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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
April 7, 2023
Akanksha Nagar, Christina Moniz; Financial Express
April 7, 2023
Reliance Retail’s (RR) launch of an omnichannel beauty and personal care (BPC) retail platform Tira this week brought the fight in the $27-billion market right to the doorstep of entrenched brands such as Nykaa, Sephora, Shoppers Stop, Tata Cliq, Myntra et al. Along with the app and website, the Isha Ambani-led company unveiled a 4,300 sq ft flagship store at Jio World Drive at BKC, Mumbai, and is working to set up stores in at least 100 locations across the country over the next few months.
RR already sells BPC products via its large network of department store chains and on its JioMart platform and last year, acquired a controlling stake in makeup and personal care brand Insight Cosmetics. RR was also in talks with Arvind Fashions to acquire Sephora, but media reports suggest the deal was called off earlier this year.
Clearly, RR has been working hard to capture the lion’s share of the fast-growing market.
According to Statista, revenue in the market will amount to $27.23 bn in 2023 and is expected to grow annually by 3.38% (CAGR 2023-27). Calling it a bottomless market, Samit Sinha, managing partner, Alchemist Brand Consulting, says, “There is definitely a huge untapped opportunity for beauty. Though we have seen a fair bit of growth in India over the past few years, we have barely scratched the surface. Its consumers are no longer just women, but also men. Additionally, differences between young female consumers in small cities and those in metro markets are reducing.”
Taking on competition
No doubt Tira has a lot going for it.
Reliance Retail Ventures Ltd, through its subsidiaries and affiliates, operates an omnichannel network of 17,225 stores and digital commerce platforms across categories including grocery, consumer electronics, fashion and lifestyle, etc.
Sinha points out that RR has a huge advantage in terms of its distribution reach and suggests it look at tapping the huge, pent-up demand in the smaller markets more than the metros, as consumers in these markets today have similar aspirations as metro consumers.
When it comes to categories like colour cosmetics or fragrances, consumers still will opt for offline retail than online, especially in smaller cities since they have limited retail outlets for product trials. That is what Reliance should be focussing on – creating a large offline footprint for its brand and if there is any company that can meet that need, it is the large corporates like Reliance, he adds.
Distribution apart, RR also needs to have a very clear positioning for the brand, notes Devangshu Dutta, chief executive, Third Eyesight. “Differentiation is the key and for that, it has to be clear about what segment of the market it is targeting and its offering. RR formats and the online presence provides a certain possible viable size of distribution, but beyond that, it has to create its own distinctive position in the market.”
Of course, competition hasn’t been sitting tight. Online market leader Nykaa, for instance, has 141 stores and plans to add another 50 in 2023; Tata Group too has announced the launch of over 20 beauty tech stores in the country.
While it has opened multiple outlets, experts say, Nykaa is still primarily an online brand. And this marketing is getting increasingly cluttered.
The online BPC market is roughly around Rs 10,000 crore in India (which is $1.2 billion) and could double in the next 3-4 years, points out Karan Taurani, senior VP, Elara Capital. That means the category could grow to reach $2.5 billion in 3 to 4 years with a CAGR of 25%.
Also, the BPC market requires a differentiated approach compared to other categories, with a lot of influencer-led campaigns and other marketing efforts to build consumer recall. “Other companies have struggled to acquire the kind of success and growth that Nykaa has seen,” he says.
That said, we have all seen how Reliance’s Ajio has given Myntra a run for its money in the fashion category with heavy discounting; so it is quite possible RR will play spoilsport in the online BPC marketplace and give Nykaa tough competition in the medium to long-term.
Tira is leaving no stone unturned. Its online platform has shoppable videos, blogs, tutorials, trend-setting tips, personal recommendations, and a virtual try-on feature, while its brick-and-mortar store offers beauty tech tools such as virtual try-on, skin analyser, fragrance finder and gifting stations to personalise purchases, along with trained beauty advisors.
Even as Tira is looking to differentiate itself via technology or by offering personalised services, Nisha Sampath, managing partner, Bright Angles Consulting, believes the only way Tira can truly stand out will be through the experience it offers. The proof will lie in how seamlessly it guides the customer through the purchase experience, she sums up.
