Nykaa Fashion’s strong growth mirrors the rise of online fashion in India

Nykaa Fashion, a direct subsidiary of Nykaa-parent FSN E-commerce Ventures Ltd., recorded impressive growth during the September quarter, partly driven by new launches as well as the festive season demand.

The four-year-old fashion vertical saw its Gross Merchandise Volume (GMV) grow 43 per cent year-on-year to Rs 599.1 crore in Q2 FY23, riding on a 66 per cent jump in annual unique transacting customers, which stood at 2.1 million at the end of September. Fashion GMV went on to contribute 26 percent to the Nykaa’s consolidated GMV during the quarter. Additionally, the platform’s festive season sale ‘Nykaa Fashion Grand Festive Carnival’ achieved the highest-ever monthly unique visitor count of 18 million in September.

Nykaa Founder, MD & CEO, Falguni Nayar said, “We’re committed to building a unique customer proposition in Fashion, aided by investments in a differentiated product, collaborations with global brands and expansion in the breadth and depth of our owned brand portfolio. Our focus on curation and discovery in Fashion is evident, as new season merchandise accounted for 24 per cent of Nykaa Fashion GMV; and international brands are at 13 per cent of western wear category GMV in Q2 FY23.”

“Repeat buyers in Fashion now contribute 66 per cent of Q2 FY23 GMV, giving us confidence in our product proposition,” she added.

Nykaa Fashion competes with the likes of Myntra, Ajio, Tata Cliq, and also Amazon Fashion and Flipkart Fashion. It currently houses more than 1,500 brands spanning across 1.8 million products in five consumer segments: women, men, kids, tech, and home. Within these segments, it offers merchandise across several categories, including Western wear, Indian wear, footwear, bags, jewellery, accessories, athleisure, home décor, bath, bed and kitchen, and more.

The vertical is yet to turn profitable though. Analysts don’t seem too concerned. “Losses in fashion business may be key, but we favour Nykaa’s slow and steady approach in this segment that is prone to hefty losses if only growth were to be chased given the high fragmentation. Nykaa may create an edge in fashion too with its private labels and exclusive tie-ups with international brands,” Elara Securities said in a post-earnings report.

Despite losses, the growth of Nykaa Fashion beyond the company’s core beauty and personal care (BPC) business, in fact, mirrors the rise of online fashion in India, and the increasing share of the category in the overall e-commerce pie.

An October 2022 report by Bain & Co. states that the category mix of online shopping is fast evolving. “Fashion, general merchandise categories (including personal care), and grocery have the highest penetration headroom (v/s. mature markets) and will therefore fuel growth. These categories will cumulatively account for as much as two-thirds of the e-retail market by 2027,” as per the report.

It further reveals that first-time internet shoppers belonging to the Gen Z demographic, “primarily purchase fashion as the first category online, and they typically start buying at entry price points”.  Fashion continues to be a  “gateway category” in e-commerce -- even more than mobiles and electronics -- and is crucial for onboarding new shoppers.

Earlier in October, Nykaa Fashion partnered with California-based fashion e-tailer REVOLVE to offer a digital storefront for over 400 international brands and 26,000+ items across apparel, footwear, and accessories. Both companies are popular among millennials and GenZs thus arriving at a synergetic fit.

Adwaita Nayar, Co-Founder of Nykaa, and CEO of Nykaa Fashion, said in a statement: “REVOLVE’s approach to fashion is an ideal match with our own--bringing to the Indian customer fashion-forward styles, celebrity-loved offerings with sustainable goals, and an unwavering commitment to diversity and inclusion.”

Prior to this, Nykaa also partnered with Dubai-based fashion and lifestyle retail conglomerate Apparel Group to expand its omnichannel operations into the Gulf Cooperation Council (GCC) countries. This is Nykaa’s first international footprint expansion after 10 years of its existence. Analysts have given a thumbs-up to the deal.

“Apparel Group is an offline powerhouse with >2,000 stores in many categories, with growing presence in e-commerce as well. Together with Nykaa with expertise in omnichannel retail and strong brand partnerships, it can create significant value via the joint venture,” Elara Securities added.

Nykaa shares were down 2.84 per cent to Rs 1,151.75 intra-day trade on the BSE on Wednesday.