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Nykaa taps growth with fashion diversification

Nykaa taps growth with fashionThough Nykaa’s recent decision to add fashion to its forte is been viewed with skepticism by many investors, there are others who are supportive of this move. These investors are confident Nykaa will venture in to this category with adequate care before stepping on the accelerator. The company has already undertaken year-long research before embarking on this venture. However, the question is, should Nykaa depend on its successful beauty venture to step into fashion. The company has achieved stable revenue estimates for FY19 at Rs 1,200 crore. The entry of new investor-TPG Growth-with a capital of Rs 5,000 has further fuelled growth prospects.

For its fashion venture, Nykaa has already on-boarded 250-oddNykaa taps growth with fashion diversification labels. These include top designers like Masaba, Ritu Kumar and Anita Dongre. The e-tailer also offers their prêt lines like AND and Global Desi. It will primarily cater to the premium category with a view to have a few private brands in apparel, lingerie, athleisure, accessories and more.

Diversification to bring new challenges

Everything about Nykaa fashion will be different from its beauty business including the app and website. The etailer will have to target one segment and focus on it. Its biggest challenge will be obsolescence as trends change faster than the seasons. The company may lose its core proposition if it gets distracted by the new supply chains and discounts. Some critics also argue that in the ever volatile and unpredictable shopping environment, fashion seems like a quaint choice. They are skeptical of the company’s ability to sustain a new business solely on account of its great recall value with the beauty customer in Tier-I cities.

For this, Shailesh Rao, India Head, TPG Growth Fund recommends distributing high involvement products through vertical e-commerce platforms. The head of an investment banking advisory however, argues fashion vertical doesn’t resonate well with the rest of the brand. As it is now venturing into non-women, non-personal category, there are strong doubts being raised about its success.

Owners Falguni and Adwaita however, disagree to this. They argue that a separate website will ensure that fashion doesn’t remain an afterthought with its customers.

Omnichannel strategy to boost growth

Nykaa intends to soon have a strong offline presence with over 75 stores by 2020 and 200 stores in the next five years. Arvind Singhal, Chairman, Technopak Advisors, opines these expansion plans shouldn’t be taken seriously as they will be small stores of 500-600 sq ft, and have a much smaller footprint. According to him, the company doesn’t have much choice but to aggressively expand its offline presence. For the moment, Nykaa will urge customers of its beauty products to also try out their fashion app and website. The company thus aims to be relevant across a variety of lifestyle segments.

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