(Published in Financial Express)
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July 24, 2022
Written By Akanksha Nagar
Urban Company aims to bring quality, innovation and affordability to the unorganised beauty services market
As the pandemic started hammering the business, a sizeable number of beauty professionals who worked at salons jumped onto the up and coming tech-enabled home services marketplaces.
The bulk of the Indian beauty services industry remains unorganised and fragmented, dominated by expensive salon brands or small players that offer dubious products, inconsistent service and unsolicited advice. With a push from the pandemic-led restrictions, there has been a sudden rise of a clutch of organised, on-demand players that offer professional beauty care services in situ. Urban Company, for one, has witnessed a big rise in service calls in recent months, driven by rising aspiration levels and disposable income, and the growing demand for standardised and safe in-home services. The segment contributes over 40% of the total revenue for the company already. As per published documents, the firm posted a 13.8% increase in revenue from operations to `239 crore in FY21 compared to `210 crore in FY20.
According to Expert Market Research report, the Indian beauty and personal care industry attained a value of `54,558 crore in 2020, and is set to grow at a CAGR of 11% in the 2022-27 period. Of this, the Indian salon market, which stood at `55,000 crore in FY20, is expected to touch a whopping `2 trillion in FY25, at a CAGR of 28%.
Numbers aside, the spread of the Covid pandemic forced the industry to switch to reverse gear as many salons shut down permanently or closed down unviable outlets just to stay afloat. Enrich Beauty which had salons in cities like Mumbai, Delhi, Bangalore and Ahmedabad, for instance, shut down five salons since 2020, bringing the total count down to 83.
As the pandemic started hammering the business, a sizeable number of beauty professionals who worked at salons jumped onto the up and coming tech-enabled home services marketplaces. Says Anand Ramanathan, partner, Deloitte India, “Service aggregator marketplaces have helped increase organisation and bring standardisation in delivery.” It was a win-win for both the customer and the brand. Brands could directly engage with the end consumers and the customer was assured quality—of both the products used and the services rendered.
Mukund Kulashekaran, chief business officer, Urban Company, says the fundamental shift in the beauty service market has been in terms of improved quality. As long as the market remained fragmented, there was zero investment in training or upgradation of services, or in product innovation. None of the small regional players really had the wherewithal to take that leap.
Focus on quality
Urban Company devoted a lot of time and attention to training the service providers while also pursuing innovations to raise the standard of the products on offer. While it uses a number of high-end brands, it has also begun to develop its own to make its services more accessible and compete on a larger scale. It operates three levels of salons: the luxury (average ticket size `2,500), the mid-mass premium (`1,200), and the classic, which is at the economy end of the spectrum (`750) and uses proprietary products for the classic and mid-mass premium segments.
Quality is assured by continuous testing and keeping a sharp eye on customer feedback. There is also significant investment in training and automation. It currently has an in-house team of over 200 full-time trainers across 50 cities. It is stepping up investments in technology to both improve product quality and to act promptly on feedback.
The firm had introduced in-home hair and nail services for women amid the pandemic, which, Kulashekaran says, has scaled quite well. Demand for men’s salon services, launched right before the pandemic, has increased from 20,000 transactions pre-pandemic to as high as 150,000 transactions per month. It launched a Skin Clinic for laser and advanced facials in seven cities and has signed on more than two million clients already.
In terms of geographical spread, while the top ten cities account for more than 80% of its revenue, non-metros are rising fast in terms of revenue share.
Long haul
The company prioritises brand-related communication rather than performance-related. The focus is more on the video medium than the click-through media. So the focus area is TV, but YouTube in case of a targeted campaign.
In the next stage of expansion its communication strategy will be key. Jagdeep Kapoor, founder, chairman and MD, Samsika Marketing Consultants, says that while expanding beyond metros the brand has to be less urban in terms of perception and imagery and take into account the culture and taboos, and the differing definition of beauty.
