Nykaa to focus on faster deliveries with warehouse expansion and regionalisation

Bengaluru: Beauty and fashion retailer Nykaa, owned and operated by FSN E-Commerce Ltd, said it expects to deliver 70-80% of all orders on the same day or the next in the country's top 12 cities, as the company seeks to steadily reduce its order-to-delivery time.

In the June quarter, half of all orders placed in these metro cities were fulfilled the same day or the next, thanks to a strong network of warehouses, Anchit Nayar, chief executive of Nykaa’s beauty business, said during an analyst call on Tuesday.

“Given the investments we have made in the space, we stay committed to our key objective to deliver better consumer experiences by getting the product into the consumer’s hands faster,” Nayar said, adding that 50% of orders placed in the next 110-112 cities are expected to be fulfilled at a similar speed by September.

For context, 65% of Nykaa’s order volume comes from the top 112 cities.

Nykaa’s warehouse count grew to 44 from 18 in FY21, alongside a 2.5x capacity expansion in the same period. The firm has also focused on bringing the warehouses closer to each other, resulting in an improvement in delivery timelines, according to the company.

“We have seen a 45% reduction in order-to-delivery timelines in the last three years, largely driven by our investment in warehouse regionalisation,” Nayar added.

Last month, Mint had reported that Nykaa is looking to set up a denser network of warehouses to deliver orders faster, improve margins, and satisfy customers at a time when speed has become the battleground in the cut-throat world of e-commerce.

“Speed has always been a priority to us and we took up faster deliveries as a bigger project coming out of the pandemic as we wanted to capitalise on the accelerated adoption of e-commerce. We realised that it is important for us to be competitive in terms of speed and convenience,” Nayar said.

Beauty retailer FSN E-Commerce, which runs Nykaa and Nykaa Fashion, posted profit after tax of ₹13.6 crore, up from ₹5.4 crore in the year-ago period, boosted by the the beauty segment.

The firm’s revenue from operations rose 22% to ₹1,746 crore with beauty and personal care— its biggest business— contributing more than 90%.

Nykaa’s overall GMV (gross merchandise value) rose 25% year-on-year to ₹3,320 crore during the quarter.

Standout brands

In a regulatory filing on Tuesday, Nykaa said that it expanded its stake in Dot & Key by an additional 39% at ₹265 crore, taking its total holding to 90%. Nykaa first invested in Dot & Key in September 2021, and the brand’s GMV touched ₹750 crore last quarter.

Dot & Key, which sells a range of products like sunscreen, moisturiser, lip balm, face wash, serum under the Nykaa brand, managed to multiply its revenue by seven times over the last three financial years since its acquisition in 2021. 

The acquisition of the additional stake is expected to be completed by 30 September. 

Meanwhile, Nykaa also acquired Earth Rhythm Private Limited, another homegrown brand for skincare, in the quarter, through a combination of primary and secondary funding, it said in an exchange filing.

Fashion takes a hit

Nykaa Fashion, the firm’s second-largest vertical by revenue—showed a marginally higher revenue at ₹148.6 crore in the June quarter, as it continues to witness slowing growth in a highly competitive space.

The BPC vertical’s owned brands including Nykaa Cosmetics, Dot & Key, and Kay Beauty, showed a 47% year-on-year rise in GMV during the quarter.

However, the Fashion segment’s owned brands which include active-wear brand Kica and western wear brand Twenty Dresses, showed a flat GMV of ₹90.3 crore, attributed to decline of 14% year-on-year in third-party channels, FSN’s chief executive Falguni Nayar said.

“This performance is a bit disappointing and I wouldn’t read into it as a long-term trend. Efforts are on to increase the innovation and performance of fashion brands,” the founder said at the analyst call.

Mint reported in June that Nykaa’s house of brands, especially in the fashion segment, has shown sluggish growth in the last few quarters, underscoring the difficulty of building a ‘house of brands’.

(With inputs from Mansi Verma)