Acquisition project | Nykaa Fashion

Table of Contents

Nykaa Overview

Market Overview

Nykaa Fashion Overview

Why Nykaa Fashion

Nykaa Fashion - Elevator Pitch

ICPs

Competition

Core Growth Loop

Website Traffic Analysis

Discovery and Onboarding Journey

Organic Channels

Content Loops

Referrals

Paid Ads

Product Integrations

Conclusion

Resources

Nykaa Overview

Nykaa is a BPC focused vertical e-commerce platform that launched in 2012. Since then, it has grown into a profitable, multi billion dollar company, and is listed on Indian Exchanges. Through it's journey, nykaa has diversified its revenue sources and has expanded to multiple business verticals. These include:

1. Nykaa (Primary BPC Business)
2. Nykaa Fashion (Fashion Business)
3. Nykaa Man (Mens Care - BPC, Apparel & Sporting Goods)
4. SuperStore by Nykaa (B2B Retail Store)
5. Little Black Book (Digital Content)

Here's the GMV contribution of each vertical, as disclosed by Nykaa in their Investor Presentations and Annual Reports:

Nykaa is a clear leader in the BPC segment, and a major player in the online fashion space, with significant headroom to grow across verticals.

NOTE: Nykaa BPC is Inventory led, fashion is marketplace model

Market Overview

Retail Market

The retail market in India was estimated to be INR 91 Trillion in 2021. This is split as follows:

1. Non-Discretionary: Includes grocery, food and pharma categories, and makes up ~76% of the total retail market
2. Discretionary: Includes other discretionary retail categories, including BPC and Fashion. Makes up ~24% of the total retail market.

The discretionary segment is expected to expand to ~34% of the total retail market by 2025, with BPC + Fashion contributing to ~35% of the discretionary retail market.

Fashion Market

India's fashion & lifestyle market is estimated at USD 110 Bn, of which roughly 10% (~$11 Bn) is attributed to online purchases. The online fashion market is expected to grow at ~25% CAGR to reach $35 Bn by 2028.

Apparel accounts for ~80% of this market, with footwear and accessories accounting for the remaining ~20%.

There are 4 major categories of players in the fashion space:

1. National Brands: Large historic players with significant offline presence (eg: Nike, Puma, Louis Phillipe etc.)
2. Private Labels: Created by marketplaces like Ajio, Myntra and Nykaa to fill gaps in demand or price and expand product portfolio (eg: Gajra Gang, Nykd)
3. Digital Disruptors: Disruptive D2C brands (eg: Souled Store)
4. Unbranded Sellers: Local, unorganized and unbranded sellers

The fashion market is largely dominated by local, unorganized manufacturers and sellers, but there are several tailwinds causing a shift in consumer behaviour and boosting online fashion, including:

1. Increasing fashion spend by youth & in T2 cities;
2. Growing Occasion-Centric Demand (Clothes for Work, Parties, Festivals and so on)
3. Consolidation in Fragmented Categories
4. Problems Inhered with Offline Fashion (Limited Inventory & Assortment, confusion about authenticity of products)

Nykaa Fashion Overview

• Focused on Premium Womens Clothing - currently ~20% of online premium womens fashion (OPWF) market
• Per Capital Spend on Fashion ($54) vs Per Capita Spend on Fashion on Nykaa ($130)
• GMV = INR 32699 Mn (2024) - Therefore total GMV (OPWFs) = INR 163,496 Mn
• OPWF expected to grow 3.5x in 6 years (~INR 5,72,232 Mn) by 2030.
• Existing Customers -> 48% of revenue. New customers -> 52% of revenue.
• 3200 partner brands. Focus on Activwear (45% GMV growth YoY)
• Fashion GMV Channel Mix:
• • Nykaa Online: 54%
  • Nykaa Stores: 3%
  • General / Modern Trade: 24%
  • Other Marketplaces: 19%

Why Nykaa Fashion

Nykaa is the dominant player in the BPC category in India. However, it's other, newer verticals are still in the scaling phase, lag behind industry peers, and have significant headroom for growth.

Among these, fashion is the largest market, is a fast growing online shopping category, is still relatively unorganised with significant scope for development, and has the potential to be larger than Nykaa's BPC business (based on the relative size of the fashion industry vs BPC).

