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December 31, 2024
Jasodhara Banerjee, Forbes India
31 December 2024
Once, there was alabaster. Then, there was porcelain. And now there is glass. And no, we are not talking about the different kinds material to make fine, delicate objet d’art, but the quality and texture of facial skin—smooth, flawless and luminescent—that humans aspire to.
While a Google search for the term ‘glass skin’ will churn out hundreds of results that describe not just what the term means—tracing it to Korean skin care routines and products—but also detail the meticulous steps, varying between five and 11, that will apparently make you look like your favourite K-pop singer or K-drama actor. Like all things K (read: Korean), be it television and OTT serials, or food and clothes, K-beauty seems to have taken the Indian market by storm. A search for ‘Korean brands’ on online platforms such as Nykaa and Tira Beauty brings up more than a thousand products, ranging from ₹75 for a facial sheet mask to ₹17,900 for 60 ml of face cream. Clearly, there is something for everybody.
Fuelling this surge has been a plethora of factors, including the rise of online marketplaces that have made Indian and foreign skin care and beauty products more accessible than before, the thriving ecosystem of influencers and content creators that has revolutionised the marketing of these products, and, of course, consumer demand for products that claim to have the goodness of natural ingredients backed by the surety of science. And, surprising as it may seem, the Covid-19 pandemic and accompanying lockdowns also seem to have played a role in this.
Case in point is Amorepacific Corporation, a Seoul-headquartered beauty and cosmetics company that operates in more than 50 countries, and has a portfolio of more than 30 brands, such as Sulwhasoo, Laneige, Mamonde, Etude House and Innisfree. It is one of the largest cosmetics companies, not just in South Korea, but in the world.
“We are the number one beauty and personal care brand in South Korea and were the first Korean corporation to enter India with direct management, with our own subsidiary,” says Paul Lee, managing director and country head, Amorepacific India. “We started our business in India with Innisfree, which uses natural ingredients from Jeju Island in South Korea. We started with Innisfree because India had a huge demand for brands with natural products. Then we introduced Laneige and Sulwhasoo, which fall in the luxury skin care segment, and these were followed by Etude, which is a makeup brand.”
Amorepacific entered India sometime in 2012, taking tentative steps in a fledgling market with minimal investments and a retail store in Delhi’s Khan market. “At that time, the awareness of K-beauty was very small, and our momentum of growth started with the popularity of dedicated ecommerce players like Nykaa. In the last seven years, our annual growth has been 50 percent, our current growth is 60 percent year-on-year,” says Lee.
A potent potion for growth
Although industry players and experts feel there are multiple factors behind this growth, the popularity of Korean cultural elements is a significant one. “Korean beauty and personal care brands have multiple enabling factors. The global expansion of Korean beauty and personal care products has been on the back of a cultural export wave like any other earlier in history; in this case through the growing popularity of K-pop and K-dramas,” says Devangshu Dutta, founder, Third Eyesight and co-founder, PVC Partners. “In India, these brands initially had an influence in the Northeastern states, where customers are usually ahead on the fashion curve and also find resonance with the look of these brands.” He adds that factors such as the increasing number of Indian tourists to East Asian countries, and the growing presence of Korean and Japanese expatriates within India have also supported the growing footprint of these brands.
A spokesperson for Tira Beauty, which was launched in April 2023, agrees with Dutta, and attributes the demand for K-beauty products to the exposure that consumers have to K-dramas and K-pop. However, she adds that a significant factor is rooted in the products themselves. “These are the innovations that these brands are bringing to the table,” she explains. “The kind of formulations they offer are very well-suited for the Indian consumer. The ingredients are very efficacy oriented, and deliver a lot of quality, thus resolving a lot of concerns that consumers in India have.”
For instance, skin hydration is a core need of consumers, and a lot of Korean skin care products focus on hyaluronic acid as an ingredient. “Consumers who have sensitive skin or inflammation as a key concern get to use ingredients like centella asiatica, that a lot of Korean products use,” she says.
The spokesperson adds that the texture of the products is also a factor behind their popularity in India: “A lot of Korean sunscreens are light weight, a lot of their essences are suited for the Indian skin and the Indian weather. Both these factors are contributing to the rise we are witnessing in the space of K-beauty.”
