On what makes e-commerce workFalguni Nayar: When I was starting the e-commerce business, I read a lot of research to understand if price was the only reason why consumers buy on e-commerce. To my surprise, assortment and convenience of home delivery were the two biggest reasons why consumers buy online. And, of course, price can be a motivator.
Nykaa does discounting but all our discounts are funded by our brand partners. We do not discount from our pocket. The reason for that and long-term sustainability and profit is that our companies benefit from customer acquisition. So it’s just the discipline of having a pace of growth that you can afford, rather than saying, well let me sink a lot of money and I’ll figure everything out later. We are definitely not driven by only revenue growth, but by what we call the long-term value of the customer that we bring to our stable.
On whether investors understand trade-off between profitability and growthFalguni: Since we were not chasing top line revenue at any cost, if you look at how our market cap grew, it was quite conservative. We were doing it at digestible sizes of our growth rather than raising money and diluting our equity and putting all of that money into customer acquisition with a belief that eventually a lot will fall into place. We did not do that. Our big realisation came when we did road shows for the IPO and during Covid. Typically, if a meeting was being held, there were some 40-50 senior fund managers from some of the biggest houses attending, and the quality of questions they asked us, told us that they understand the trade-offs that they are making between profitability and growth. It emboldened us that there is a place for our business model in this world. Before the IPO, we knew that this was our path, but we were not sure whether it would be so well-appreciated.
On sharing information with investorsFalguni: I personally feel you must try to share more information with the investor community so that they can make the right choices. However, companies like us have a lot of data, we are data driven and sometimes all the data cannot be put in the public domain because there are monthly differences in the numbers. There are reasons for those differences. Also, there is information that may be very competitive. In the sense, why would you share how many customers you acquired in a quarter. It’s competitive information that you’re putting out there. So there are reasons for not sharing too much information. I do not justify what others are doing. Our own effort is going to be more about sharing as much as we can in a safe manner so that investors who have chosen to invest or may invest can make a reasonable decision based on that information.
On the future of tech startupsAdwaita: What we’ve always believed at Nykaa is that eventually the buck has to end with someone, the buck has to end some time, businesses have to transition to delivering meaty profitability. Just being in the trenches of trying to build Nykaa, we found that it is actually so difficult to build a business at scale with reasonable profitability. My opinion is that some of the valuations floating around for startups, where there is clearly no business model and no path to profitability, do require a correction. Having been on the other side, seeing the Nykaa valuation and the way it’s rising and the correction in the last couple of months, you realise the valuation is just one piece of the pie. The amount of hard work behind the scenes to actually transition your business into being sustainable, profitable and sizable is just so much. So I think there’s a disconnect between valuation and the amount of work that’s actually required to build.
Anchit: My point of view is that these are all new-age businesses. The reality is, I’m not an investor. We’re operators, right? I have a lot of respect for the businesses that everyone is building. Today, from a consumer point of view, these are very useful businesses in the future, whether it’s Nykaa, Paytm or Zomato. These businesses are becoming part of the consumers’ life and they will be for the coming decades. There are investors who see that and they probably attribute a certain valuation and premium to that. So I’ll leave that to the investors. What we could say is that India has such an awesome opportunity to create some of the most high-tech digitally first giants for the future. The talent in this country is unbelievable. The risk-taking ability, the entrepreneurs, government support and regulator support is there.
On the difference between global and domestic customersAnchit: Data tells you that India is very early in its consumption journey. The per capita spend on BPC (beauty and personal care) in India is only $14 annually. That number is close to $300-400 in the West. It’s somewhere around $75 to $100 in China. So India is, in terms of its consumption journey, where China was exactly 15 years ago. It’s a total difference in terms of the purchasing power, awareness, education from a small town in India versus the US, and I think that is what excites us. But we’ve been able to build a business of our scale when we’re so early on in our journey as a country. So the opportunity is massive.
Adwaita: The one thing that strikes me when I think about the Indian market versus the US market is that the Indian market is just really, really small. There’s just no comparison of consumption in the US and India.
