The debut of Tira, Reliance Retail Ltd’s omni-channel beauty platform, is set to increase competition in the beauty and personal care (BPC) segment.
Tira’s first store opened in Mumbai last week, and analysts at Jefferies India who visited the store said, at 4,300 square feet, Tira is quite large for a BPC specialist store. “Reliance also recently soft-launched an online version with a wide assortment, including mass-to-premium offerings. Competition is certainly heating up against Nykaa—need to watch the space,” they added in a report on 12 April.
Though this increased competition is a new headwind for FSN E-Commerce Ventures Ltd, the parent company of Nykaa, it is too early to determine Tira’s impact on Nykaa’s market share from a near-term perspective. Nykaa’s BPC segment remains strong at present and the company is likely to see higher growth rates in the March quarter (Q4FY23) compared to Q3.
Analysts at Elara Securities (India) said, as things stand, Nykaa’s online platform outperforms Tira due to factors such as variety in stock-keeping units, lower lead time in delivery, and a better app user experience.
While that augurs well, discounts tend to play a role in boosting customer purchases. The discounts offered by Nykaa is lower compared to Tira, note Elara analysts. In other words, this could attract customers for Tira.
“The premium customer base focuses on factors such as user experience and products being delivered on time, where Nykaa has carved a niche. This is not likely to be disrupted by new brands easily,” said Karan Taurani, analyst at Elara Securities
As Tira grows, it could potentially offer a better experience than Nykaa, affecting the latter’s market share.
The intensifying competition in the BPC segment comes at a time when demand in Nykaa’s fashion segment is not picking up adequate pace. Lower discretionary spends has weighed on the segment. This vertical formed about 26% of Nykaa’s gross merchandise value in the nine months ended December. The company in its Q4 update said that it expects the fashion business’ net sales value to see subdued growth.
Investors should watch for any positive surprises in Nykaa’s fashion business during the upcoming Q4 results and track the evolving competitive landscape in the BPC segment. So far, Nykaa’s shares have declined by 18% in 2023.