⚡[Data Story] The Battle of Beauty: Nykaa v/s Tira
[10 mins read] Nykaa has had the first mover advantage so far. But now, Reliance's Tira is going all in! Who will win?
A little more than a decade ago, finding premium beauty brands in smaller cities and towns of India was not an easy task. Dabur and HUL had created brands like Vatika and Sunsilk, catering to mass India. But, if you wanted a product from a premium brand like L’oreal Paris or Matrix, the struggle was quite real.
This is precisely the gap that Falguni Nayar identified about 12 years ago and launched Nykaa - a marketplace for the rapidly growing beauty and personal care (BPC) market in India.
Now Nykaa made such a splash by unlocking the potential of the Indian BPC market, that it even caught the eyes of Reliance.
So much so that it ended up launching its very own beauty marketplace, Tira, last year. While Reliance might be about a decade late for the race, we are all aware of the disruption it is capable of bringing.
So, can India’s first women-led unicorn hold its ground in front of a force as strong as Reliance? Let’s find out who holds what ammunition in this battle of beauty!
In this piece, we cover:
What does the Indian BPC market look like?
What is driving the growth of the Indian BPC industry?
The new way of selling beauty
The Amazon and Flipkart of the beauty market – Nykaa vs Tira
The Nykaa Story
The Tremendous Tira
Battle of the Giants
What does the Indian BPC market look like?
India might be the land of humble ubtan and desi nuskhe but we also lap up the Western beauty formulations with the same enthusiasm. India ranked 4th in the global BPC market in 2023, making it beauty’s next big global bet.
As per a report from Statista, the largest segment of the Indian BPC industry is personal care (comprising products such as soap, toothbrush, toothpaste, etc).This segment is expected to grow from US$ 14.31 billion in 2024 to US$ 16.32 billion in 2028, making it approximately 46% of the total market. Following personal care are the skin care (covering the likes of serums and moisturizers) and cosmetics segments amounting to ~31% and 20% respectively.
What is driving growth in the Indian BPC market?
Today, India is where China was a few years ago.
With a growing population of young people entering the workforce steadily, it is the perfect environment for personal care to thrive. Let’s dive into the many forces driving the high growth of the Indian BPC market:
The most populous country in the world: India surpassed China as the world's most populous country in July 2023. In fact, 66% of the population is aged below 35, making it a huge target market for BPC.
The rise of the Indian middle-class: According to a report by BMI, approximately 25.8% of Indian households will have an annual disposable income of $10,000 by 2027. The growth of the Indian middle-class coupled with an increase in disposable income is making personal care that was once aspirational to many, now accessible.
Girl power in beauty: In 2022, women dominated India’s BPC market with a share of 60%. Further, as more and more women enter the workforce, they are more likely to spend on looking and feeling their best.
Beauty influencers: You have to be living under a rock to avoid the captivating power of skincare and beauty influencers. Before the beauty gurus of the internet took over Instagram and YouTube, words like niacinamide and acids like salicylic, glycolic and hyaluronic would be intimidating to most people. But today, they are all the rage.
Why should girls have all the fun: The men’s beauty industry is flexing its muscles. Gone are the days where a bar of soap and splash of water was enough to get by. A report from Statista shows that where the average number of skincare products purchased by women in 2020 was 6.1, men were not far behind at 5.9. With changing perceptions, product innovations and celebrity endorsements, men’s personal care products are carving their place on the shelves of the BPC industry, one beard oil bottle at a time.
E-commerce boom: Back in the days, if you wanted your favorite lipstick or your perfect shade of foundation, you would have to brave the traffic, find a store that had enough options and spend hours scouring the perfect product. Today, there is a plethora of products available at your fingertips whether you are sitting in a high-rise building in Bengaluru or placing an order from Nashik.
The New Way of Selling Beauty
E-commerce arrived in the Indian market and transformed it into a glittering playground for the OG brands and uber-cool new ones alike.
Of course there is the convenience factor, but there is also so much more at play:
Greater reach to India 2: With e-commerce, the gap between the underserved areas and the urban ones is narrowing. Consumers in smaller towns now get access to the same quality and brands as urban ones.