Lee of Amorepacific highlights the use of unique ingredients such as fermented beans, ginseng and green tea that were never used before by American or European companies. There are also many options for consumers to choose from, depending on what is best suited for them. For instance, there is a product line with green tea for consumers with sensitive skin, and the same products are available for those with dry skin. “There are three key metrics that we have seen among Indian consumers: One is the demand for premium quality, two is the demand for glass skin, and the third is reliability.”
Lee also attributes market factors that have been instrumental in making Korean products more accessible to Indian consumers. “There has been a lot of change before Covid, and after Covid. From the macro perspective, the number of internet users with access to low-cost data plans has increased. During the Covid-19 pandemic, the number of new people watching OTT platforms such as Netflix also surged. From the Netflix perspective, I think India is one of the top three countries, where the number of subscribers is concerned.”
According to the Korea Trade-Investment Promotion Agency, the beauty market in India saw substantial growth following the Covid-19 pandemic and is projected to expand by 10 percent annually from 2022 to 2027, more than twice the global average growth rate for the beauty sector. According to market analyst Mordor Intelligence, the K-beauty market in India is expected to grow annually by 9.4 percent from 2021 to 2026.
Lee highlights the popularity of Korean OTT series such as Squid Games in making Indians familiar with Korean culture, and YouTube videos making a lot of people aware of K-beauty. “When we started operating in India, there were hardly two or three brands operating here, but currently there are more than 60 Korean brands in India. The influence of TV and music content has made people familiar with Korean culture, which is similar to Indian culture in being family-centric,” he adds.
Content creator Scherezade Shroff Talwar says, “The Hallyu [Korean] wave during the pandemic has definitely contributed to, what I would say, an over-consumption of Korean culture and I definitely contribute to it as well. K-beauty products have been around in India for a while, but with the increasing popularity of K-dramas and K-pop, people are seeing more such content across multiple platforms. This has contributed to the rising number of Korean brands in India, and the use of their products.” She recalls how, in November, she was in South Korea with her K-drama club, and the members had lists of the products that they wanted to buy there because they are not available in India.
According to a September report by market research firm Mintel, social media analysis in India reveals that there have been 6.2 million posts in the last two years discussing K-drama, K-pop, and K-beauty trends, predominantly among the 19 to 24 age group. This continued popularity in K-pop throughout the APAC region influences consumers’ interest in Korean skin care and beauty products, the report adds.
Lee says that Korean beauty companies have also been prompt to react to the demands in the market. For instance, Innisfree introduces new products every three months, and they are based on consumer feedback through social media and actual stores. Given the demand from Indian consumers, Amorepacific has also formed a task force at its headquarters which is dedicated to reviewing and studying the Indian market, with plans bring in more brands and businesses.
Data shows, adds Lee, that the import of Korean skin care products into India is increasing by 63 percent every year, going up four times compared to 2020. Amorepacific’s own research shows that 53 percent of Indian beauty consumers have already tried Korean products. “Fifteen percent of the entire skin care products market is now dominated by Korean products,” he claims.
Although Amorepacific decided to close all 23 of its exclusive stores in India because of the losses suffered during the pandemic, it decided to partner instead with local channels such as Nykaa, Tira Beauty and SS Beauty, and its products are today available across 400 counters in 45 cities. “Although our company is seeing 60 percent growth every year now, our retail area is doubling every year,” says Lee. “Our aim is to be available in 500 counters within a year.”
The availability and accessibility of Korean skin care and beauty products have also coincided with the rise of marketing products through influencers and content creators. The spokesperson for Tira Beauty says that influencers have played a massive role in the popularity of Korean products. “One of the reasons why K-beauty products do well across markets is because Gen-Z consumers tend to follow a lot of these influencers,” she explains. For instance, Tira launched the Beauty of Joseon sunscreen, and it went out of stock very quickly. “We experienced this because there was a lot of awareness due to influencer activations, and there’s a certain amount of virality these products enjoy even before they are launched.” She also gives the example of the brand Tirtir, which was launched on Tira Beauty in India in November. “The brand rolled out samples to influencers in India in July, and that helped propel demand to a great extent.”
According to business consulting firm Grand View Research, celebrity influencers have been beneficial to marketers due to their global reach, which often transcends cultural boundaries. Hence, the top strategy used by Korean cosmetics brands is to sell their products to Korean celebrities. Storytelling using Korean celebrities as brand ambassadors, and streaming advertisements and video tutorials all over the social media platform are some of the major strategies adopted by K-beauty brands.
