Orders restricted to a fraction amid lockdown, no magic moment: Nykaa CEO

CEO Falguni Nayar says in an interview to Viveat Susan Pinto that consumers continue to focus on essentials

Falguni Nayar, founder and chief executive officer of Nykaa, a beauty retailer, admits that orders per day are down to a ‘fraction’ following the nationwide lockdown, which has crippled non-essential retail operations. While the two recent back-to-back funding rounds, amounting to Rs 167 crore, led by investment firm Steadview Capital, are likely to help Nykaa mitigate the losses, Nayar says in an interview to Viveat Susan Pinto that consumers will continue to be focused on essentials till the dust settles on the pandemic. Edited excerpts:
 

We are less than a week away from Lockdown 3.0 ending on May 17. How do you see life changing for non-essential retailers?
 

I think everybody has realised there will be no magic moment in retail, especially, non-essential retail, once the lockdown is lifted. It will be a gradual recovery in beauty. Yes, consumer needs are there. Latent demand is strong and we will have to service it. But the ones who are strong in their servicing skills will survive. For now, the focus remains mostly on essentials.
 

You have 60 offline stores, apart from your online platform. Are any of them open following the relaxations given by states in the third phase of the lockdown?
 

Yes, some standalone stores are open in the orange and green zones. Stores located in red zones as well as in malls and shopping centres are not open. There are challenges in terms of distribution because 50-55 per cent of the beauty business, whether online or offline, comes from metros, which are all in the red zone. If you look at our online platform, we are doing a fraction of what we were doing pre-Covid in terms of orders per day. That is because half our pincodes fall in red zones, which we can service to a limited extent. Only beauty essentials are permitted in red zones.
 

What do you mean by beauty essentials and how is your catalogue divided across zones?
 

Customers in the red zones will only get products such as soaps, shampoos, and hair conditioners. These are essential products. Consumers in the orange and green zones will get a wider array of products (including cosmetics) to choose from. Again, the warehouses have to be adequately stocked to take care of these needs. We operate on an inventory-only model, implying orders will not be accepted if the inventory does not exist in the warehouse. And there have been challenges with regard to replenishment of stock, since manufacturers have also been focused on pushing essential products during the lockdown.
 

There is a view that online shopping will gain in the post-Covid world. How are you preparing for this?
 

Our first priority would be to ensure that inventory is available to service requirements. We have been studying markets that have opened after the lockdown. A case in point being China. There has been a bounce-back in terms of non-essential retail in China. But my own assessment is that the consumer shift in India would be gradual. Conversations with our partners, including manufacturers, also seem to suggest that.
 

Is it a concern that discretionary spending has taken a sharp hit. Nielsen data shows March sales for beauty and personal care have seen a decline and April is expected to be no better.
 

The immediate priority of the consumer in a lockdown is to stock up on products he/she considers essential - food and daily-use items. As far as the beauty market is concerned, I remain optimistic it will bounce back slowly, albeit steadily.