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Falguni Nayar, ex-managing director of investment bank Kotak Mahindra Capital, who now runs online beauty retailer Nykaa as founder and chief executive officer, has been silently building her business. It has emerged as a key online beauty retailer in a space rapidly gaining traction. In an interaction with Viveat Susan Pinto, Nayar says she proposes to set up offline stores even as she ramps up online presence. Excerpts:
You were a successful investment banker. What made you give it up for the rough and tumble of entrepreneurship?
I was quite inspired by Sephora, a French beauty retailer, and how it operates in the US. In my view, multi-brand retailing is the right thing for beauty. In a market where there is a proliferation of brands, a consumer wants choice and multiple options. That is hardly the case when she walks into a single-brand store. Second, I'm a great believer in e-commerce. When I quit investment banking (in 2012), e-commerce was beginning to take off. I felt offering beauty products online would be the best way to build a business from scratch.
It has been two years since you launched Nykaa. Where do you see it going?
In the past two years, we have seen a steady rise in business. From Rs 22 crore in terms of gross merchandise value in FY15, which was our first full-year of operation, our current run-rate is Rs 60 crore. Our target is to touch Rs 95 crore in terms of gross merchandise value in FY16. At this rate, we should achieve that target, possibly even exceed it. We will also get into import and distribution of foreign brands and launch private labels.
Online retailers are venturing offline. Any plans on that front?
We have one store at Delhi airport. We do plans to start three more, targeting Mumbai, Bangaluru and one additional store in Delhi. All these will be destination stores, where consumers can experience what is on offer. But, in terms of sales, online will be the main channel of focus. We are already getting big in our space and this segment will only grow if you take into account the assessment of different experts concerning the online beauty space in India. Today, for most beauty majors, their online sales make up two per cent of total sales. Most of these are looking to take that number to 10 per cent in the next few years.
Given this space is set to grow, do you expect rival action to increase?
That possibility is always there. So far, we have had the first-mover advantage. The only other player in the beauty space apart from us was Urban Touch. It was acquired by Fashion and You in 2012 and eventually shut down. We have been the only ones in this space so far, though Amazon has got into the segment with a dedicated channel on its website of late. Yes, the attention of other players will grow but beauty requires undivided attention.
Are you open to the prospect of being acquired, given that the horizontal portals are acquiring verticals to build scale?
If a vertical player can build a sustainable business, they don't have to be acquired. I haven't set up the business to sell it. If anything, we are looking at growing the business. I've already raised two rounds of funding from domestic investors totaling Rs 80 crore. We intend to plough this into the business for growth.