Grand View Research gives the example of the lip layering bar of Laniege, which has emerged as a convenient tool for those who want to get the trendy gradient lip look with just a single application. Celebrities such as actors Song Hye Kyo and Lee Sung Kyung have used the product, enhancing its appeal and desirability among consumers.
Celebrities from different parts of the world promote K-beauty products, and this fosters a cross-cultural appeal and encourages individuals from diverse backgrounds to explore and adopt these products in their skin care routines. Following this global trend, in India, young celebrities have been roped in to appeal to Gen-Z consumers. For instance, actor Palak Tiwari became the first Indian brand ambassador for Etude, while actor Wamiqa Gabbi became first Indian brand ambassador for Innisfree, and Sara Tendulkar, daughter of cricketing legend Sachin Tendulkar, is the brand ambassador for Laneige.
Dutta of Third Eyesight says, “Influencers certainly have played a role in building the buzz around K-beauty and have formed a relatively cost-effective means to spread the message in the past. However, in recent years with a growing number of social influencers, there is more clutter as well on the channels.”
India not in the big league, but demanding
Although the rise of K-beauty products in India has been significant, the country remains a far smaller market for these brands compared to markets such as the US, Europe and China. According to Grand View Research, the global K-beauty products market size was valued at $91.99 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 9.3 percent from 2023 to 2030.
The consulting firm says the Korean cosmetics industry grew steadily during the Covid-19 pandemic, owing to an increase in awareness of the numerous benefits offered by the products. Moreover, due to a rise in popularity among consumers, major K-beauty companies are taking initiatives such as R&D, product launches, mergers and acquisitions to retain shares in the market and respond to changes in the marketplace by introducing a range of items.
Grand View Research valued the US market, one of the largest for K-beauty products, at $20.2 billion in 2021 and expects it to grow at a CAGR of 8.8 percent between 2023 and 2030. Compared to this, Statista valued the India K-beauty market at $486 million in 2021, and expects it to grow to over $1.3 billion by 2032.
Lee of Amorepacific says the US remains the largest beauty market as a whole, followed by China, Japan, the UK, France and India. “One of the differentiating factors between the US and Indian consumers is that the premium market in India is very small, and it is still a mass-product driven market,” he says. “Secondly, ecommerce in India is still quite small. In South Korea and the US, ecommerce just in the beauty segment, is 30 to 40 percent, while in India it is 13 percent. India is traditionally an offline market.”
He adds that despite the growth, Indians remain sceptical about whether Korean products are suitable for Indian skins, and there is demand for products that are made only for Indians. “Localisation, therefore, has become important for the company. Although we conduct clinical trials in different geographies, we are starting to take more feedback from Indian consumers, and we are ready to develop products only for the Indian market. For instance, we have introduced the Innisfree kajal and the Innisfree hair massage oil, and have developed lip colours for the Indian market.”
Although the company did not divulge revenue figures, it is expecting to grow six times in the next six years in India, and plans to introduce at least five more brands within the next seven years in this market.
(Published in Forbes India)
admin
January 5, 2024
Sagar Malviya, Economic Times
January 5, 2024
Top global apparel and fast fashion brands appear to have struck a strong chord with young customers, racking up sales growth of anywhere between 40% and 60% in FY23, bucking the trend in a market where the overall demand for discretionary products slowed down.
For instance, Swedish fashion retailer H&M and rival Zara reported a 40% increase in its topline while Japanese brand Uniqlo saw a 60% jump in sales. American denim maker Levi Strauss and British brand Marks & Spencer posted a 54% increase, latest filings with the Registrar of Companies showed. Dubai-based department store Lifestyle International, too, saw a 46% jump in revenues on a large base. These brands garnered combined annual revenues of nearly $2.6 billion, more than double compared to FY21 when it was $1.1 billion all put together.
“With consumers getting brand conscious, global brands have a natural advantage. There is a distinct aspirational momentum for international brands that carries them through. Also they can sustain having unsold inventory and discounting better than smaller peers,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm. “Also, these brands have not yet reached saturation point in terms of network and hence can invest further to widen their reach.”