Accessibility to global brands: Whether you want the latest blush from Selena Gomez’s Rare Beauty or whether the magic of Korean beauty has caught your eye, you will find it all in the comfort of your home today. Thanks to the global partnerships formed by beauty marketplaces, it is becoming more and more easier for Indian consumers to splurge on world-class products.
Customisation and personalisation: Companies have steadily improved their game by using data analytics and artificial intelligence to offer personalised shopping experiences to consumers. E-commerce platforms today are using advanced algorithms to anticipate and cater to consumers’ ever-evolving needs and preferences.
Awareness, community, education: E-commerce platforms and modern beauty brands have evolved from selling just products to actually educating consumers. With the help of how-to guides, tutorials and transparency of the ingredients list and awareness of their benefits, consumers are now enabled to make informed decisions.
The Amazon and Flipkart of the Beauty Market – Nykaa vs Tira
The cut-throat competition of Amazon and Flipkart is set to replay with new actors in the BPC industry. Let’s explore how.
The Nykaa Story
Being one of the first beauty focused marketplace in India, Nykaa disrupted the beauty and personal care market. Here are some key metrics to set some context on its business.
Revenue: Nykaa’s revenue has grown ~9.3x from 2018 to 2023 from INR 5.5 billion in 2018 to a whopping INR 51.44 billion in 2023.
Customer base: In 2023, the annual unique transacting users on Nykaa saw a YoY growth of 24% in its BPC segment from 8 million users (about twice the population of Oklahoma) in 2022 to 10 million users (about half the population of New York) in 2023.
Volume: Having partnerships with over 3,400 domestic and international brands, Nykaa’s BPC GMV saw a growth of 33% from INR 50,089 million in 2022 to INR 66,491 million in 2023.
Loyalty: As a true testament to its place in the market and in customers’ lives, ~78% of Nykaa’s GMV in 2023 was generated from repeat customers.
Physical presence: After establishing itself in the online BPC market, Nykaa is steadily growing its offline presence. Nykaa set its presence in 60 cities in FY23, and the number of physical stores increased from 104 physical stores in FY22 to 145 in FY23. Further, Nykaa has 38 fulfillment centers spread across 15 cities to improve its order fulfillment.
The numbers above speak for themselves, quantifying the place Nykaa has in the BPC market. What are some of the other factors that give Nykaa its MOAT?
House of brands: Nykaa is not just a marketplace, it is also a house of brands. While enabling the very competitive D2C players to reach their target market, it has also created a portfolio of 12 brands through creation and acquisition. Some cult favorite brands such as, Kay Beauty, Dot & Key, Wanderlust and Nykaa Cosmetics contributed to 11.9% of its BPC GMV in FY23.
Content is king: In a country where there is a vast majority of the population that is not exposed to the nuances of cosmetics and make-up, Nykaa realised the power of content.
Its YouTube and social media handles are filled with tutorials and guides around make-up and skincare, providing consumable content to its target audience. Not only does it publish its own content, but it also publicizes user generated content to establish a formidable connection with its users.
With a social media reach of about 4 million, Nykaa has pioneered in modern marketing and brand building, helping it consistently win in the customer acquisition game.
Technology: Nykaa is enhancing customer experience from every angle possible. It uses advanced algorithms and AI/ML technologies to offer personalisation in discovery and recommendation, virtual try-ons and chatbots to answer a wide range of customer questions. On the business front, it uses ad-tech for targeted ads, AI for inventory optimisation and data analytics to power its seller panels.
Consumer experience: Nykaa has not just created a beauty marketplace but along with it, it has created a community. With events like Nykaa Beauty Bar being conducted across India (including Tier 2 cities like Lucknow and Bhopal), Nykaa is making sure it is not forgotten by its customers.
Trustworthiness: When you go to the busy fashion street markets around the country, one thing that you will very easily notice is the widespread availability of counterfeit products. So, when you’re ordering your favorite lipstick online, what is the guarantee that someone is not selling the same duplicate product in Sarojini market at half the price?
One of the main reasons that Amazon and Flipkart were not able to crack the BPC market was the lack of trust. Nykaa overcame this deal-breaking customer apprehension through the adoption of an inventory model, wherein it buys and owns inventory from its suppliers before it is sold to customers.