Nykaa has spent more than a decade building trust with consumers as a vertical e-commerce platform that sells authentic, high quality products. This, combined with it's captive user base from its BPC business, economies of scale, and extensive operational and technical expertise have positioned it perfectly to capitalize on the online fashion opportunity.

However, competitors like Myntra and Ajio have captured a lions share of the online fashion market. Consumers default to Nykaa for BPC products, but it is not top of mind when making fashion purchases. There are a host of negative reviews for Nykaa fashion online and on the app store, with customers complaining about the lack of discounts, delayed delivery, poor customer service and an opaque return process. Despite these issues, Nykaa's fashion business has showcased robust growth, growing at 27% YoY, and is the market leader in women's premium clothing, all of which it has achieved with a focus on unit economics and without the deep discounting tactics used by competitors, showcasing incredible PMF.

Nailing user acquisition, onboarding and retention could make Nykaa Fashion a dominant player in the space.

Nykaa Fashion - Elevator Pitch

Nykaa Fashion offers a curated marketplace for premium clothing, accessories, and footwear, ensuring high-quality and authentic products with every purchase. Whether you’re looking for everyday essentials or designer pieces for special occasions, Nykaa Fashion makes luxury accessible, delivering the latest trends directly to your doorstep.

User Insights

I conducted user research across ~23 women, 5 of which were on call, with users of Nykaa Fashion, while the rest were conducted asynchronously, by means of a survey.

To contextualize the user research and refine the ICPs, I want to first provide some insights on the Nykaa Fashion Business and their positioning:

1. Nykaa claims that it identified a gap in the market - online premium women's fashion, which it has sought to capitalize on and where it has captured ~20% of the market.
2. Nykaa is focused on sustainable, long term growth, and wants to grow their fashion business fast, but with a focus on unit economics and profitability.
3. It generally refrains from the deep discounting practices of its competitors, which it is able to do only because of the premium segment it is targeting.

Keeping these stated business goals in mind, we do not want our acquisition strategy to dilute the value proposition of premium women's fashion offerings, or tailor it to a different segment of the market that has requirements that run counter to Nykaa's business and strategic goals, even if these segments are a significant part of the overall fashion industry.

Insights from Customers

General:

• 90% of users surveyed spend >INR 5000/ month shopping online
• ~30% of surveyed users shop for siblings or partners in addition to themselves
• Browsing fashion online is a weekly activity for ~45% of surveyed users, with purchases typically happening only a couple times a quarter (Behaviour indicates a high likelihood of browsing and saving without purchase)
• Quality of garments, price, and the return policies are key factors in making buying decisions.
• Outfits and accessories are often impulse purchases, and discovery happens primarily through instagram from content that appears on the home page, then through recommendations by trusted influencers, and finally through ads.
• Google search is typically a search channel by older millennials, with younger users preferring new social media apps for search.
• Users relate more to D2C brands than big platforms (D2C brands are often able to establish and clearly convey a brand identity), that triggers purchases and repeat orders.
• On platforms like Myntra, Ajio and Nykaa, users typically search by category and scroll through results or look for specific brands or use cases. Social selling and trends tabs on platforms are underutillized, and do not seem to be a significant means of product discovery.
• Most users have highlighted the need for better quality checks, features like virtual try ons, group wishlists & shareable wishlists and better understanding of a product's fit based on their body type and dimensions.

Nykaa Fashion Users:

• Brands are a major mode of acquisition for Nykaa, and the availability of exclusive brands are a primary reason users shop on the Nykaa Fashion platform.
• Nykaa is the most trusted platform for high ticket purchases - with trust built on the back of their track record with BPC products. This is particularly relevant when shopping for occasions - festivals, events and weddings.
• The quality of Nykaa's products and post delivery service and experience is a key differentiator that constantly brings customers back to the platform.

Online Shoppers that do not use Nykaa Fashion:

• 43% of surveyed users use Myntra, 10% use Ajio, 10% use Amazon as their default shopping platform
• ~15% of surveyed users are extremely price sensitive, not loyal to any specific platform, and will try to find the best price for the product across platforms before making a buying decision.
• Nykaa is not top of mind as a fashion platform. Consumers often don't even consider it as an option when thinking about fashion purchases, and default to larger, more well known platforms like Myntra and Ajio instead.
• Some users in this category only shop online for relatively low ticket items. Generally speaking, nykaa is 30-50% more expensive across categories, and not well suited to this kind of buying behaviour
• Some prefer other platforms because of exclusive brands available only on those platforms, or the greater variety offered on those platforms.

