Myntra is selling lipstick and blush. Should Nykaa be worried?

On Myntra, she zeroed in on a nude shade sold by MAC Cosmetics, an American cosmetics manufacturer, called ‘Powder Kiss Lipstick’. She loved playing with a ‘virtual try-on’ feature. That’s a trial room of the online world where augmented reality and virtual reality technologies are used. Over live camera or through a selfie uploaded, one can check exactly how a shade looks and feels.

“Myntra’s virtual try-ons are great and addictive; the platform is so well-stocked; the search results are intuitive," the colleague told me.

But, she did not buy from Myntra. She bought the same lipstick from Nykaa. Why?

“I got a ₹420 discount. The listed price was ₹2,550. In addition, I also received a MAC cleansing oil free," she said.

Discounts work like magic in e-tailing and this is nothing new. For almost a decade now, Amazon and Flipkart have engaged in a battle to grab a customer at any cost. Many e-commerce companies, who couldn’t sustain the ever ballooning costs of customer acquisition, bit the dust. While that battle was mostly fought for mobile phones, other electronic items and household products, beauty is a relatively newer category. For many years, online beauty shopping was Nykaa’s playground. It’s getting crowded.

Last year, the Tata group launched beauty retail platform Tata Cliq Palette; Reliance Retail Ventures launched Tira to sell ‘mass and prestige beauty products’; Sephora, a global beauty retailer partnered with a subsidiary of Reliance Retail Ventures to develop beauty retail in India. Myntra, which became synonymous with fashion shopping online, now sees beauty as its second growth engine.

Myntra always sold some beauty products but there was little focus before the pandemic. In 2020, the company decided to build the category more strategically. In this short time, it has partnered with a host of premium domestic and international brands—apart from MAC, there is NYX Professional Makeup, Victoria’s Secret, Makeup Revolution London, Armani, Bath and Body Works, L’Oreal Paris, Lakme, Maybelline New York, Shiseido, Forest Essentials and Philips. Yet, as my colleague’s shopping behaviour shows, cracking this category won’t be easy. What exactly is Myntra’s strategy and why is the company so bullish on selling beauty products?

On a foggy morning late January, I caught up with Nandita Sinha, the chief executive officer of Myntra. She was in Delhi (Myntra is headquartered in Bengaluru) and we met at Shangri-La Eros, a plush hotel near Connaught Place. In a conversation that lasted well over an hour, over multiple cups of black coffee and cookies, she reasoned why Myntra stands a great chance to take on anyone in the industry.

Dress and a perfume

Before joining Myntra, Sinha worked at Flipkart for eight years, across product categories such as fast moving consumer goods, books, home and furniture. She knew that beauty and personal care was a large and growing market.

According to estimates by Redseer Strategy Consultants, a consulting firm, this market in India is expected to grow from $17 billion in 2021 to $30 billion in 2026, a CAGR of 12%—among the highest within the retail categories. The online beauty and personal care market is expected to grow even faster, at 27% annually between 2022 and 2026, to $8.4 billion. The growth is expected as the beauty business is getting organized. For years, India lacked the presence of large, organized beauty retail chains. Instead, customers would buy lip colours, kajal sticks and foundations from one-off beauty stores in their city. Now, online commerce chains have created more awareness around the category, product discovery is easier and they have been able to establish trust. In the business of beauty, counterfeits are a nuisance.

Sinha sees a clear synergy to play in this market because beauty is an adjacent space to fashion. Buy an evening dress, and you would want to get a matching lip colour, a makeup kit, a perfume.

“Myntra’s aim is to be a lifestyle destination. Beauty is a very natural extension of what this journey is all about," she told me.

Over the last many years, Myntra has already built a large consumer base, many of whom are premium fashion shoppers. The company claims that 55 million users visit its platform every month; it added 75 million new users last year. The trick will be to convert these users, who primarily shop for tees, jeans, dresses and shoes, into buyers of lipsticks, lip liners, blushes and concealers among others.

“Of course, the platform needs to be able to offer the right journey for the consumer," Rohan Agarwal, partner at Redseer, told me over phone. “For example, there is a lot more nuance beyond the size and fits that are there in fashion. In the case of beauty, the cataloging needs to cover skin tones, skin type, issue types, etc—the variety needs to be very dynamic and cohesive," he added.

Provided Myntra is able to give that experience, it can extend the lifetime value—an estimate of the average revenue generated over a period of time—of existing customers.

Sinha claims good results already among its top customers. “Our average order values continue to be higher for our top 10 million customers—they drive a lot of the growth in terms of how new categories are adopted," she said. Overtime, she believes, the adoption will penetrate deeper into its customer base.

As of now, one in three women shoppers on Myntra have already bought at least one beauty item on the platform and more than half of its ‘insider base’—consumers who are part of the company’s loyalty programme—have bought beauty, the company stated.

Nuts and bolts

There are many legs to how Myntra is going about building the beauty business.

First was to aggregate and curate the supply-side—the brands, domestic and international. In the last two years, like we mentioned earlier, it did manage to create that ecosystem of premium brands. There are over 1,500 beauty brands selling on Myntra today and about 25% of its beauty business is currently driven by luxury and international brands.

