Beauty lies in the eyes of the beholder. However, D2C brands like Nykaa, Sugar Cosmetics, Purplle, MyGlamm or Plum Goodness are unlikely to find anything beautiful about Reliance Retail's foray into the beauty sector.
On 5th April, the Reliance Industries subsidiary launched the Tira beauty platform, which has an app, website and 4,300 square feet flagship store at Mumbai's upscale Jio World Drive mall. This move caused worry lines to appear in India's burgeoning beauty and personal care (BPC) market, which is Elara Securities stated was a $15 billion market in CY21 and is estimated to grow at a 10 per cent CAGR until CY30.
An Avendus Capital report cites that online beauty and personal care shoppers are likely to quadruple from 25 million in FY20 to 110 million in FY25. This virtual space is exactly where brands like Nykaa, Sugar Cosmetics and Plum Goodness originated and earned their success from before adopting a well-rounded omnichannel avatar.
Will Tira, with Reliance Retail's finances and business, might behind it, put a wrinkle in their well-contoured plans?
Dressed To Kill
According to retail expert Govind Shrikande, former CEO and managing director of Shopper's Stop retail chain, it's essential to understand the makeup of the retail trade before jumping to oversimplified conclusions, especially since the beauty sector has changed drastically in the past decade. BPC's categories—skin care, makeup and fragrances—have distinct buyer behaviour, with the first two having a high customer loyalty level.
Retail chains like Shoppers Stop, MAC Cosmetics and Sephora concentrated on the premium end of the market through curated offerings. At the same time, brands like Nykaa, Purplle, Plum, MyGlamm and Sugar Cosmetics offered a wider assortment across varied price points through their digital-first platforms. This further opened the gateway for other D2C brands to enter the market.
While e-commerce platforms like Amazon, Myntra and Flipkart also tried to capture the online clientele, they weren't as successful since their horizontal marketplace approach did not help in the curation of the BPC product range.
"Reliance, like all its other retail ventures, is planning a big splash in this category through an omnichannel play. Considering the market size, it should be able to gain market share, especially from smaller beauty stores across pan-India," Shrikande added. "Moreover, with no distinct big leader, other than Nykaa in the online space, there is sufficient room for a new player with deep pockets to create a strong position for itself."
Karan Taurani, senior vice president of Elara Capital, believes that Nykaa is a better platform than Tira since it has a wider product variety, lower lead time in delivery, and a better app user experience. However, he admitted that could change in favour of Tira in the near to medium term, given its large-scale operations on the retail side. This, in turn, can help Reliance Retail garner a sizeable market share in the online BPC segment and have a negative impact on Nykaa’s growth in online BPC.
“We have seen many new entrants in the online BPC space due to reasons like lower discounting, increased penetration opportunities, demand for premium products and better profitability for platforms. However, Tira may increase the quantum of discounts in the near term only to drive increased traffic and customer base,” he surmised.
Beauty Is Not Skin Deep
While introducing Tira, Isha Ambani, executive director of Reliance Retail Ventures Ltd, said that the brand was aiming to democratise beauty for consumers across segments. "Our vision is to be the leading beauty destination for accessible yet aspirational beauty, one that is inclusive, and one that harbours the mission of becoming the most loved beauty retailer in India," she added.
Shopping behaviour has evolved within this segment as contemporary consumers are more experimentative, with growing awareness about distinct product attributes and an eagerness to opt for clean, sustainable merchandise. And they want an unfettered shopping experience—anywhere, anytime in physical outlets and online platforms.
Therefore, any beauty brand's success depends on its omnichannel presence. Prateek Ruhail, co-founder and CEO of beauty marketplace Vanity Wagon feels that Reliance Retail is playing its cards right by adopting an omnichannel approach.
"Post-pandemic, digital-first companies are finding it difficult to cope with the ever-increasing marketing and allied costs. Having a foot in the retail space allows a brand to balance out its bottom line," he elaborated. "Reliance Retail will definitely have the advantage of brand value, which customers will see in their stores. Because omnichannel strategy is likely to build trust early on!"
Here, There, Everywhere
That digital-native brands have focused primarily on digital platforms to build their presence is evident since it is part of the ecosystem's DNA. Many forayed into physical outlets for multiple reasons—tap more customers, retain existing ones or create better brand awareness.
Ultimately, beauty is an omnichannel business requiring significant investment to build a seamless and consistent brand experience across multiple touchpoints. Pakhi Saxena, Practice Head-Retail CPG at Wazir Advisors, noted that the online channel contributes around 15 per cent to the business, which will double in the coming two years. The offline channel will remain the dominant two-thirds of the BPC segment.
"An engaging ecosystem of social media, deep penetration of retail points, expertise across assortment, warehouse and logistics management, order fulfilment, and service grid, gifting and personalisation—these are all imperative for building an omnichannel platform. And this expertise is something that the Reliance Group has built over the years," she noted.
This does not mean that the other players in the beauty business have let the omnichannel opportunity pass them by. In 2022, Nykaa's new store openings stood at 45, taking its total store count to 141. It plans to add 50 more outlets by this year-end. This is despite offline retail accounting for less than 10 per cent of the company's revenue, as Nykaa's executive chairperson, MD and CEO, Nykaa Falguni Nayar, informed media persons during a post-earnings call in March 2023.
Sugar Cosmetics also has over 150 physical outlets and plans to augment this number. Most D2C brands opt for a shop-in-shop format, a kiosk in a mall or departmental store or an exclusive business outlet for their offline foray. However, this long-term and capital-intensive investment is not for the faint-hearted. And this is where Reliance Retail can bring its A-game.
Prashant Narang, co-founder of Agility Ventures, feels that Reliance Retail has shown its ability to invest in and scale up diverse businesses, such as telecom, retail, and e-commerce, with a long-term perspective. By integrating Tira into its existing retail and digital infrastructure, the conglomerate can optimise costs and resources while maximising customer value.
"Moreover, Reliance Retail can leverage its partnerships and collaborations with global beauty brands and suppliers to source and curate the best products and services for Tira. In short, while there are challenges in the omnichannel beauty business, Reliance Retail's track record and resources can give it a fighting chance to fare better than its peers," he stated.
Saxena, too, agrees that private labels tend to be successful post consumers enjoy the variants across brands and products on digital platforms. Hence, it is quite probable that Tira may explore private label accessible pricing over a few years to find a place in a consumer's shopping basket.
However, it would be overreaching to presume that a second player could define the future of the beauty sector, even one as strongly placed as Reliance Retail. What is more probable is a collective push of multiple entities that meet the varied needs of different consumer groups with a broader assortment of products across different price points.
There is also a possibility that startups could partner with Reliance Retail to offer niche or premium products, build loyalty programs, or tap into new distribution channels. Ultimately, the vast beauty sector is evolving quickly, and there is room for multiple players to coexist and thrive if they offer value, quality, and relevance to their customers.