TAM, SAM and SOM:

For the purposes of this project, I am calculating the TAM, SAM and SOM for the Women's premium fashion segment only, and not the entire fashion market.

To understand the sizing of the premium women's online fashion market, we will leverage some data shared by Nykaa in its annual reports, and work through the calculations from there:

Note: The actual TAM, SAM and SOM for Nykaa Fashion is likely much larger if you include mens fashion and non premium segments. It presents a lucrative opportunity at least as large as, if not larger than it's BPC business.

ICPs

Note: The sample is biased towards young women (23 - 30) living in metro cities, with some execeptions, on account of the consumers I had access to. A deeper dive across customer segments would be required to crystallize the ICPs and their behaviours.

Competition & Web Traffic Analysis

Direct: User actions that take them directly to the platform

Organic: Keyword Search that results in traffic to the platform

Social: Redirect from Social Media (Primarily Facebook for Desktop)

Paid: Google Ads

Referrals: Through Referrals

NOTE: The traffic mix is likely different for mobile. Mobile traffic may be directed to the website, or to the app, depending on whether the user has the app installed or not.

Core Growth Loop & Discovery Journey

User Discovery Journey:

Major Acquisition Channels

Desktop:

Based on data from Similarweb, the top channels for traffic on the desktop site are:

(1) Organic; (2) Direct; (3) Social; (4) Paid; (5) Referrals / Partner Program

Mobile:

I was unable to find data around a specific split of top channels on mobile by volume. The following is an assumption i've made on the basis of customer conversations:

(1) Social; (2) Paid Ads; (3) Direct; (4) Organic; (5) Referrals / Affiliate Programs

Core Growth Loop

Nykaa is a content first company, and has built its brand, business and top of funnel awareness by expertly using content loops.

1. Nykaa / Partnered Influencers / Users generate Content (Vlogs, Tutorials, Tips, Styling Advice etc)
2. Content is widely consumed and shared
3. People engage with content
4. Increased Engagement boosts visibility and drives traffic to the website
5. Increased traffic leads to more transactions on the platform

ICP Prioritization

I am prioritizing ICPs not only on the basis of the market size & potential, but also taking into consideration Nykaa's business strategy and focus on growing revenues and profitability, as well as its unique positioning as a premium, trustworthy platform that remains dominated by women shoppers (competitors drive more traffic from men, though the absolute number of women shoppers on those platforms may be higher).

Given Nykaa's positioning as the market leader in online premium women's fashion, and its focus on unit economics, managing costs and growing profitably, we can target the following ICPs for the purpose of this project:

1. Trend Conscious Youngsters;
2. High Spend Occasional Shoppers.

Given the stage Nykaa is at, the goal with these ICPs is not to build awareness, but rather to drive adoption as the platform of choice for online shopping and increase conversions from website visits.

Nykaa Fashion Acquisition Channels

Nykaa Fashion is in the mature scaling stage, have found PMF, and have run several experiments across different marketing channels, as set out below.

1. Organic Search:

Nykaa generates a significant volume of traffic from organic search, and ranks for various informational, navigational and transactional intent searches for beauty and fashion products in India.

• Direct searches for Nykaa / Nykaa Fashion
• Searches for Nykaa exclusive brands like footlocker
• Searches for specific keywords eg: Heels for Women, Buy womens shoes online, sarees for women
• For organic searched on youtube, searching for women's fashion online mostly shows UGC for purchases from Amazon and Myntra, and does not surface results from nykaa fashion

While it generates significant traffic from keywords, it lags behind competitors like myntra and ajio significantly on ranked keywords, domain authority, and total traffic generated through organic search on google.

Content Loops:

Nykaa has nailed its content loops across platforms, and its content loops are the primary source of top of funnel awareness about the brand, and lead to some direct conversions too. It's content loops are it's core growth loops (described earlier in this document) and reproduced here for ease of reference:

1. Nykaa / Partnered Influencers / Users generate Content (Vlogs, Tutorials, Tips, Styling Advice etc)
2. Content is widely consumed and shared
3. People engage with content
4. Increased Engagement boosts visibility and drives traffic to the website
5. Increased traffic leads to more transactions on the platform

Instagram: Nykaa has separate pages for beauty, fashion, men and its owned brands

YouTube: Nykaa's YT channel - Nykaa TV is a source of continuously content around fashion, makeup, skincare etc.