The revenue surge was also led by brands’ shifting focus on ecommerce, which now accounts for more than a quarter of their sales, even as they face intensify competition from both local and global rivals in an increasingly crowded market where web-commerce firms continue to offer steep discounts. Over the past two years, sales growth for most retailers have been price-led, reversing the historic trend when volumes or actual demand drove a bulk of the sales.
The fashion retail segment has been struggling with a demand slowdown since January last year due to inflationary headwinds. The overall retail growth slowed down to 6% in both March and April, increasing marginally to 9% in August and September before falling slightly to 7% in October and November, according to the Retailers Association of India.
“Spends are shifting to experience, holidays and big ticket purchases such as cars. Stronger retailers which had the right product to price proposition works for consumers who are not necessarily looking at brands from global and local lens. What helped our sales was product rationalisation, renovation of stores as well as our value proposition,” said Manish Kapoor, managing director at Pepe Jeans that clocked 54% growth to Rs560 crore in FY23. “The current fiscal has been muted and we expect election spending and improved sentiment to drive recovery next fiscal.
As the world’s second most-populated country, India is an attractive market for aspirational apparel brands as rising disposable incomes cause the consuming base of the pyramid to broaden further. “The Indian economy is on course to be among the top economies in the world. The key factors driving the India consumption story include a large proportion of young population, rising urbanization, growing affluence, increasing discretionary spending and deeper penetration of digital,” said Levi Strauss in its latest annual report.
Last year Levi’s said India is now the largest market for them within Asia and sixth largest globally while M&S said it is opening a store every month in India, already its largest international market outside home in terms of store network.
(Published in Economic Times)
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October 7, 2023
Gargi Sarkar, Inc42
7 Oct 2023
The Indian ecommerce industry anticipates a stronger festive season compared to last year with over 20% sales growth, driven by the D2C segment’s expected 40% QoQ surge
The overlap of festive celebrations and wedding seasons, particularly with a later Diwali this year, is predicted to further stimulate demand
Despite the evident purchase intent, retailers are preparing for a possibly neutral festive season as economic challenges may hit consumers’ spending
As the festive season rings in its 10th anniversary in the ecommerce realm, giants like Flipkart and Amazon are prepping for their annual mega sales, set to begin on October 8. This year, however, they will face tough competition from newer players, including Meesho, which carved out a significant slice of the festive sales pie last year.
With new entrants like Tata Neu and JioMart, and fashion and lifestyle ecommerce players such as Myntra, Nykaa, and AJIO, the stage seems to be set for a fierce showdown.
For these ecommerce platforms, the annual festive sales aren’t merely about revenue generation; they’re pivotal customer engagement and acquisition opportunities. These events lure consumers with compelling discounts and promotions, giving a considerable boost to their yearly sales targets.
Through strategic marketing blitzes, they also aim to amplify brand recognition and glean insights into shopper preferences. Following last year’s subdued festivities, market analysts have predicted a revival in shoppers’ enthusiasm this year, forecasting a robust 20% surge in sales.
The festive season this year is set to witness a remarkable upswing in the ecommerce sector’s gross merchandise value (GMV). According to consulting firm Redseer, the GMV is anticipated to see an 18-20% surge, amounting to INR 90,000 Cr, a leap from INR 76,000 Cr in the previous year.
“The preceding quarter (April to June) witnessed a subdued performance in both offline and online retail sectors, primarily due to persistent inflationary pressures. However, the scenario is expected to undergo a transformation during the upcoming festive season. Festive periods tend to unleash latent consumer demand, prompting individuals to open their wallets more liberally,” Ashish Dhir, EVP (consumer and retail) of business consulting and services firm 1Lattice said.
There is a growing focus on electronics and appliances as traditional categories of interest. However, fashion and beauty are also emerging as important categories. The emergence of luxury goods is another important segment, which will likely make waves during the upcoming festive sales.
The ecommerce industry anticipates a stronger festive season compared to last year with over 20% sales growth, driven by the D2C segment’s expected 40% quarter-over-quarter (Q0Q) surge. However, average user spending is likely to remain flat.
Further, Tier III cities and beyond are becoming key revenue contributors, particularly in the fashion and beauty categories. Although consumer sentiment has improved, retailers are wary that buyers could maintain a cautious stance when it comes to spending lavishly.
