Nykaa sees a bright spot in beauty bet, in GCC

Beauty retailer Nykaa is pegging its next growth frontier on a new market—the Gulf Cooperation Council (GCC)—as it aims to expand its market beyond domestic borders.

The Mumbai-headquartered company entered into a strategic partnership with Apparel Group, one of UAE’s largest retail conglomerates, it announced in October 2022. Titled Nysaa, the e-commerce website was launched in January this year, and the first physical retail store in Dubai was opened in March, marking Nykaa’s first international foray.

Through a mix of offline and online multi-brand retail, Nykaa is looking to set up a significant presence in the region by replicating its domestic omnichannel beauty playbook.

“… We do believe that Nysaa could be significant business over time as there is a clear market opportunity,” Falguni Nayar, founder and CEO of Nykaa, said during the fourth-quarter analyst call on Wednesday.

The e-commerce firm has plans to pump in sizeable capital into the venture as well. In February, the FSN E-Commerce’s Board approved the infusion of $2.5 million into Nysaa. The company announced on Wednesday that it will invest an additional $1.9 million in the venture through its overseas subsidiary Nessa International Holdings.

Nykaa follows the footsteps of many Indian brands that have ventured into the GCC region, aiming to capture a technology-driven and wealthy customer base.

Also Read: Nykaa should double down on digital rather than foray into physical

Adventure gear maker Wildcraft India signed an agreement with Apparel Group on Wednesday to sell products in the GCC region. Last year, Tata Group’s Titan said it will expand its jewellery brand Tanishq aggressively in the GCC among other countries.

Back in 2017, Kishore Biyani’s Future Group too had forayed into the region to expand its fashion vertical FBB.

Significant opportunity

According to Nykaa’s Nayar, the Gulf region offers a range of opportunities in the beauty market.

The beauty and personal care market in GCC is worth $30 billion with the world’s highest per-capita spend. Moreover, nearly 40% of its population is women—Nykaa’s largest audience—and about 40% of the market is under the age of 25.

“The region’s affinity for beauty, high per capita consumption, potential for rapid growth, and profile of the consumer are clear opportunities,” Nayar said during the analyst call, adding that Nysaa has the capability to materialize revenue and profits much faster than other markets.

Also Read: Nykaa raises fashion game but beauty segment fades

Nykaa stands to benefit from Apparel Group’s network of more than 2,200 retail stores across the UAE, Kingdom of Saudi Arabia, Qatar and Kuwait among others.

According to Karan Taurani, research analyst at Elara Capital, Nykaa has the advantage of driving growth in new markets on the back of its technological expertise and understanding of e-commerce marketplaces.

However, growth may be stagnant beyond a point which may make it necessary to push private labels or exclusive brands. “Nykaa does not have the first-mover advantage in the region like in India. The company will also have to invest a lot of capital towards marketing to make its mark,” Taurani told Mint.

Nysaa is likely to give a small push to Nykaa's overall revenue in the near term, according to Taurani, while profitability will be a challenge.

Exclusivity of brands on the platform plays a key role in drawing and retaining customers. In India, Nykaa has a few beauty brands exclusively available on its platform including Charlotte Tilbury, Fenty Beauty, Colour Pop, and Elf Cosmetics.

Taurani noted that the success of Nykaa’s international foray will be decided by how it chooses to differentiate itself from incumbent retail brands.