Nykaa, the beauty and personal care (BPC) company that also runs Nykaa Fashion, remains confident of its positioning and does not expect an increase in competitive intensity despite Shein, the Chinese fast-fashion giant, staging a comeback in the country.
“Fashion is a very wide business, with (categories like) women’s western wear, women’s Indian wear, men’s wear, sportswear, as well as kids and home, and Shein is only in one category (women’s western wear)... The market is very wide and no one brand can dominate it. So, I do believe that it should not have much of an impact,” Nykaa founder and CEO Falguni Nayar told analysts after announcing the company’s December quarter results on February 10.
Nykaa has more than 4,000 brands listed on the platform, which is a large enough assortment to ward off competition from a company like Shein that specialises in categories such as women's western wear and fast fashion, she said.
Abhijeet Dabas, executive vice president and business head at Nykaa Fashion, said, "Trends in fast-fashion change very quickly. We have also seen a proliferation of several D2C brands, specifically in categories like women’s western wear… The demand is very wide, and so is the number of brands supplying that demand."
"It is still a very large playing field. So, we do not see a massive impact.”
Shein recently re-launched in India through a deal with Reliance Retail. The new app, developed and run by Reliance Retail, is available on the Google Play Store and Apple’s App Store.
While Nykaa's management said the firm’s top-of-mind recall is expected to give it an edge over rivals, the company is also aware that it needs to advertise and market more aggressively to retain its position.
During the quarter, marketing expenses for the business grew to 30.5 percent of net sale value (NSV), compared with 24.6 percent a year ago, due to investments in campaigns and events, and surging customer acquisition costs.
“Some of the growth in the near-term got affected due to a marketing strategy that was followed, which was a bit narrower, and some of those experiments in the early days set us back a quarter or so. But we do not think this is a long-term issue,” Nayar said.
According to Nayar, Nykaa Fashion is among the top three platforms preferred by customers in India. “We do believe that we are one of the top three platforms of choice, besides Myntra and Ajio, and we remain in customer consideration. We remain very positive about the business,” she said.
Notwithstanding Nykaa's optimism, analysts say Shein's re-entry into India signals an imminent shake up in the country’s fashion market, which has been affected by an industry-wide slowdown.
In a recent client note, the analysts at BofA said Shein is well positioned to gain traction in the fashion market.
In line with the ongoing slowdown, Nykaa’s fashion business’ gross merchandise value grew just 8 percent year-on-year (YoY) in the December quarter despite a 21 percent revenue growth.
Despite the slowdown, the company said it is on track to achieve its target of turning EBITDA breakeven in FY26.
“All customer acquisition costs break even on second or third order. So, that is the investment we make ahead of becoming profitable on each customer,” Nayar said.
According to the CEO, out of Nykaa Fashion’s roughly 6-6.5 million customers, around 3 million are annual transacting users.
“We remain reasonably confident that, as the ratio of new to repeat customer keeps improving in the fashion business, we should be in a better place,” Nayar added.
Nykaa parent FSN E-Commerce Ventures reported a 51 percent YoY increase in net profit at Rs 26.4 crore during the quarter.
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