Beauty etailer Nykaa counts on private label to increase FY18’s revenue

Online cosmetics and beauty store Nykaa is positive that private brands would help them triple their revenue in the FY 2017-18. The company dabbled in the private label business in late 2015 by introducing a range of nail paints. And since then, the sales of their own brands accounts for nearly 10% of their total revenue.

While Nykaa gets to keep 10-20% profit margins by selling established brands, its own range of products gets them 40-60% profit margins. The feasibility factor coupled with high profit margins has worked for the firm to sustain its growth.

“We are on track to register Rs250 crore revenue for this year (FY2016-17), 10% (of which) will be from private label… In next year (FY2017-18) we are looking at Rs750 crore turnover, 20% of that should be from private label,” affirmed Nykaa’s founder Falguni Nayar.

Competing with online marketplaces

Founded by Falguni Nayar in 2012, the Mumbai-based e-cosmetics store is fairly popular amongst all the niche ecommerce players and has managed to survive amidst Flipkart, Amazon and other ecommerce biggies.

Many fashion and beauty niche etailers like FreeCultr, Fashionara and Zovi had to shut shop as they were unable to fight with Flipkart’s dominance or Amazon’s deep pockets. But Nykaa believes that with over 450 brands in their kitty, big marketplaces don’t worry them.

“Even though they may be offering beauty products, that cannot match the range of high-end brands that Nykaa offers,” stated Nayar.

The beauty etailer raised Rs. 82 crore in September 2016 from Marico’s chairman Harsh Mariwala and Hero MotoCorp’s Sunil Munjal. And Max Ventures acquired 2% stake for an undisclosed sum in December 2016. Nykaa plans to use these funds to expand its product offering in non-beauty categories like lingerie, invest in warehouses and open more offline stores.

Private label, a profitability tool

In the last few years, the popularity of private labels has picked up exponentially. Right from Flipkart to Amazon, all are busy building their own brands to create a differentiating factor, build customer loyalty and increase their revenue. Online grocery firms and fashion etailers too are focusing on promoting their own brands.