Falguni: There’s a lot of potential.
We are big believers in the Indian retail consumption story, particularly for lifestyle products like beauty and fashion. These are also aspirational categories.
On the Indian woman’s evolving relationship with beautyFalguni: When Nykaa was introduced, we said this is for women who want to use make-up or beauty products for themselves, and not to please nor to get the attention of a man or a woman. Consumers understood and appreciated our message.
Adwaita: I think one thing that struck me when I used to travel to open Nykaa stores was… I’d go to Guwahati, Ludhiana, Bhubaneswar and in all these cities I’d expect to meet young women my age and expect them to be different from me. And they were absolutely metropolitan, as driven by trend, as ambitious, very career driven. I think there is definitely a lot of commonality across a particular socio- economic bracket of course and above, whether it’s a smaller city or a metro.
Anchit: It’s probably a global trend that we are seeing in India as well. There are a lot of great role models now. There is so much focus on gender diversity in the workplace. It’s a trend that is definitely visible and it’s obviously for the better.
On whether government involvement should be less in the e-commerce spaceFalguni: If you look at it, the entire GST implementation has changed the future of the consumer industry. The entire IPO possibility also happened because it worked on changing past track record of profitability to allow these IPOs to list in the country. It came from not trying to only benefit the tech companies but also giving access to Indian investors to invest in technology. Whatever the reasons for the government to do that, time and again, we do see it trying to put in place areas of underlying infrastructure that benefit everyone. There will be a policy framework that will emerge among these industries. Technology, data and privacy… All of these are global subjects. These are all emerging and we all have to be very mindful.
On concentration of power with a few tech companiesFalguni: We are believers in entrepreneurship and entrepreneurs and there are enough of those who will succeed irrespective of who the kingmaker is. The energy, knowledge and learnings that an entrepreneur gathers along this journey, and what they do for the company is the main thing… We don’t understand companies where people who are governing them don’t have enough stake and so they’re not really answerable to the stakeholders. Our model brings alignment of all the stakeholders.
Ronnie Screwvala, Chairperson and Co-Founder, upGradYou’ve set the benchmark really high not just for yourself but for other entrepreneurs. Where do you go from here in terms of value creation and creating an impact for the entire ecosystem of entrepreneurship in India?Falguni: We believed in beauty because it was not a very developed industry and we wanted to build something which didn’t exist in the country. We realised that more women buy fashion than beauty and as a result it is five times the size of the beauty market in the country. We got into this industry when there were already entrenched players, both in e-commerce and physical retail, and in general as fashion bra
nds. We have small ambitions, but the market size is big and we’re going to continue to build. Within lifestyle itself there is so much play available to continue to build platforms. We already have about 12 brands between beauty and fashion and are carefully building them. E-commerce is like an open book and we want to play fair and get the right to win by understanding the consumer.
Priya Iyer, Founder and CEO, Kids Must Read LimitedHave there been any mistakes that you made and have these been valuable lessons or things that have pulled you down?Falguni: As an entrepreneur you take hundreds of decisions every day and you take them with imperfect information, so you’re never sure whether it’s the right decision. For many decisions, you don’t see the impact in the same quarter or year. A lot of it is based on data, some is based on instinct or principles you believe in. I think if you are an open-minded person, no mistake is a long-term mistake; if you have data and analysis, you can quickly correct your mistakes. So I don’t see any mistake as a big setback that one can’t overcome. I see it as a lot of small roadblocks, small mistakes that you can quickly correct and alter your course.
Adwaita: The first couple of years were insanely difficult, everything used to seem to go wrong, whether it was the CXO team quitting, investors constantly saying no to invest, not being able to scale the business, the ERP crashing. There is an unglamorous part of entrepreneurship, which is the first two-three years. Mom and I had totally different approaches — she was totally thick-skinned, whereas I would crumble. I think being resilient is important.
