Nykaa sees online sales getting back in shape by end of the month
Beauty and fashion e-tailer Nykaa expects online sales to recover nearly 85% from February levels by month-end even as sales at physical stores lag due to the effect of a nationwide lockdown over the past two months, its top executive told ET.

In an exclusive interview, Falguni Nayar, founder and CEO, said Nykaa’s offline retail business is about a couple of months behind its ecommerce vertical, as consumers have preferred to stay home and shop online.

She said Nykaa’s online business is aiming to keep the momentum going and bounce back fully by July, but progress is going to be slower on the offline side. “In May, we clawed back 20% of physical sales compared to pre-lockdown levels and in June, we expect to be at 50% of business as usual and by July, it should be at 70-75% of recovery to pre-Covid-19 numbers. To be honest, it is hard to predict brick-and-mortar retail because cities behave very differently,” Nayar said.

The omni-channel retailer, which runs 70 stores, had plans to expand its physical footprint by adding 40 more outlets this year, but that will be delayed, Nayar said, as the pandemic has severely affected the offline retail segment. Malls that house Nykaa stores have yet to open in many cities, although standalone shops are operational.

“In February, 90% of our stores were Ebitda-positive. It was the best month for Nykaa, for its physical retail store business. Our turnover was stretching to be almost 10-15% of our overall turnover, and we were hoping it was going to be 20% by next year…” she said. “We are just shifting our execution timetable by 3-4 months, which also gives us more time.”

Nykaa had already signed some new properties and ordered inventory when it was forced to shut stores, but those will be slowly rolled out, Nayar said.

The firm is, however, bullish about overall demand and growth across channels despite strain on its supply chain, especially for international brands sold on its platform. “We are seeing an uptick in Tier-2 and Tier-3 demand vis-a-vis Tier-1, because bigger cities are reeling under Covid-19 far more. There is more demand suppression in metros because people are still scared,” she said.

Despite the sombre macroeconomic conditions, Nayar said she was optimistic that considering the country’s young population, people would get back into consumption mode. “People want to spend on self-care. All over Asia and in the US, we are seeing the trend of spending more on this (beauty) category,” she said.

Like other players during the lockdown period, Nykaa discontinued cash-on-delivery options, which Nayar said let them streamline demand amid capacity constraints in its warehouses. “We were, therefore, allowing orders only above ₹1,500 which helped make a huge improvement in our Average Order Value (AOV),” she said. Nykaa’s AOV, as a result, jumped 30-40% across physical and ecommerce businesses.

Sticking to the plan

Despite horizontal ecommerce marketplaces wanting to cater to the value shopper, Nayar made clear that Nykaa would not go down that path.

“We are not chasing the marginal customer and will not change our strategy. I don’t think a lot of ecommerce businesses in India have a very clear understanding of the cost of customer acquisition vis-a-vis what is the long-term value of that customer, given the industry they are in. They run around doing a very marginal business, which does not lead to any long-term value-add,” she said.

Being an omni-channel, inventory-led retailer, Nykaa used its physical stores as hubs and pushed hyperlocal deliveries to fulfil customer demand, said Archit Nayar, CEO of Nykaa Fashion.

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