Nykaa Inks Pact With Apparel Group To Expand Operations To Middle East

Nykaa Inks Pact With Apparel Group To Expand Operations To Middle East

SUMMARY

Nykaa’s board gave its assent for the partnership with the UAE-based Apparel Group on October 6

The move will enable Nykaa to leverage Apparel Group’s retail infrastructure in the UAE, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain

The announcement comes nearly a month after Nykaa closed the acquisition of discovery-led ecommerce platform Little Black Book

Beauty ecommerce unicorn Nykaa has formed a strategic alliance with the UAE-based Apparel Group to expand its operations in the Gulf Cooperation Council (GCC) region. 

This comes right after Nykaa received the backing of its board to strike an alliance with the lifestyle retail conglomerate. The Mumbai-based startup made the announcement in a regulatory filing to the bourses. 

As part of the deal, Nykaa will leverage Apparel Group’s retail infrastructure and deep market relationships to offer beauty offerings in the UAE, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain. The move will also enable Nykaa to scale its operations overseas and expand its user base to target the highly-lucrative GCC market.

“Poised for accelerated growth, especially in the beauty and personal care category, the GCC presents a large opportunity for Nykaa to extend its highly focused value offering and drive the region’s offline and online retail growth story with the Apparel Group,” Nykaa said in a statement.

On the other hand, the partnership will also enable the Apparel Group to offer a diverse range of products from the coffers of Nykaa and offer a unique value proposition for its consumers in the region. 

“Emboldened and encouraged by the love and trust of consumers in India, we now look forward to recreating our distinct beauty retail value proposition internationally, beginning with the GCC, with the Apparel Group…Through this alliance, we are confident of growing the GCC beauty market and bringing the best of both brands to a new world of consumers,” Nykaa CEO and founder Falguni Nayar said.

Echoing the sentiment, Apparel Group’s chairperson and founder Sima Ved said, “This alliance is going to be a new chapter in our expansion journey as we look forward to leveraging each other’s strengths and offering a unique value proposition to our consumers in the GCC region.”

The announcement comes weeks after the beauty ecommerce platform completed the acquisition of digital content platform Little Black Book (LBB) in an all-cash deal. 

Focus On Discovery-Led Ecommerce, Phygital 

As intent-led ecommerce makes way for a discovery-led paradigm, Nykaa has been revamping its operations accordingly. While LBB’s acquisition was a part of this plan, it has also strengthened its offline experience to woo more customers. 

Nykaa also opened 8 new physical stores across Pune, Coimbatore, Delhi, Ranchi, Ahmedabad and Kolkata in the first quarter of the current fiscal year and expanded its warehouse storage space by 2.3 Lakh sq feet by adding 7 new warehouses. 

Through its ecommerce platform, Nykaa offers more than 4,500 brands and around 4.6 Mn SKUs to a wide range of customers. It has a store count of 113 stores in 52 cities across India, and is now looking at international markets to shore up its user base.

On the other hand, the Apparel Group operates a chain of more than 2,000 retail stores and 75+ brands across 14 countries. The UAE-based group also claims to have a strong presence in South Africa, Egypt, Singapore, Indonesia, Thailand and Malaysia. 

The move to open up a base in the GCC can also be attributed to the presence of a large number of Indian expats in these countries. 

According to a report, Saudi Arabia and the UAE were the GCC’s two biggest beauty and personal care markets, pegged at $17.1 Bn and $6.6 Bn, respectively, at the end of 2021. 

Decline In Share Prices A Concern

The strategic partnership with Apparel Group comes close on the heels of a slew of announcements made by the unicorn to keep the investors glued to its stocks and to scale its operations in the current gloomy market scenario. 

Recently, Nykaa’s board approved issuance of bonus shares in the ratio of 5:1. The company’s shares rose over 11% following the announcement. However, they gave up the gains thereafter. On Thursday, the shares closed 1.64% lower at INR 1,285.20 on the BSE.

Shares of Nykaa, like other new-age tech startups, continue to bear the brunt of market volatility and negative investor sentiment. The unicorn’s stock has fallen by more than 53% from its record high of INR 2,574 it reached in November last year. 

Nykaa is looking to consolidate its position as a ‘house of beauty brands’ and has been on an acquisition spree, picking up stakes in D2C wellness and lifestyle brands such as Earth Rhythm, Kica, and Nudge Wellness.

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