Nykaa Fashion Charging Convenience Fees To Push For Profitability: CEO Adwaita Nayar

Nykaa Fashion has started charging an additional ‘convenience fee’ on all orders, Adwaita Nayar, the CEO of the vertical, told analysts on August 11.

The convenience fee ranges between INR 29-99. 

“Nykaa charges a nominal INR 29 ‘Convenience Fee’ on all orders. This fee ensures a strong fulfilment network for timely delivery of your items,” a pop-up on the app reads. For orders below INR 500, a shipping charge of INR 70 gets added to the convenience fee, bringing the total to INR 99 for an order.

Incidentally, the charges are only limited to the Nykaa Fashion app and are yet to be introduced on the main app. For now, Nykaa has not come out with plans to roll out a similar fee on its core app.

“We’re doing a lot on cart charges. Even Zomato and other companies are starting to levy a lot of charges at the cart level, whether it’s around shipping or returns or whatever. So, we do feel that there is a margin opportunity in putting some level of charges on the cart level to drive better customer behaviour. That will also drive some amount of profitability,” Adwaita Nayar told analysts on August 11.

Nayar also admitted that Nykaa Fashion was not performing as per internal expectations, adding that Nykaa does not want to lose money while building the business. She said the company has no growth concerns regarding Nykaa Fashion.

Nykaa Fashion Sees Another Grim Quarter

“We’re not at all giving up on the growth targets that we believe this business can achieve in the year. Yes, Q1 was a bit odd but Q1 was a bit of de-growth or flat for a lot of the fashion folks. We still took market share but yes it wasn’t up to our overall expectation from a growth point of view,” Nayar said.

The listed ecommerce platform has joined a growing list of ecommerce players charging customers additional fees. The likes of Myntra, Zomato, Swiggy and others have also been charging similar fees for each order to bolster cash flow. Given the high order volume these brands receive, a nominal fee goes a long way towards increasing cash flow.

The contribution of the fashion vertical to Nykaa’s total GMV contracted to 24.5% in the quarter ended June 30, 2023 (Q1 FY24) against 27% in the year-ago period. Overall, the BPC vertical’s GMV jumped 12% YoY to INR 653.7 Cr in Q1 FY24.

The fashion arm improved its GMV contribution from existing customers, as they accounted for 44% of the volume during the quarter.

Meanwhile, operational metrics saw an uptick as the number of orders logged on Nykaa Fashion rose 12% year-on-year (YoY) to 1.3 Mn in the quarter. Annual unique transacting customers zoomed 30% YoY to 2.6 Mn, while cumulative traffic to the vertical jumped 7% YoY to 126 Mn at the end of June 2023.

Average order value (AOV) hovered around the INR 4,413 mark, rising a meagre 1% compared to the corresponding period last year.

On a group level, Nykaa’s consolidated net profit rose 8.2% YoY to INR 5.4 Cr in Q1 FY24, growing from INR 5 Cr in the year-ago period. Sequentially, profits soared 138% from INR 2.3 Cr in Q4 FY23.