ETtech caught up with Falguni Nayar, founder and CEO of Nykaa, and Anchit Nayar, CEO for beauty ecommerce at the company, for an exclusive interview after the company announced its results on Wednesday.
Here are some edited excerpts:
Your profit numbers have taken a hit. Can you elaborate on the reasons for this?
FN: We have ramped up our marketing and advertising spends and a bulk of our expenses are now towards that. Last year was a bit of an exception because after the lockdown, there was revenge buying and the numbers show that. Our revenue from operations grew 24% quarter-on-quarter (qoq) and 36% year-on-year (yoy) to Rs 1,098.4 crore, led by growth in transacting customers and advertisement revenue. So for us it has been a good quarter.
Can you break down the numbers for us, business-wise?
FN: We continue to see strong growth in our cosmetics business, both online and offline. The beauty vertical’s GMV (gross merchandise value) grew 29% qoq and 32% yoy, while fashion GMV went up 17% qoq and 137% yoy. Our fashion business is now growing at a faster clip and contributes almost 25% of our consolidated GMV.
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What does your customer acquisition cost look like, given that marketing spends have been increasing?
FN: Our marketing has been slowing picking up and so has our customer growth. But our customer acquisition, trailing 12-months customer and repeat user acquisition spends, have been lower. We are seeing significant growth offline as well. We added about 12 stores in the last quarter to take the total to 96. We will be adding more in this quarter as well. The brand’s physical store network also saw one of its strongest quarters ever and the company continued opening new stores in line with our larger omnichannel vision.
Will the marketing trajectory continue, considering it constitutes a large part of the cost?
FN: What we have been trying to highlight is the fact that the last year has been exceptional and our marketing spends are never going to be as low ever again. So if you look at it from a weighted average basis, we are more comfortable if it goes back to pre-Covid levels. We will continue to push our marketing efforts to clock growth.
Last quarter you expected the festive and wedding seasons to bring in the growth. How has that played out? And what will the next quarter look like?
We admit that the third wave due to the Omicron variant has dampened the typically festive month of January. But Covid notwithstanding, we have seen a 29% growth in GMV quarter-on-quarter. Though we cannot give any forward guidance, we believe the current quarter will be better with normalcy returning.
Many of your competitors are going big on the content-to-commerce channel and are trying to corner a large part of the creator economy and the influencer network through live commerce. What is your take on that?
FN: We have had all the aspects of the content funnel for many years now. For instance, Instagram is a content funnel because you can educate on that platform. Nykaa has also invested in Youtube for many years. We have an influencer community that we draw on. Our own ‘Nykaa army’ of content creators who give advice. We feel we need to create an upper funnel and then use other avenues to stay in touch with customers and convert them.
I think you are hearing stories from people who have had much smaller businesses and that is why the rush.
AN: All of this content-to-commerce strategy we have done from day one and continue to do it. We have now created a large base. So the people who are now playing up this content to commerce thing are probably not as big in terms of numbers and customer base.
Tech stocks started crashing in the US around December and by the beginning this year we saw the effects of it in India. What are your thoughts, considering Nykaa too has been hit?
FN: In the US, everyone is expecting the interest rates to go up and that is affecting stock prices in general and high-growth stocks in particular. On what is going to be the long-term strategy of the US and when will (interest rates) will change… I am not the best judge of any of those things. What I can explain is Nykaa’s performance and our strategy. All we can do is deliver on the fundamentals and if the valuation goes up or down with the broader market, there is nothing that we can do about it.
You had mentioned an inorganic growth plan in our earlier chat… anything new coming up?
FN: Nothing as of now that we can talk about. We are constantly evaluating opportunities and will see what suits and complements our business well across categories.
You’d said the business to business (B2B) vertical will be key for you. How’s it coming along?
FN: We launched our B2B business called Super Store, and it is gaining a lot of traction among retailers. Though it is currently a very small part of our business, we expect it to grow significantly faster as the market is very large. Through our e-B2B business we are trying to serve general and modern trade channels. It is not just for our own brands but also for third party brands. While we have always been distributors for our own private labels, now we are doing it for third-party brands.
