Nykaa attempts to shake off fashion biz's sluggish growth as it braces for Shein

Nykaa plans to tap into fashion private labels and other international D2C brands on its fashion platform as it anticipates competition from global fast fashion giant Shein.

"Dot com (referring to its fashion ecommerce website) is going to get that kind of speed of new launches through a lot of D2C and other brands that are also coming onto our platform like international D2C brands like Cider, that has a very similar model to Shein. There are other players from China which have a similar model that are operating, and a number of players will cater to that need for speed of launch. Our own labels may also participate in that," said Falguni Nayar, Founder, Executive Chairperson, Managing Director and CEO at Nykaa, in a post-earnings call with analysts.

Shein, which has re-entered the Indian market after five years through Reliance, launched its Indian app earlier this month.

"I think women's Western wear—which is the category where a brand like Shein typically plays—is one of the fastest evolving. These are also categories which are style-first and maybe not as much brand first," said Abhijeet Dabas, Executive Vice President and Business Head of fashion ecommerce at Nykaa.

"We have seen a proliferation of D2C brands, especially in women's Western wear. The category remains fragmented, with numerous brands catering to broad demand. I think it's still a very large playing ground. So we don't see such a massive impact," he explained.

Investors and analysts keenly tracked Nykaa's budding fashion vertical, which witnessed a relatively subdued performance in the quarter ended December 2024. The segment clocked just 8% year-on-year growth in GMV (Gross Merchandise Value) to Rs 1,129 crore, along with a 21% improvement in topline, mainly driven by LBB and higher service-related income.

The vertical, which competes with marketplaces like Myntra, Tata Cliq Fashion and Ajio, is expected to show improvements as the company focuses on diversifying the catalogue following newer partnerships and onboarding more brands on the platform.

"I think some of the growth in the near term got affected due to a marketing strategy that was followed, which was a little bit narrower. I think some of those tend to be experiments in the early days that sometimes set you back by a quarter or so. But we don't think this is a long-term issue," noted Nayar.

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Investments in beauty vertical

On a consolidated level, Nykaa saw its marketing and advertisement expenses rise by 37% YoY to Rs 292.6 crore as it focused on growing both the beauty and fashion businesses.

The quarter also saw marketing events like Nykaa's flagship Pink Friday sale and Nykaa Wali Shaddi, and an overall surge during a festive and wedding season.

Investments in customer acquisition is one of the larger buckets of our marketing expense," said Anchit Nayar, CEO of Beauty E-commerce at Nykaa, adding "The investment in customer acquisition of the past few quarters has been one of the major drivers for the growth, the revenue growth, which we've seen in the beauty business in this Q3 numbers."

Nykaa's beauty platform saw 26% YoY growth in annual unique transacting customers—the highest in the last four quarters. It plans to fund its expansion in new businesses through cash accruals from the beauty business, including the fashion and eB2B business.

Nykaa's beauty vertical witnessed a 32% increase in GMV to Rs 3,389 crore, with a 27% increase in its topline. On a consolidated level, the company saw its bottomline swell by more than 60% to Rs 26 crore and its operating revenue rise by 27% to Rs 2267 crore.