A little more than ten years ago, Nykaa upended the beauty industry by developing a specialized platform where none had before. The business, led by former investment banker Falguni Nayar, was rewarded by investors, which enabled it to list in 2021 at an 80% premium to its issue price. For the following few years, it remained the most popular choice among entrepreneurs because there weren't many well-funded competitors in the market.

However, the competition is rapidly catching up, so that light is already dimming.

In the $19–20 billion beauty and personal care (BPC) sector in India, Reliance Retail's Tira and competitors like Tata Cliq Palette, Myntra, and Shoppers Stop have intensified competition in the past year. According to Bengaluru-based Redseer Strategy Consultants, the Indian BPC industry is expected to reach $30 billion by 2027, accounting for around 5% of the worldwide opportunity. This growth may be attributed to Indian consumers' desire to feel and look well using organized beauty goods, both domestically and internationally.

Retailers, both online and offline, have seized the chance with great speed. In the past year, Myntra in particular has had remarkable success partnering with over 50 multinational firms in the cosmetics industry.

Shoppers Stop subsidiary SS Beauty Brands has increased its focus on beauty, bringing on board skin care brand Fre, makeup lines from Prada, Valentino, and Bath & Body Works, an American fragrance brand, as well as global makeup brand Nars Cosmetics from Shiseido, in recent months.

Industry insiders stated that Tata Cliq Palette, which debuted its first location in Navi Mumbai, features a selection of more than 1,000 domestic and international brands in the categories of tools, accessories, skincare, haircare, cosmetics, and fragrance. And Reliance's Tira, which now has 12 storefronts in cities like Mumbai, Pune, Delhi, and Bengaluru, has the same amount of brand partnerships (around 800-1,000 brands) both offline and online. and plans to open additional stores in the future.

What does it mean for Nykaa, the first omnichannel or online-to-offline specialist retailer?

"Nykaa's unique selling proposition has become less as more companies enter the beauty market and offer similar services," states Arvind Singhal, chairman of Technopak Advisors, a retail and management consulting firm with headquarters in Gurugram. According to him, Nykaa may have difficulty "finding that next disruptor to upend the market as it may require sustained investment in a competitive market."

The founder and CEO of Nykaa, Nayar, stated during the company's Investor Day last week that the store aims to expand its consumer, fashion, and beauty divisions over the next three years, as well as its footprint in international markets like the Gulf area.

The goal of the beauty industry, according to Nayar, is to expand at a compound annual growth rate (CAGR) of mid-to-late 20s until FY28. She said, "Yet Nykaa Fashion hopes to grow to 2.5–3 times over the next three years, with the goal of becoming Ebitda positive shortly after."

Increased investment will be necessary to maintain this rate of development, according to analysts like Latika Chopra of JP Morgan. In a study published on Nykaa on Thursday, she stated that "the pace of new customer acquisitions will have to accelerate and faster offline scale up will be key monitorables."