While there is much to look forward to, let’s delve deeper into what shoppers and retailers can expect from this milestone year, which marks 10 years of festive sales fervour in the Indian ecommerce space.
D2C Brands To Lead The Charge
Notably, the Indian market is projected to have 500 Mn+ online shoppers by 2030, growing at 12% compound annual growth rate from 205 Mn in 2022, according to a 2020 report.
As far as the upcoming quarter is concerned, industry experts forecast that the homegrown ecommerce sector will likely see impressive growth of over 20%.
Playing a pivotal role in this escalation will be the D2C segment, predicted to grow more than 40% QoQ from October to December. Established ecommerce giants like Amazon, Flipkart and Meesho could also be looking at an approximate 30% uptick in sales, according to experts.
Tracing back to the inaugural ecommerce festive sales in 2014, the industry’s GMV was recorded at INR 27,000 Cr. Fast forward to 2023, the GMV is poised to touch an impressive INR 5,25,000 Cr, a nearly 20-fold increase, per a RedSeer report.
Festive Ecommerce OffersAverage User Spending Could Remain Muted
Despite the rise in GMV in 2022 compared to 2021, average expenditure per shopper held steady at INR 5,200 during the initial four days of the festive season sale, according to a RedSeer report.
This year doesn’t seem poised for a significant spike in individual user spending either. However, there is a silver lining in the form of rising consumer activity in smaller towns and cities. On the flip side, elevated living costs in metropolises like Bengaluru and Mumbai could dent extravagant consumer spending, noted Devangshu Dutta, the founder and CEO of Third Eyesight, a boutique management consulting firm.
Yet, with the growing online shopper populace in these cities, there’s potential for the average order value (AoV) to reduce as more users flock online to shop.
“As the online shopping base continues to expand, the average spending per user naturally tends to decrease. This phenomenon occurs as more people venture into ecommerce, with platforms like Amazon and Flipkart extending their reach to cover a broader audience. However, it’s essential to note that this drop in the average ticket size is a common trend when the customer base expands,” Sangeeta Verma, director of digiCart India said.
Consumers Sentiment Positive, But Retailers Remain Realistic
With the waning impact of inflation, India is witnessing a positive shift in consumer sentiment from the previous year. Unlike several developed nations wrestling with inflation, India has remained largely untouched by its dual impact on demand and supply, experts suggest.
For example, Flipkart delivered strong gross merchandise value (GMV) and sales growth in the company’s second quarter of the financial year 2023-24 (FY24), Walmart’s chief financial officer John David Rainey said during an earnings call.
“In India, the distinguishing factor in terms of festive demand is that it’s not merely brand-driven; consumers here are eager to spend, and the purchase intent is notably high. Unlike some developed economies grappling with inflationary concerns, both the demand and supply sides in India have not seen any impact of inflation. The consumer demand continues to stay buoyant,” Chirag Tanjeja, cofounder and CEO of GoKwik said.
The overlap of festive celebrations and wedding seasons, particularly with a later Diwali this year, is predicted to further stimulate demand, 1Lattice’s Dhir added.
Nevertheless, a note of caution reverberates among retailers. Despite the evident purchase intent, retailers are preparing for a possibly neutral festive season as economic challenges may hit consumers’ spending.
However, a recent study conducted by Nielsen Media India and commissioned by Amazon India says otherwise. According to the report, 81% of consumers are enthusiastic about shopping during the upcoming festive season. More importantly, this positive sentiment towards online shopping is not limited to metropolitan areas but Tier II and III cities and towns.
Ecommerce Platforms Ramp Up Efforts To Woo Sellers
In this year’s festive season, a standout trend is ecommerce giants’ intensified drive to court and captivate sellers with multiple strategic offerings like enticing commission rates, equipping them with advanced selling tools, enhancing the overall selling experience, and broadening their outreach.
Recently, ecommerce heavyweight Meesho made its platform accessible to non-GST registered sellers too. Not too behind in the race is Amazon India, which unveiled its multi-channel fulfilment (MCF) last month for D2C brands and retailers. This initiative is expected to aid sellers in managing customer orders from diverse channels.
Meanwhile, Flipkart flaunted its impressive seller growth, citing a tally surpassing 1.4 Mn — a notable 27% jump since 2022. Meesho currently has a seller base of 1.3 Mn and Amazon has over 1.2 Mn sellers.
