Brands increasing self-funded discounts because of muted demand environment, says Nykaa’s Anchit Nayar

Nayar also said that Nykaa will experiment with newer store formats, moving beyond traditional brick and mortar stores.

An increasing number of brands, especially in the beauty and personal care (BPC) space, are opting to offer higher self-funded discounts on the Nykaa platform, the company’s CEO (Beauty E-c0mmerce) Anchit Nayar said.

His comments come at a time when several industry experts have said that customers are cutting back on discretionary spends and are being more watchful of their purchases.

“...because of a muted demand environment, brands have chosen to accelerate the brand funded discounts which comes at the expense of advertising income (for Nykaa),” Nayar told analysts on May 22.

He was speaking after the company announced its Q4FY24 results. Nykaa reported a net profit of Rs 9 crore, a 4X jump while revenue grew 28 percent.

“Some money that would have gone towards advertising has gone towards discounts in FY24…Brands either spend on discounts or on advertising, it is difficult for them to do both,” he added.

Nayar, however, was quick to add that this is a rare phenomenon and will not be a recurring theme as “brands do not like it” and but they need to see an overall revival in demand for the brand-funded discounts to stop.

In the quarter, Nykaa also saw its gross profit margin decline from 44.6 percent in Q4FY23 to 43.1 percent in Q4FY24. That was largely because of expenses like ESOP grants, expansion to the Gulf Cooperation Council (GCC) region and other restructuring costs. The company does not expect its gross margin to remain subdued going forward.

Nayar also said that Nykaa will experiment with newer store formats, moving beyond traditional brick and mortar stores.

“Could we do a slightly more drug store format (over the counter) for beauty products? We could. It is something we are evaluating. That could expand our network,” Nayar said while adding that the details will be revealed at a later point if the company goes ahead.