Forums: Nykaa Network is a community driven forum that promotes interactive discussion on beauty, fashion and lifestyle topics.

In App: Nykaa has created in app social shopping experiences through its 'Stream' function, allowing users to consume shoppable content in the BPC segment within the app directly. However, this feature does not exist on the Nykaa fashion ap.

Paid Ads:

Nykaa runs a number of paid ads, focused on thematic campaigns like the recent 'Stay Stylish' campaign with Jahnvi Kapoor, Masoom Minawala and Ayesha Kanga, promoting festivals, sales and its loyalty program through campaigns around Pink Friday, nykaaland and Prive days.

These ad campaigns are designed to be seasonal, topical, capitalize on trends, inform customers about sales and boost purchase and conversion rates.

Product Integrations:

Nykaa owns multiple apps and platforms, and has executed some integrations across platforms to drive traffic from one owned property to another.

Referral Partner Programs:

Nykaa runs the "Nykaa Affiliate Program" for creators and influencers, where it offers a share in commissions to creators for every purchase made through their affiliate link.

It also has a loyalty program, 'Nykaa Prive', which rewards recurring users with points, cashback and other perks.

Channel Prioritization:

Before jumping into channel prioritization, it is important to first align on how you define an 'Acquired' customer, and then understand background and business metrics and goals to sharpen focus on the right chanels.

Generally, e-commerce platforms consider a customer to be acquired when they make their first purchase on the platform. For Nykaa, a customer can be acquired by:

(1) Targeting new customers and educating them to sign up and transact on the platform; or

(2) Converting non-purchasing visitors into purchasing users.

Now, let's consider some data about the business:

1. Average Monthly Unique Visitors = ~17 Mn
2. Annual Unique Transacting Customers = ~3 Mn
3. Order to Visit Conversion Rate (Fashion) = 1.2% (Annual Report FY 24)

Again, Nykaa's primary goal is to increase revenue and profitability while limiting expenses. From data available online, and customer research, it is clear that awareness about Nykaa fashion isn't the problem. The problem is that Nykaa Fashion is not top of mind for its ICP given it's strong positioning as the largest BPC marketplace, and it's inability to convert users browsing on its website and mobile apps.

Paid Ads

An analysis of Nykaa Fashion's recent ad campaigns shows a focus on specific brands (Puma, Aheli), events (Nykaaland, Nykaa Prive Days) and Sales (Pink Friday, Diwali sale etc.)

These ads seem to be designed to trigger immediate purchases, or inform customers about events in the near future, hoping to trigger purchases. However, there are a few opportunities I believe have not been capitalized on, that could offer differentiated positioning, improve conversion, and make Nykaa Fashion a top of mind platform for online shoppers:

Platform Features:

A key theme that Nykaa (and its competitors) seem to be missing is a focus on technology, platform features and returns. User research conversations reveal that both shortlisted ICPs (Trend Conscious Youngsters and High Spend Occasional Shoppers) show that they face common pains when shopping online, particularly for premium products:

1. Poor post purchase experience
2. Opaque return policies
3. Inability to understand material quality
4. Poor size charts
5. Inability to visualize how clothing would look on their body type
6. Poor discovery experience for new, trendy garments

Nykaa recently rolled out a host of tech features to improve shopping experience:

1. Whatsapp fashion stylist to give users fashion and styling advice and purchase recommendations
2. Create a Look - Allows users to create and shop custom looks
3. Immediate Refunds to Nykaa Wallet

Platform features play a key role in helping users decide which platform to pick for their online shopping requirements. However, consumers are not aware of feature releases on platforms, and need to be educated on what features are available and how they can be used.

Creating ads tailored to educating users about platform features, new functionality and tech innovations can play a crucial role in bringing Nykaa fashion to top of mind for online fashion purchases, create unique positioning in the minds of consumers, and trigger more frequent purchase behaviours (Driven by ease of access, simplicity of use, and clear return and refund policies)

Marketing Pitch:

Imagine a shopping experience where your doubts about fit, style, and returns are taken care of—all in one place. With Nykaa Fashion’s latest technology features, you get personalized styling advice, on-the-spot refunds, custom looks, and much more. Nykaa Fashion isn’t just another shopping platform; it’s where fashion meets convenience. We’re not only bringing you the best in style but also giving you the tools to make every shopping experience feel personalized, informed, and satisfying.

