. Thus, it makes a lot of sense for us to invest in these international brands. 

What is the marketing strategy that you follow?
We have been very textbook marketers, but at the same time also quite innovative. Our approach has been innovative, but our principles are textbook-oriented. Our core principle is that you cannot spend more money than what you are actually going to acquire from the customers or what the customers are going to spend on your website. Because what will happen in the future is always a different game due the dynamics of change. So, for Nykaa, the core principle is – am I acquiring the users at the right price from the right channel. Therefore, it becomes more challenging because it’s not about spending money but it’s about communicating in the right way and showing the right kind of imagery to reach out to the right targeted customers. The innovations which have come in is that we are using technologies like Adobe and Amazon web services through which we are trying to give a better experience to our customers. Our relevancy is very strong because of the technology partners, otherwise as I said, we are very textbook followers when it comes to marketing. 

Nykaa has its presence on digital platforms, and one can now also find it on TV as a sponsor. What’s the reason behind it?
We have realised that television has the element of longevity in people’s memories. Television doesn’t have an overloading of information like the Internet. Also, I think that in India the English stack rates attract people like us to come and advertise. If we go to the Hindi genre, you will be paying 10 times more than the media cost which is the right value for the money. 

What is the pricing and packaging strategy for Nykaa?
Lot of our products are priced at par with brands like Maybelline and sometimes more than that. We don’t undercut our price to sell our products. We just price it according to the formation and what it should demand in terms of the margins that we are getting. What we ensure is that we are sourcing the products directly from the factories where the world’s top brands are produced. So, if we are associating with the right product, it will not come cheap. It’s all about production and manufacturing, which sets the product’s goodness. We are not at all comparing ourselves with other brands for pricing. 

Have you ever thought of roping in a brand ambassador for Nykaa, as is the norm with other beauty brands?
We have got 5 million brand ambassadors! Everybody who comes and shops from Nykaa is a brand ambassador, then why do I need to go out and get top faces? 

You have also forayed into the lingerie category? What is the strategy behind this?
This is what you call as a ‘popup’ format, which is more or less based on customers’ feedbacks, where people who bought products from our site had asked us why we don’t have jewellery, lingerie, accessories and many more things. And now our catalogue has Accessories and Lingerie alongside Beauty. 

How is technology being used for users?
We have AR for foundation finder, nail paint finder, but it’s a very tough game to crack in the beauty space. I think in the end it needs a human touch. Technology is a part enabler, but your main factor remains manual touch, which is needed in terms of aspiration. 

What has been Nykaa’s YOY growth?
We have seen 3x YOY growth and we think that the numbers on which we are sitting now – 3X – would be ambitious. So, we are looking at 2.2X growth for next year. 

What are your future plans what are the trends that you foresee?
There will be good expansion for retail stores and we are also trying to double our revenues by next year. 

I think going forward it will be important how technology will be used to enable human interfaces or make it more humane. Conversational commerce is also a great innovation trend that I see, where e-commerce companies have got enough of data about consumers to predict what they will buy next. 

Do’s and don’ts that one needs to keep in mind?
Treat customers as part of your family. Maintain a healthy relationship with your customers. Don’t put them in a block of data and algorithms and numbers, because it’ll never work.