Echoing the seller-side optimism, digiCart’s Verma said, “As a seller, we hold a very bullish sentiment. We’re so confident that we started stocking up well in advance. The robust build-up is evident from the current numbers. Mature sellers will expand into existing and new categories after.”
A recent survey by Redseer revealed that sellers are projecting a 15% increase in festive sales year-on-year. Even though the recent sales momentum on ecommerce platforms has been somewhat subdued — with only 40% of those surveyed reporting a 10% quarterly hike — there’s palpable enthusiasm for a significant festive sales boost across a multitude of product sectors.
Who Will Drive The Festive Ecommerce Growth?
Tier II and III cities and towns are expected to be the biggest contributors in this year’s festive season sales. According to experts, customers from these cities and towns are keen on giving their wardrobes and beauty kits a festive makeover. Although Tier I cities are spoilt for choice with numerous offline stores, spanning both legacy and contemporary brands, such luxuries are scarce in smaller cities.
However, this is steadily changing now. Some of the prominent D2C brands that have emerged from the country’s Tier II & III towns and cities are Raipur-based Drools, Mohali-based Lahori, Kanpur-based Phool, Coimbatore-based Juicy Chemistry, just to name a few.
Furthermore, consumer demand in the eastern regions of the country, along with enhanced connectivity in the Northeast, is also on the rise. Semi-urban and rural areas are fast emerging as the driving force behind the new wave of ecommerce growth, a trend expected to be pronounced during the festive season.
Considering that a whopping 65% of India’s populace resides in rural regions, the untapped ecommerce potential is immense, according to the Economic Survey 2022-23.
Yet, fostering trust will be paramount. Residents in these regions typically bank on word-of-mouth endorsements and recommendations from local retailers when exploring new products and brands. This is expected to give local D2C brands a much-needed boost in the upcoming festive season.
What’s Beyond The Festive Sale Fervour
As festive trends leave their mark in the ecommerce landscape, we’re likely to witness several transformative strategies. Central to this evolution will be Buy Now, Pay Later (BNPL) schemes. Yet, the traditional cash-on-delivery remains a preferred choice for many.
Ecommerce brands are increasingly prioritising customer retention, recognising that fostering enduring relationships offers more value. This shift is evident in the rise of loyalty programmes.
Notably, Flipkart introduced “Flipkart VIP” – a direct competitor to Amazon’s Prime – right before the festive sales kickoff. Simultaneously, Meesho debuted a loyalty initiative, targeting both customers and sellers.
Apart from the dominant themes, a few other noteworthy trends are slated to redefine the festive shopping narrative. Black Friday, for instance, is set for a revamp. Gen Z’s influence, especially their propensity to favour specific brands, will be significant.
Last year, for D2C brands, the Black Friday event overshadowed the traditional Diwali and Dusshera festivals in sales figures. GoKwik data indicates that brands on their platform saw a staggering 63% rise in GMV during the Black Friday sale, contrasting starkly with the 10-day Diwali sales.
Also, Christmas, too, is evolving. The allure of winter holidays and modern gifting practices are propelling this transformation, turning Christmas into a significant commercial event.
Given that the final leg of 2023 (October to December) will host almost all the major Indian festivals, the ecommerce players are in for a treat. Even though there will be a lot of cut-throat competition among ecommerce players, there will be no dearth of opportunities for them to woo customers who are eager to splurge to add more flavours to their festive celebrations this year. Going ahead, we will keep a close eye on the ecommerce players and D2C brands that will emerge triumphant after the great Indian festive showdown.
(Published in Inc42)
admin
May 6, 2023
Gargi Sarkar, Inc42
6 May 2023
With one of the largest consumer bases in the world, the Indian retail industry is on a constant upward spiral, thanks to the increase in the purchasing power of Indian consumers and the ever-increasing ecommerce adoption.
Notably, this has helped segments like online beauty and personal care (BPC) sustain and grow faster than the players in the offline space.
According to industry experts, the online BPC market has been growing in the range of 20% to 25% annually, compared to the offline segment at around 8% to 10% a year. According to a IMARC Group report, India’s BPC market size reached $26.3 Bn in 2022 and is expected to reach $38 Bn by 2028, growing at a CAGR of 6.45% between 2023 and 2028.
