Early success fuels funding in online beauty start-ups like MyGlamm, others

Between Covid-19 winners and losers, one segment has rocketed: online beauty and personal care. While subdued in the initial months of the lockdown, growth at brands like Nykaa, MyGlamm, Sugar Cosmetics and Beardo has picked up, with recovery being stronger going into 2021.

Sure, e-commerce boomed as people could not (some still cannot) visit stores, but higher sales of beauty products – which includes makeup, fragrance, wellness and personal care consumables, mostly “non-essentials” – is a curious case. Analysts say the trend has been made possible because of two reasons: higher household savings during the lockdown, and an increase in orders, particularly from women, in tier II and tier III cities.

This has resulted in a blockbuster first quarter for the industry. A week back, MyGlamm, a direct-to-consumer online brand, raised $25 million at a valuation of $100 million. The start-up is only four years old. Purplle, an online marketplace, raised $45 million, while private label brand Sugar Cosmetics bagged $21 million.

To add to the list, Nykaa, the category leader, closed two funding rounds in the pandemic year 2020. It is now said to be planning an initial public officering, at a reported valuation of $3 billion.

“A lot of these brands have been very successful in creating a direct connection with consumers, with the right marketing, targeting and price points. The early success and acquisitions in the space have also been a big boost,” said Pinaki Mishra, partner and consumer leader at EY.

Last year, packaged-goods major Marico acquired the controlling 55 per cent stake in Beardo. Marico had been an early investor in the men’s grooming brand. The idea that niche consumer brands become good acquisition targets is widely seen, and makes the category an attractive play for venture capital investors, say analysts. Back in 2015, HUL acquired ayurvedic hail oil brand Indulekha for Rs 300-odd crore. The public-listed company said that Indulekha had become a Rs2,000-crore brand in 2019.

“The tier II-story is also playing out,” said Mishra. “People in non-metros always had cash but didn’t have access so some of these products. Now they do, and that is what is driving the surge.”

The beauty and personal care market in India is currently worth $14 billion and is expected to grow at 7.5 per cent CAGR, according to pre-Covid estimates by RedSeer Consulting. Currently, only 6-7 per cent of sales are online.

The growth is due to an “Increase in disposable income leading to higher ability to purchase specialised products, rise in freedom of spending for women (because of more working females), and spread of urban fashion trends in tier-II+ areas propelling higher consumption,” noted a September 2020 report by the firm.

“While e-commerce is a good place to start, an omnichannel play is required to scale the category,” said Ankur Bisen, senior vice president at Technopak Advisors. Evidently, these brands have relied on a multi-channel approach. For instance, Nykaa now has 70 stores across 34 cities and its website and app draw 60 million monthly visitors. Beardo sells in supermarkets like Big Bazaar, et al.

The industry has also taken the next step towards diversification. “Nykaa, today, for instance, is no more a beauty-only product company, it has gone into fashion and lifestyle,” said Bisen.