The second leg was banking on technology to create a differentiation. There’s the mother app and then a beauty app within the mother app. This helps in cross-selling. Technology investments have also led to more personalization. Apart from the virtual try-on we mentioned earlier, there is a ‘skin-analyzer’. The app integrates with Revieve, a Chicago and Helsinki-based company that provides artificial intelligence and augmented reality-powered solutions. It will ask you a series of questions before analyzing your skin type. Product recommendations follow.

“We saw great traction in terms of how consumers are responding—there is a 20% to 30% higher conversion rate for consumers who interact with these tools," Sinha told me during the meeting.

Beauty also has a big content part. Nearly all beauty platforms look like media companies, very similar to the approach fintech companies dealing in personal finance and markets have taken. Unlike fashion, which is about visual inspiration, beauty is about application. New consumers, particularly GenZs, need to be educated about applying foundation or mascara. “Ten years back, India used to be a kajal and lipstick market. Education has helped democratize the market," Sinha said.

Myntra, on its part, has created “snack-able content" to help users understand a product and its application better. In parallel, the company invested in a ‘beauty squad’—influencers on social media—who push doses of inspiration regularly, apart from educating buyers.

The other building block was the supply-chain. Beauty is a tad different from fashion. While fashion products don’t have an expiry date, beauty products do. So, the company had to put in place expiry date management processes, replenishment systems and inventory placement systems, also optimizing them for speed. Remember, we have become impatient. We simply don’t want to wait two days for a product to be delivered.

“We were able to grow 3x versus the industry in beauty in the last one year and continue to be a big partner for many key brands in the country," Sinha said, underlining the early success, partly because all the nuts and bolts of the backend systems are in place. “Today, we are the fastest growing partner for many big brands. We continue to drive a large part of their e-commerce growth," she added.

Second engine

To hear what brands think, I spoke to a few executives. One of them works with LoveChild By Masaba.

Designer Masaba Gupta, who is known for designing bold prints and fusion outfits, unveiled her beauty line in 2016-17 as a limited edition of lip colours in association with Hindustan Unilever Ltd’s Lakme brand. In 2022, she launched a fresh range of cosmetics under LoveChild. Today, the brand sells everything from concealers to perfumes. It was listed on Myntra last year.

“Myntra beauty is a channel to watch out for and brands like us will be foolish if we don’t invest in it," Pratik Mukherjee, business head of beauty, Lovechild by Masaba, told me over phone from Mumbai.

“That’s because the captive audience of fashion is actually good for cross selling beauty—both skin and makeup. Brands and beauty marketers need to build the number two growth engine after Nykaa and that answer is still missing. Maybe Myntra can be that growth engine for beauty e-commerce," he added, sounding hopeful.

So, while Myntra is looking for a second growth engine, beauty brands need a second alternative, too. There is Flipkart, of course, but beauty brands perceive it as ‘mass’ rather than premium.

Nykaa is currently the largest online beauty platform for LoveChild followed by Amazon. Prices for its products range between ₹1,000 and ₹1,500.

“Flipkart is more mass where brands sell lipsticks priced at around ₹200 to ₹300. These brands are doing better on Flipkart. I think the top five million consumers will be on Myntra from a socio-economic point of view. And the ones below 10 million will be more on Flipkart," Mukherjee said, further explaining why Myntra matters to his brand.

Another seller who didn’t want to be identified said that the competition, Nykaa particularly, is closely watching Myntra’s moves—more closely than Reliance’s Tira. “Myntra is hungry for growth and ready to accommodate brands to grow. It’s more about getting customers to use beauty along with fashion. For some premium direct-to-consumer brands, Myntra is already touching 60-70% of sales they do on Nykaa," the seller told me.

The Moto G moment

It is early days but Myntra appears to have grabbed reasonable eyeballs. Nonetheless, the path ahead will not be that rosy. Unlike Nykaa, Myntra is still making losses. It reported a total loss of ₹782 crore in 2022-23 compared to Nykaa’s profit of ₹25 crore in the same year. A new pricing war in a hot segment is almost a given—my colleague would have happily shopped for her Powder Kiss on Myntra if there was a similar or more discount on offer compared to Nykaa.

Second, analysts point out that Myntra would need more brand partnerships, particularly exclusive partnerships, to establish itself as the go-to beauty platform. Nykaa has exclusive brand partnerships with a range of players—E.L.F, Urban Decay, ColorPop, Charlotte Tilbury and Sol de Janeiro among others.

Sinha, who came from Flipkart, knows well that exclusives can fire up an e-commerce company. Flipkart’s rise in electronics was propelled by exclusive mobile phone deals—a decade back, it tied up with Motorola to exclusively sell Moto G phones, boosting sales to $1 billion in 2014. Many view this as the inflection point in India’s e-commerce story.

“Nykaa has done a phenomenal job on customer engagement and education in beauty. Myntra has innovated on multiple fronts in the fashion customer journey but fashion does not require a lot of customer education unlike beauty," said a market watcher who didn’t want to be identified.

“Myntra has no past expertise in beauty. It would take some time for them to build up that portfolio," the executive told me.

Things will probably turn more interesting two years from now.