Notably, in their endeavour to capture this opportunity, new players are entering the BPC space, and the existing ones have started to scale their omnichannel presence.
The newest entrant in the space is Reliance Retail. The retail major forayed into the BPC market with its omnichannel platform, Tira, earlier last month. Along with launching its app, Reliance Retail also opened its flagship Tira store in Mumbai.
It is crucial to note that existing marketplaces like Nykaa and Purplle, and D2C brands such as SUGAR Cosmetics and Mamaearth, too, have started expanding their offline footprint, after scaling up their online presence.
Similarly, offline retailers such as Loreal India, Sephora, and Hindustan Unilever’s Lakme have increased their focus on expanding their online presence via direct-to-consumer websites.
Given that Reliance’s Tira has entered the market with an omnichannel playbook, piggybacking on its parent’s cash reserves, it becomes all the more important to understand what impact it will have in the long run on the existing players and industry dynamics.
According to the industry experts that Inc42 spoke with, the beauty and personal care market offers more than enough opportunities for multiple players to grow, due to multiple favourable factors.
“The BPC segment remains one of the fastest growing categories in consumer retail because the penetration of beauty products has remained relatively low. With increasing awareness, and more disposable income, the BPC segment has witnessed decent growth. Now, since the segment is growing, there is a scope for multiple players to grow. That is why some of the big players have entered into the market,” Ashish Dhir, EVP (consumer and retail), 1Lattice said.
Despite Dhir’s optimism, it is pertinent to note that Nykaa saw some initial pressure on its share prices and overall stock performance with the launch of Tira. Brokerage firm Macquarie said that the entry of new players such as Tira could exacerbate the problems for Nykaa at a time when the competition in the segment is already tough.
In the past, Reliance’s entry into the fashion ecommerce space with Ajio impacted leading existing players like Myntra. Now that we already have an example from the past, coupled with a falling will to spend due to factors like rising unemployment and inflation, it will be interesting to see how Nykaa performs under such pressure.
How Tira Could Threaten Nykaa & Ilks Dominance In The Beauty & Personal Care Space
It is no wonder that Reliance Retail will look at disrupting the market to emerge as a market leader as it has done in every segment.
Compared to sectors such as apparel and telecom, the BPC segment is different, and it is not very easy to scale here the way Nykaa has done over the years, according to Karan Taurani, SVP Research, Elara Capital. He noted that many other players in the past tried to scale but failed.
“Nykaa has emerged as a winner due to several factors such as a superior consumer experience on the app, trustworthiness, and product variety. Currently, the product delivery time is also lesser on Nykaa compared to Tira, although the latter could improve it. Moreover, Nykaa has created a network of influencers over the years, and its approach on social media is very different,” Taurani added.
He, however, highlighted that there will be an initial consumer churn as some customers will try Tira as well, and whether the new venture, Tira, can retain all these customers will depend on the consumer experience it provides.
As per Taurani, marketplaces like Nykaa will see some sort of pinch in terms of demand but will not have a significant impact until Tira offers a differentiated experience. Right now, Tira has very few differentiating factors.
However, we should not forget that Reliance Retail is experienced in building brands and has the heavy financial backing to scale in the offline segment.
Given that many players do not have much experience in the offline segment, they may see a visible impact facing the retail giant in the offline BPC space.
It is important to note that Nykaa’s consolidated net profit fell 70.7% year-on-year (YoY) to INR 8.5 Cr in the December quarter of the financial year 2022-23 (FY23), despite the festive season.
In addition, Mumbai-based beauty ecommerce startup Purplle’s net loss almost quadrupled to INR 203.6 Cr in the financial year 2021-22 (FY22) from INR 52 Cr in FY21.
An optimistic Dhir, however, likes to believe that Tira would only increase the competition in the segment and would not impact the profitability of its rivals, at least in the near term.
Will D2C Beauty & Personal Care Brands Face The Heat?
Along with conglomerate-backed large players such as Tata Cliq and online marketplaces, there are several Indian startups and brands such as mCaffeine, Mamaearth, Sugar and Minimalist, which are looking to capture a big chunk of the ever-increasing BPC market pie.
According to an Inc42 report, BPC will remain one of the fastest-growing D2C segments between 2022 and 2030, growing at a CAGR of 27%.