Goals:

1. Build awareness around Nykaa Fashion’s tech innovations and unique features, positioning it as a top-of-mind choice for premium online fashion.
2. Drive conversions by showcasing how Nykaa Fashion’s platform features solve common customer pain points, particularly among Trend-Conscious Youngsters and High-Spend Occasional Shoppers.
3. Establish a clear, unique value proposition for Nykaa Fashion as a platform that combines premium offerings with cutting-edge tech features, differentiating it from competitors.

You can check out a sample creative here.

Ad Spend on Pull Brands & Exclusive Brand Drops😀

From our user research, we know that the exclusive availability of brands on a platform is a key factor in users deciding which platform to shop on. These brands typically are highly trusted, have strong recall, and engaged customers, with customers seeking to purchase these brands regularly, without additional marketing spends.

Allocating budgets for ad spends for such brands, and then redirecting users to the nykaa platform will help Nykaa Fashion acquire users and boost sales for the brand - a win-win situation.

Additionally, while platforms have been focused on making pull brands exclusive to their platform - a more interesting opportunity may lie in having exlcusive drops or discounts on the platform. These arrangements are quicker to negotiate and implement, reduce the risk for the platform and brand, and engage users, encouraging them to make a purchase.

Note: I have not gone into extensive CAC / LTV calculations because some of this information is available in the public domain, and nykaa has been able to scale its business profitably, confirming that this is a viable channel for acquisition. However, we would need to track specific metrics around the messaging and creatives for these ad campaigns and benchmark performance against other ad campaigns to validate the success of these experiments.

Product Integrations

Beauty and Fashion are complementary and adjacent categories. Nykaa has a large, captive audience on its BPC website and app (~2x monthly average unique visitors and ~4x annual unique transacting customers). There is a significant overlap between these customers and the ICPs for Nykaa Fashion. However, there is limited redirection of customers from Nykaa to Nykaa Fashion.

There are no major CTAs to get consumers to check out the fashion offerings. Additionally, all content, recommendations and looks are exclusive to Beauty, and there is no overlap with fashion, despite the adjacency of the categories.

Driving traffic from Nykaa to Nykaa Fashion could offer a significant unlock in terms of customer acquisition, in an extremely cost effective manner.

You can check out some sample Product Integration Flows here.

Side Note: UX changes on Platform

While UX changes are not generally considered a 'Acquisition' method - based on the nature of marketplaces and the way we have defined 'Acquired' customers for Nykaa, boosting conversion of unique non-paying visitors to unique paying visitors offers a significant opportunity to convert brand aware users to 'Acquired' users.

Some impactful changes that can be made on product pages to facilitate this conversion include:

1. Clear description of the materials and quality of materials
2. Currently, the platform only mentions the height of the models.
   
   
   Other information about body dimensions is missing. Adding product Images on different models with varying body types can boost conversions - women often want to see how a product will look on someone with their body type (models in e-commerce shoots aren't usually representative of the average body type). This will have the added benefit of reducing returns over time.
3. Intelligent Recommendation Systems integrated into the product description page. (Could be used to gather customer data in terms of body type, style preferences etc to improve recommendations)
4. The option to shop combos or full looks instead of individual garments.
5. Integration of stylist function directly onto the product page (to recommend accessories, other garments and provide styling recommendations)

You can check out some revised designs with these changes incorporated here.

Conclusion

If I was tasked with improving customer acquisition for Nykaa Fashion, I would prioritize the following:

1. 1. Invest in paid ads focused on visual media platforms:
   2. 1. ICPs spend time scrolling on visual media. We can become a top of mind platform for online fashion from here.
      2. ICPs will be better educated about platform features and offerings, which often play a key role in defining the shopping platform of choice for fashion
      3. Brands are a key reason users adopt and shop on specific platforms. Allocating ad spend to key brands that attract customers and redirecting them to Nykaa Fashion, and offering some brand SKUs or deals (for pull brands) exclusively on Nykaa's platforms are all great ways to acquire and onboard customers.
   3. Work on Product Integrations:
   4. 1. Nykaa has a large, engaged and captive user base on its BPC business that has a significant overlap with the ICPs for their fashion business. This presents a low cost low effort opportunity to integrate the beauty and fashion businesses closely together, with potential synergies across content, shopping combo deals and more.