Samit Sinha, managing partner, Alchemist Brand Consulting, says to keep up the pace of growth the brand has to invest in its service providers, and not just its customers. This is a business model that will not be difficult to replicate. The trick will be to incentivise the beauty care technicians so that they are able to offer high-quality services to the customer and have little reason to join a rival brand. The thing to remember: Like most other service businesses, beauticians too can bypass the company and establish direct relationships with customers — a phenomenon that has plagued the ride hailing and ride share services in India.
BOX: Staying on track (Insights from Devangshu Dutta, CEO, Third Eyesight)
Three factors that will determine success
• The customer sees the aggregation platform as the “provider” of service, rather than a listing agency. So the company needs to totally own the customer experience, end-to-end.
• Ensuring quality of service consistently is the biggest enabler for growth.
• Over time, UC has moved to this “ownership” of the experience, which does mean additional investment, but also pays off in the end.
Three factors that might undo the good work:
• If it doesn’t keep working on customer experience ownership, it could slip
• Margins/commissions need to be reasonable, otherwise, service professionals may abandon the platform
• Given the high customer acquisition costs, it has to drive repeats rather than one-time or low-frequency purchases.
Source: financialexpress
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June 24, 2022
Written By Christina Moniz
Prashanth Aluru, a former Facebook and Bain hand, will be behind the steering wheel for this venture
The Aditya Birla Group has just announced the launch of its ‘house of brands’ business entity, TMRW, to support digital fashion and lifestyle brands. TMRW, which will operate as a wholly owned subsidiary of Aditya Birla Fashion & Retail (ABFRL), aims to build and buy over 30 brands in the next three years, the company said in a statement.
With this move, the company expects to make its entry into the D2C market, which is expected to be reach $100 billion by 2025. “What a brand like Shoppers’ Stop does in brick and mortar, ABFRL is doing online. While in the past, the company was known for certain brands, it is now pivoting itself towards a wider pitch with bigger variety of brands that could potentially appeal to a wider range of consumers,” said Ankur Bisen, senior partner and head, food and retail, Technopak Advisors. The launch could be ABFRL’s next step in positioning itself as a fashion major, he said.
Prashanth Aluru, a former Facebook and Bain hand, will be behind the steering wheel for this venture.
ABFRL will compete with start-ups like the Good Glamm Group and Mensa Brands, among others. The number of D2C brands and online sellers in the country have grown over the last couple of years, and experts believe that TMRW could be the company’s endeavour to become relevant to new-age consumers. Brands like Reliance Retail and Myntra are going down the same path, says Bisen.
The opportunity is immense; according to a report by IMARC Group, the Indian textile and apparel segment reached $151.2 billion in 2021 and is set to grow at a CAGR of 14.8% between 2022 and 2027.
ABFRL, which has a network of over 3,300 stores across India, is home to brands like Pantaloons, Van Heusen, Louis Philippe and Allen Solly, and has partnerships with labels like Forever 21, American Eagle and more recently, Reebok. The retail company has also forayed into the ethnic wear business and has forged strategic partnerships with designers such as Sabyasachi, Masaba and Shantanu & Nikhil.
Having reported losses for the last three years, the company narrowed its losses to `108.72 crore in FY22 on the back of revenues of `8,136.22 crore. The company reported a 55% surge in revenues during the last fiscal. While Madura Fashion & Lifestyle contributed 68.4% to the company’s FY22 revenue, the remainder 31.6% came from Pantaloons, according to Bloomberg data.
Ambi Parameswaran, author and founder of Brand-Building.com, said ABFRL has already built a good retail presence for the brands in its portfolio. “There must be significant synergies at the back end, but the brands are managed separately,” he said. “I suppose the new venture, TMRW, will offer all these brands as well as all the other ethnic brands that ABFRL has acquired in the last three years.”
He said the synergies will probably lie at the back end with supply chain, logistics, finance and HR. However, the brands will most likely be given the space to build strong individual identities.
This is not the company’s first foray into the e-commerce space. ABFRL shut down its e-commerce venture, ABOF (All About Fashion) in 2017, though in August last year, it said the brand would be made available on Flipkart and Myntra.
A concept like ‘house of brands’ is potentially beneficial to both — the large conglomerates and also to the smaller, emerging brands that are acquired. In a D2C framework, niche brands that would otherwise find it difficult to navigate the established multi-layered distribution and retail channels see greater feasibility in connecting with their customers directly through digital channels.