The Tremendous Tira
Reliance entered the glamor industry with Tira in April 2023.
And as one would expect from Reliance, the launch was nothing short of grand.
With a massive 4,300 square feet flagship store in Mumbai along with the formal launch of its app and online platform operational in 100 cities, Tira made a fashionable entry.
They had an omnichannel playbook in a market where other players were just starting to shift gears from an online-only approach.
Reliance is huge and so are its pockets.
So, here’s the question:
Why BPC?
There could be multiple other factors, but here is our hypothesis:
Huge market and high growth potential
High gross margins: Nykaa earned a gross profit of about 46.4% in FY23. Naturally, it makes sense for Reliance to pick a market where gross margins are already high, giving it further profit-making opportunities through competitive strategies while also leaving room to spend on customer acquisition.
Reliance is the king of consumer markets: Reliance is known for its disruptions, especially in consumer industries. Whether we talk about the erstwhile Reliance Telecom that single handedly made calling affordable in India or the protege Jio that made India’s internet adoption skyrocket, Reliance made one thing clear: it knows what it is doing. It already has been giving stiff competition to older players in the fashion industry such as Myntra with Ajio and the lessons learnt in the fashion industry can be great learnings for its BPC endeavor.
What gives Tira the edge?
We all know that Reliance has a reputation for disruption.
Is Tira going to be the disruptive force in the world of glam? Is the BPC industry going to be an easy nut to crack for Reliance?
Let’s dig into why Tira has got Nykaa and other beauty marketplaces worried:
State-of-the-art Customer Experience: Reliance loves to arrive in style! And so it did with the launch of the flagship Tira store in Mumbai.
Picture this, you enter a beauty store, try some products, and check their look and feel in front of a smart mirror which then quickly analyses your skin and recommends products using a tablet!
Not just this, you want to give someone special a bottle of perfume and an AI enabled fragrance finder helps you find the perfect perfume. You can also then get the bottle of perfume personalised with the initials of that person in the same store!
Sounds like we’re a few decades ahead of our time, right?
Well, this is what you get in the Tira store among many other cool experiences like a beauty vending machine giving you free samples and free no-questions-asked Dyson blowouts.
Brand shopper: Reliance is a purchaser of brands and somewhat a pro in international brand partnerships. With collaborations with brands like Burberry, Armani and Versace in the fashion industry, Reliance already has demonstrated the strength of its global brand recognition.
If it were to replicate the same in the beauty market, it could get exclusive deals from a bunch of international players and would be able to offer an exclusive and wide range of difficult-to-get products to Indian consumers.
Retail Superpower: Reliance Retail is Indua’s largest retail chain with 18,000+ stores across the country. If Reliance were to do nothing but just put a Tira kiosk in each of these stores, its physical distribution network would become 124 times that of Nykaa.
By the way, Tira is not the first plunge that Reliance took in the BPC market. In 2022, Reliance Retail acquired Insight Cosmetics as a prologue to its omnichannel venture into the BPC industry. With the acquisition, Reliance got access to its 12,000 brick-and-mortar stores spread across 20 states.
Tira might be its largest bet, but in November 2023, Reliance also acquired the rights for Sephora from Arvind Fashions for an equity value of INR 990 million. This not only gives Reliance access to Sephora’s 26 stores across 13 cities in India, but it also opens a premium contact book for international brands that can be leveraged to boost Tira’s brand portfolio.
Battle of the Giants
Tira’s performance and penetration in the market is something both industry specialists and competitors are looking out for. It is going to be a very interesting time for the BPC industry as the giants fight it out for the trophy.
Whatever the outcome may be, one thing is guaranteed: the BPC consumers are going to enjoy the fruits of their labor.
Today, Nykaa’s customer experience, variety and lower lead time in delivery already helps it stay ahead of competitors and enjoy a sizable market share. While this is going to work in Nykaa’s favor at least in short to medium-term, it might not be too difficult for Reliance, with its large-scale operations to offer similar quality of services.
Tira, taking a leaf out of Nykaa’s playbook, has already started accelerating its content game and leveraging user generated content. It is going to be interesting to watch how Nykaa holds its ground when a giant like Reliance enters the fight for market share. Especially with its deep pockets and disruptive history.