Gitanjali Puri, Founder, Growth Strategy VenturesAfter such a successful career in investment banking, how did you think of making this switch to entrepreneurship?Falguni: Just wanting to experience entrepreneurship—
I told myself I must jump in before I turn 50 because after that maybe I won’t have enough motivation. So the deadline was drawing nearer. After both Anchit and Adwaita went to college, the itch came, saying I have more time on my hands. So there were many factors.
AG Ramakrishna, Chief Product Officer, Card91Will it be fair to say that behind every successful woman there is a man, given the spectacular success (of Nykaa), and if yes, what has been the biggest contributing factor of such a person?Falguni: I think Nykaa has been supported by so many individuals. Adwaita and Anchit are here and they both have supported big vision and also, now, execution at Nykaa. Sanjay, my husband, who comes with a lot of experience in many aspects of business, has always been around as someone who is there for any advice or help we seek from him. I personally feel that today’s complex businesses are built with teams of thousands of people working very hard, so it is the team behind Nykaa that makes it happen.
Saurabh Mukherjea, Founder and Chief Investment Officer, Marcellus Investment managersNykaa has managed to build real customer captivity. How have you done that?Falguni: We just got to it by being very authentic. Beauty business in India is a registered business and you need an FDA licence to operate here. Even with bigger brands, if they were not registered in the country and were coming through a back channel, we would not sell them on our platform. We made sure that we were getting authentic and genuine products. We would sell authentic brands at full price, as a brand would not discount more than twice a year. There are a lot of fake and counterfeit products in beauty and so many of those were being sold on other open platforms. Ours is a curated platform and we made sure we got authentic products. We did the heavy-lifting instead of choosing the marketplace approach to sell beauty.
Adwaita: Whenever I have spoken to people who have love for Nykaa, I am always struck by how it is different for each person. For some people it is the angle of authenticity, for some others this is the brand that taught them how to use make-up, so there is a lot of loyalty for the brand that educated them. For another group of people who are make-up savvy, we are the brand that went abroad and brought them the world’s best brands. It is a number of small things we have done sincerely—from assortment to price, education, content, community—that made it click.
Anchit: I think we were very lucky as a young company to get a lot of supportive investors. It was probably more patient capital and as a family we had a large part of the business, so there was a coming together of minds, where the investors, promoters and senior management had the same mindset, which is no shortcuts and do what’s right for the customers. Very large part of our revenue is from repeat customers and our cohorts are very strong.
We’re a vertically specialised retailer and don’t sell any other category except beauty. We have a team of 300-plus professionals who have a specialisation in the category.
Also in the room: OP Mishra, Joint CP, Delhi Police; Akshay Raheja, Director, Hathway Investments; Dilip Chenoy, Founder, DC Skills; YK Alagh, Vice Chair & Professor Emeritus, Sardar Patel Institute of Economic and Social Research; Karni Singh Bhada, Head – Corporate Affairs, ACC; Lt Gen Arun Sahni, Former Army Commander; Madhav Kalyan, CEO & MD, JP Morgan Chase Bank India; Dorab Sopariwala, Editorial Advisor, NDTV; Mahesh Thakkar, Director General, Finance Industry Development Council; N Arjun, Advisor, SB Energy; Nandini Chatterjee, Chief Communications Officer, PwC; Rajesh Mehta, Founder & CEO, Agora Marketing Advisory; Sandeep Mishra, Director — Commercial Banking, Standard Chartered Bank; Sanjeev Dev Malik, CMD & Editor-in-Chief, Asian News Channel; Sarita Ahlawat, Managing Director, Botlab Dynamics; Sevanti Ninan, Columnist, The Telegraph (India); Uday Bhende, MD, Kirloskar Energen; Vineet Nanda, Founder and Managing Partner, Sift Capital; Vivek Jain, MD, DCW; Pradyumna Dalmia, Managing Partner, Triton Investment Advisors LLP; Paroma Roy Chowdhury, Senior VP & Head — Corporate Communications, Byju’s