According to Devangshu Dutta, CEO of retail consultancy Third Eyesight, this makes it viable to launch a product range, which would not be immediately entertained in established channels, and allows them to retain their distinctiveness. With the passage of time and with their growth, some of these brands could also expand into established modern retail and traditional retail formats and to a more mainstream audience.
“Large companies, on the other hand, can find it difficult to grow their existing brands beyond a certain pace, and often may not be able to break new ground in terms of product development and customer experience. At some point, inorganic growth by acquiring other businesses and brands becomes an important element of their strategy,” Dutta said.
The house of brands model, to be sure, comes with its fair share of challenges. Angshuman Bhattacharya, EY India partner and national leader – consumer products and retail, said the strategy must have clear synergies from an operations and distribution perspective. “Possible challenges could emanate out of the non-compatibility of categories with the distribution. Another potential challenge could be in supporting multiple brands with marketing investments, failing which the realisable value envisaged during acquisition could stay unfulfilled,” Bhattacharya said.
The other downside, as Dutta pointed out, is that over time there is consolidation of market power within a handful of companies. This has happened across the globe and across sectors, and can negatively impact consumer choice, supplier dynamics and pricing.
Source: financialexpress
admin
May 30, 2022
Written By Akanksha Nagar
Having acquired Patanjali Ayurved’s food retail business, the company has ambitious plans
While its edible oil business has been its mainstay, Ruchi Soya’s CEO Sanjeev Asthana is confident that the share of FMCG revenue could touch 20% this fiscal.
Ruchi Soya has its sights set on clocking `20,000 crore- `22,000 crore in revenue over the next five years from its FMCG business, after recently having acquired Patanjali Ayurved’s food retail business worth `690 crore. The Patanjali food portfolio comprises 21 major products, including top-selling items such as ghee, honey and juices, besides staples such as atta and spices.
To achieve its target, Ruchi Soya plans to launch a D2C (direct-to-consumer) channel in the next two months for its nutraceuticals business, with more categories to follow, while also increasing its investment on e-commerce and expanding its offline footprint. It is quite active across all key online marketplaces including Flipkart, Amazon and JioMart.
According to the latest Statista report, India’s FMCG market was valued at $110 billion in 2020, and by 2025, it is expected to touch $220 billion, as more brands adopt the D2C route. Several top FMCG makers, including Hindustan Unilever, Dabur and Emami, have launched D2C brands in the past two years.
Oiling other products
While its edible oil business has been its mainstay, Ruchi Soya’s CEO Sanjeev Asthana is confident that the share of FMCG revenue could touch 20% this fiscal. It is targeting `7000 crore in revenue from FMCG and `25,000 crore from commodity sales by the end of FY23. “Over the next five years, the revenue split between FMCG and commodities will be equal,” he says.
Furthermore, Ruchi Soya plans on consolidating and rationalising the Patanjali food portfolio, while simultaneously revamping some of its existing products. “The aim is to reposition the entire company towards being a food FMCG major,” says Asthana.
Following the acquisition, Ruchi Soya will be renamed Patanjali Foods (after regulatory approvals). Asthana says that brands such as Nutrela, Mahakosh, Ruchi Gold and Sunrich will continue to be marketed under their existing names, while all the businesses that are coming in from Patanjali will use the Patanjali brand in exchange for a brand licensing fee
evangshu Dutta, chief executive, Third Eyesight, says the company name change may work in its favour, since there is a large audience aligned with the image and values of Patanjali Group and its founder Baba Ramdev.
Casting a wide net
But not all is smooth-sailing. Alagu Balaraman, CEO, Augmented SCM, suggests for the company to scale up, it needs to build a robust traditional distribution network, since a bulk of sales still happens through these channels. “The cost of doing e-commerce delivery is significantly high,” he notes.
Ruchi Soya is working on those lines. Asthana says besides utilising Patanjali’s existing distribution muscle, it is expanding its offline retail footprint by adding 10,500 non-exclusive modern grocery stores and 4,500 exclusive ones every month.
Source: financialexpress
