Amid the intensifying competition in the offline and online beauty and personal care (BPC) industry, analysts at Kotak Institutional Equities assert that Nykaa will need to continue investing in advertising to safeguard its market share.
The brokerage highlighted in a report the expanding user base of Purplle and the prospective competition posed by Reliance’s Tira and Tata Cliq.
“Beauty products aggregator Purplle has been witnessing a stronger increase in app MAU (monthly average user) compared to Nykaa. While the overall positioning of the two players is different, there is a divergence in user trends,” said the brokerage.
According to Kotak, Nykaa experienced a notable decline in its Monthly Active Users (MAU) by over 20% year-on-year (YoY) in August, reaching 6.7 million, while Purplle’s MAU surged by 60% YoY to reach 4.8 million. Furthermore, Nykaa’s website visits dropped to 10.9 million in September, marking a 16% month-on-month (MoM) decrease, whereas Purplle witnessed a 26% YoY decline to 3.2 million, as per the brokerage’s observations.
Kotak reported that metrics indicate Purplle has already secured approximately one-third of Nykaa’s monthly website visits.
“Purplle has caught up with Nykaa’s high organic search traffic share. Upstarts such as Tata Cliq Palette and Tira Beauty are using paid search channel to garner traffic on the platform,” the analysts said.
Nonetheless, the analysts hold the belief that the recent entrants, Tata Cliq Palette and Tira Beauty, may not have substantially eroded Nykaa’s market share.
Nevertheless, the increasing offline presence of all beauty and personal care (BPC) brands has heightened competition even more.
“Offline BPC retail is also witnessing heightened competition, with Tira and Palette entering the fray and Trent (Misbu) as well as Shoppers Stop planning to increase their footprint. Nykaa may have to keep up ad-spends to retain market share,” the analysts added.
Kotak’s report follows Nykaa’s Q2 FY24 performance update released last week, where the company anticipated a roughly 20% year-on-year (YoY) increase in its Beauty and Personal Care (BPC) net sales value (NSV) for the quarter. Conversely, Nykaa projected a YoY growth of approximately 30% in its fashion vertical’s NSV.
Kotak noted that Nykaa’s fashion business NSV outlook surpasses the brokerage’s projections, but the 20% growth in BPC NSV falls short of their expectations.
Additionally, the brokerage had forecasted a consolidated revenue growth of 24% year-on-year (YoY) for Q2, whereas Nykaa provided guidance indicating growth in the early 20s.
In Q2 FY23, Nykaa’s net sales value (NSV) for its Beauty and Personal Care (BPC) segment amounted to INR 981.5 Crores, while the NSV for its fashion vertical was INR 175.3 Crores.
Yesterday, Nykaa’s shares witnessed a 1.5% decline during the trading session, concluding the day at INR 147.15 on the BSE.