3 April 2024

Nykaa: From Unicorn to Stumbling? Lessons Learned From a Beauty startup


Nykaa, the name synonymous with Indian beauty e-commerce, has had a whirlwind journey. From a dream in Falguni Nayar’s living room to a billion-dollar company, Nykaa’s initial rise was nothing short of meteoric.

But recent stumbles have cast a shadow, prompting questions about its long-term trajectory. Let’s discuss  Nykaa’s story, dissecting the good, the bad, and the lessons aspiring entrepreneurs can learn.

The Visionary Founder



Falguni Nayar, a seasoned investment banker with a keen eye for spotting opportunities, identified a significant gap in the Indian beauty market. Here’s a deeper dive into the problem she saw and how Nykaa addressed it:

  • The Pain Points of Traditional Beauty Retail:

    • Disorganized Stores: Physical beauty stores were often cluttered and overwhelming, making it difficult for customers to navigate and find the products they needed.
    • Limited Selection: Availability of international brands was scarce, and domestic brands lacked variety. Indian consumers craved a wider range of high-quality options.
    • Counterfeit Concerns: Counterfeit cosmetics were a major concern, and the lack of transparency made it difficult for customers to trust the authenticity of products.
  • Nykaa’s Solution: A Curated Beauty Haven:

    • Seamless Online Experience: Nykaa offered a user-friendly website and app, creating a convenient and organized shopping experience.
    • Curated Selection: They addressed the lack of variety by offering a well-curated selection of both established international brands and exciting new domestic labels. This catered to a diverse range of beauty enthusiasts.
    • Focus on Authenticity: By partnering directly with brands, Nykaa ensured the legitimacy of every product on their platform. This built trust with customers who were wary of buying beauty products online.

Falguni Nayar’s vision wasn’t just about selling cosmetics; it was about creating a trusted and convenient one-stop shop for all things beauty in India.

This focus on solving real consumer problems laid the foundation for Nykaa’s initial success.

What Went Right?


  • Curated Selection: Catering to a Diverse Audience: Nykaa understood that Indian consumers craved a wide variety of beauty products, both familiar and international. They went beyond just established brands and offered a platform for exciting new domestic labels as well. This catered to a growing segment of beauty enthusiasts who were looking for something unique and catered to Indian sensibilities.

  • Focus on Authenticity: Building Trust in a Flawed Market: Counterfeit cosmetics were a major concern for Indian consumers. Nykaa addressed this head-on by establishing partnerships directly with brands, ensuring the legitimacy of every product on their platform. This built trust with customers who were wary of buying beauty products online and solidified Nykaa’s reputation as a reliable source.

  • Seamless Online Experience: Creating a Beauty Haven: Nykaa didn’t just offer products; they created a delightful and informative online experience. Their user-friendly website and app made navigation a breeze. But what truly set them apart was their focus on rich content. Informative tutorials, expert advice, and video reviews on product usage empowered customers to make informed choices. This not only enhanced the shopping experience but also positioned Nykaa as a beauty authority.

  • Omnichannel Strategy: Bridging the Gap Between Online and Offline: While Nykaa started purely online, they recognized the value of a physical presence. Their strategic expansion into brick-and-mortar stores provided customers with the opportunity to try products before they buy and experience the brand in person. This omnichannel approach catered to the diverse needs of their audience and further strengthened their brand identity.

  • Building a Loyal Community: Nykaa understood the power of community. By creating a platform for user reviews, tutorials, and beauty discussions, they fostered a sense of belonging among their customers. This not only provided valuable insights into customer preferences but also turned them into brand advocates, strengthening Nykaa’s position in the market.

The Glitches Beneath the Gloss:


Nykaa’s recent stumbles have cast a spotlight on some potential shortcomings that could hinder its long-term growth:

  • Profitability Concerns: While Nykaa is a profitable company, its margins haven’t shown significant improvement. This raises a red flag for investors seeking high-growth potential. In today’s market, profitability is no longer enough; investors are looking for companies that can demonstrate both growth and healthy margins. Nykaa needs to find ways to optimize its cost structure and explore revenue streams that offer higher margins.