Talking about Tira’s impact, experts said these (aforementioned) D2C brands will not see any major impact due to two factors.
“Firstly, these brands will have similar arrangements with Tira as they have with Nykaa. Secondly, these brands have created a loyal customer base for the products they offer and they have their recall,” Taurani said.
“While deep-pocketed companies can spend their way into buying the market share, all brands need to be prepared for the long term. Also, for these brands a clear positioning be crucial to stand out, not just in their product and service mix but also the overall customer experience specific to their target audience. This would also give opportunities to several beauty and personal care brands to profitably serve niches that may be too small for the larger companies driving for the market, “Devangshu Dutta, the founder of Third Eyesight, said.
Also, Nykaa and Purplle have a portfolio of private labels, which includes skincare brands such as Dot & Key, Earth Rhythm, and Good Vibes, among others. Hence, it will not be surprising if Tira launches its private labels or acquires small brands to grow its portfolio.
As brands like Dot & Key, and Good Vibes are already direct competitors to these D2C beauty brands, a new player can pose more challenges for them.
What Else Could Work In Tira’s Favour
“Our vision for Tira is to be the leading beauty destination for accessible yet aspirational beauty, one that is inclusive and one that harbours the mission of becoming the most loved beauty retailer in India,” Reliance Retail’s executive director Isha Ambani said at the time of launch in April 2023.
When Reliance entered new segments like telecom and fashion ecommerce with Jio and Ajio, respectively, many of the existing players struggled to sustain in the segment as the Mukesh Ambani-led conglomerate scaled up quickly, thanks to its strong financial position. Hence, it will work as the biggest favourable factor in the beauty and personal care space as well, industry experts believe.
Tira is also expected to lure customers with big discounts. “For Tira, a big chunk of revenue will initially go towards marketing and customer acquisition, at least for the first couple of years, as it is a new brand. More than marketing, Reliance will look at discounting more prominently. Reliance will try to give higher discounts compared to other players,” Taurani said.
He added that Reliance has some expertise in building new platforms, such as Ajio, and a rich talent pool and strong brand exposure.
While players like Tata Cliq, Purplle, and Myntra’s beauty segment have tried to scale up in BPC, none of these players has seen significant growth. Hence, the market consists of one large player, making it easier for a deep-pocket player like Tira to carve its positioning quickly and create a duopoly with Nykaa.
At the time of Tira’s launch, the company said that the brand would offer a curated assortment of the best global and home-grown beauty brands. In terms of its offline play, Reliance Retail can leverage partnerships with global beauty brands and suppliers to get better deals. As it is looking at an omnichannel play at an entry stage itself, it may be able to gain market share from smaller beauty retailers, especially in bigger cities.
The Tira offline store will have the latest beauty tech tools such as virtual try-on to create customised looks and a skin analyser that will personalise and assist consumers in making purchasing decisions based on their needs, the company said.
On the luxury side, Reliance Retail is also directly targeting the market which has higher margins and could eat into the margins of Nykaa easily. It must be noted that Nykaa’s Luxe is still in its infancy.
While it is true that Tira will increase the competition in the BPC segment, it is not likely to rewrite the industry’s future over the next couple of years. Tira currently has very few differentiating factors in both the online and offline segments. Additionally, in the offline segment, Tira has opened only one store while Nykaa already has 141 physical stores across 56 Indian cities, as shared in its Q3 earnings report.
Even though there are glaring differences, some industry experts see Tira’s journey to be the same as that of Nykaa, going ahead.
(Published in Inc42)
admin
May 27, 2019
(The following is the video and the text of the Commencement Speech by Devangshu Dutta, chief executive of Third Eyesight, at the Convocation of the batch graduating in 2019 from the National Institute of Fashion Technology, Patna, India.)
I would like to just share a few learnings from my own career. I hope some of these learnings will provide you some food for thought, and if they stick, I hope they prove valuable to you in some way in your own career.
I think as a graduate of a professional institute, there are 5 life-skills or attributes or pieces of advice that could be useful to you.
Thank you so much for patiently hearing me out. I hope some of the advice would have resonated with you, and will prove useful. I wish you all the very best and offer you my congratulations, on behalf of all the other alumni – welcome to the industry. Thank you!
