Nykaa Business Model Explained – How Does Nykaa Work?

Introduction

The increasing demand for cosmetics among millennials is one of the key reasons for the booming of various cosmetic brands. One such top beauty brand is “Nykaa.” There are numerous cosmetics brands in the current market. But what makes Nykaa unique and famous? It gained its reputation due to the exclusive quality of its products and a brilliant business strategy. The super-effective business model of Nykaa plays a crucial role to help it stand out in the crowd of its competitors. This article explains the Nykaa business model in super easy terms. 

The business model of Nykaa consists of three key parts:

• Working Strategy
• Marketing Strategy
• Revenue Sources

Working Strategy

Nykaa utilizes three types of strategies for effective functioning- 

• Omnichannel Strategy: Nykaa uses an omnichannel strategy for its business, where it focuses on both offline retail shops and online channels by connecting them. 

• D2C Model: Nykaa is an e-commerce brand based on the D2C business model. The acronym “D2C” stands for Direct-to-Consumer. Here, the manufacturers directly sell their products to the consumers without the involvement of any middle distribution channels. D2C is a type of B2C (Business-to-consumer) where they manufacture the products, run marketing campaigns, and ship the product directly to the customer without hiring any agent or third party. 

• Inventory-Based Model: In this type, Nyka purchases the products directly from the manufacturers and stores them in their warehouses. Thereafter, it sells those products on its website or brick-and-mortar stores (also known as “physical shops” or “offline retail stores”). Its warehouses are located in three metro cities namely- Mumbai, New Delhi, and Bangalore.

In short, Nykaa extensively follows D2C as well as inventory-based business strategies. The former involves the manufacturing and selling of the products, whereas, the latter involves the collection of products from different manufacturers, storing them in warehouses, and then shipping or selling it to the customers. It helps the business to ensure product authenticity and to set a fair as well as profitable price. 

Marketing Strategy

Do you remember how you came to know about the company “Nykaa”? You might have found it through the banners, commercials on social media platforms, or directly from cosmetic products. All these things are part of the marketing strategy which educates and informs the common people regarding their existence and products. This increases the awareness regarding the brand as well as uplifts the sales of their products.

Nykaa has a robust marketing strategy. It fully utilizes the modern boon i.e., the internet to promote its products through digital marketing. The marketing strategy of Nykaa involves the following-

• Social Media Marketing: Social media marketing helps to promote cosmetic products on all online platforms. Nykaa has four official accounts on social media platforms namely Nykaa (in-house brand), Nykaa beauty (e-commerce platform for Nykaa beauty products), Nykaa fashion (apparel store), and Nykaa Beauty Book (online beauty magazine with numerous beauty tips and makeup tutorials). In all these social media handles, it promotes its products.

• Ad Campaigns: Nykaa effectively runs ad campaigns to sell its products to the target audience. Their ads hit the target audience effectively which enhances sales.

• Influencer Marketing: An “Influencer” is a person who can influence people and convert the audience into customers. The influencers have a large number of followers due to which the brands pursue them to promote their products and Nykaa is one of them. If you are familiar with the makeup tutorials on youtube, then you must have seen how the influencers describe and teach the usage of Nykaa cosmetic products.

• Youtube Marketing: Nykaa has an official channel on youtube where it is involved in offering consumable content to the viewer rather than selling products. It offers makeup tutorials, product reviews, beauty tips, and personal grooming guides to the target audience. This indirectly influences the viewers to purchase Nykaa beauty products to enjoy all the benefits.

• Content Marketing: One of the prominent marketing strategies of Nykaa is “Content Marketing”. It shares consumable content like blogs, DIYs tutorials, and videos related to beauty, skincare, and makeup on the blogs of “Nykaa beauty book” which helps in the conversion of the audience into customers.

• Event Marketing: This is the unique marketing strategy of Nykaa. This strategy aimed to hit the target customer in the right place and perfect time. Being a cosmetic and beauty brand, it organizes large beauty events like the Femina Miss India event.

Revenue Sources

Now, here comes the most important part of the company that plays a crucial role in its income. The revenues determine the size of the company because the higher the revenues, the higher the profits and reputation. Various revenue sources of Nykaa are-

• Selling of Products– Nykaa sells beauty, cosmetic, and fashion products of its own as well as its partnered brands. The sale of BPC (Bulk Pharmaceutical Chemical) products generates a direct income for Nykaa.

• Advertisements– Nykaa also earns through the display of banners and the advertisements of the partner brands on Nykaa’s website.

• Funding– Nykaa receives funding from various investors because it is a profitable company. The market capitalization of Nykaa is approximately USD 8.3 billion. With the latest fundraising amount, it received funding of USD 341.9 million. It opened its IPO on October 2021.

Note: As of 14th Dec, 2023, Nykaa is trending in the news headlines due to its stock prices recovery after global tech-shake up! The IPO issue price of Nykaa was Rs.1,125 but now its price is Rs.1,026. Still, it is one of the profitable unicorns of India.

Conclusion

Nykaa follows a unique business model that has helped it to grow into one of the most profitable companies in the cosmetic industry. The business strategies are beneficial for the company as well as the buyers because they earn good profits and get good quality products at affordable prices respectively.