  • The Fashion Gamble: Nykaa’s foray into the fashion market appears to be a mixed bag. The fashion landscape is a different beast compared to beauty. It’s a more competitive market with lower margins and established players. Nykaa’s initial losses in fashion raise questions about the strategic planning behind this expansion. Did they adequately assess the competition, target audience, and profitability potential before diving in?

  • Post-IPO Jitters: The recent expiry of lock-in periods for pre-IPO investors might be leading to a sell-off, similar to what Zomato experienced. This can cause temporary stock price fluctuations. However, it’s important to distinguish this from a fundamental weakness in the company. This is a short-term market response and doesn’t necessarily reflect Nykaa’s long-term prospects.

Beyond these points, here are some additional factors to consider:

  • Evolving Consumer Preferences: The beauty market is dynamic, with new trends and ingredients constantly emerging. Nykaa needs to stay ahead of the curve by actively monitoring these shifts and adapting its product offerings accordingly.

  • Intensifying Competition: The Indian e-commerce landscape is fiercely competitive. Established players like Myntra and Reliance-backed Ajio are vying for market share. Nykaa needs to solidify its unique value proposition to differentiate itself and maintain customer loyalty.

  • Marketing and Brand Building: Building brand loyalty is essential in a crowded market. Nykaa’s marketing strategy might need to be reevaluated to ensure they’re effectively reaching their target audience and maintaining brand relevance. This could involve exploring new marketing channels, influencer partnerships, or loyalty programs.

Nykaa: A Case Study

Beauty products by Nykaa, an Indian beauty products retailer, are seen for sale in a store at a mall in New Delhi, India, July 12, 2022. REUTERS/Anushree Fadnavis/File Photo

Nykaa’s story serves as a compelling case study for aspiring entrepreneurs, particularly those with dreams of dominating the beauty market. Here’s a breakdown of the key takeaways:

  • Identify a Gap, Fill it Well: Nykaa’s success began with founder Falguni Nayar recognizing a genuine consumer need – a trusted platform for high-quality beauty products in India. This highlights the importance of identifying a problem point in the market and offering a solution that resonates with your target audience.

  • Quality & Trust Matter: Counterfeit cosmetics were rampant in India, creating a trust deficit among consumers. Nykaa addressed this head-on by partnering directly with brands, ensuring product authenticity. This underlines the importance of prioritizing quality and building customer trust as core principles. Don’t chase growth at the expense of either in the long run.

  • Strategic Expansion is Key: While Nykaa’s initial focus on curated beauty products was a masterstroke, their recent foray into fashion seems to be a mixed bag. This highlights the need for thorough research and a well-defined strategy when expanding into new territories. Ensure the new venture complements your existing brand and leverages your core strengths.

  • Focus on Sustainable Growth: Nykaa’s profitability concerns raise a red flag for investors seeking high-growth potential. It’s crucial to focus on sustainable growth, not just short-term spikes. This involves optimizing costs, exploring higher-margin revenue streams, and demonstrating a clear path towards long-term profitability.

  • Building a Loyal Community: Nykaa fostered a sense of community by creating a platform for user reviews, tutorials, and beauty discussions. This highlights the power of building a loyal customer base. By engaging with your audience, understanding their needs, and fostering a sense of belonging, you can create brand advocates who drive long-term success.

Nykaa’s journey is ongoing. The company’s strong foundation, loyal customer base, and presence in the beauty market position it well for the future.

However, addressing the challenges discussed above will be crucial for regaining investor confidence and ensuring its long-term success.

Nykaa’s story serves as a valuable reminder that the road to entrepreneurial success is paved with both triumphs and challenges. By learning from their experiences, aspiring beauty moguls can navigate their own journeys with a clearer vision and a sharper strategy.

So, is Nykaa a cautionary tale? Not necessarily. It’s a story of ambition, adaptation, and the challenges that come with scaling a startup. The important message? Learn from the missteps, celebrate the wins, and focus on building a brand with a sustainable future.

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