Beauty companies are experiencing slower growth, prompting them to shift towards offline and quick commerce channels to enhance profitability. E-commerce growth has decelerated due to market saturation as direct-to-consumer brands emerge, leading to a strategic pivot to broader retail opportunities. Notably, investments in quick commerce are gaining traction, indicating potential for resurgence in the beauty sector.
Beauty companies are currently in a phase of subdued growth, prompting them to seek revitalization through both offline and quick commerce channels. The rise of direct-to-consumer beauty brands and market saturation on traditional e-commerce platforms have contributed to this slowdown, with industry experts noting an increase in competition that has shifted the focus towards achieving profitability. Anurag Kedia, co-founder of the beauty and personal care brand Pilgrim, observed that between 2015 and 2022, e-commerce sales in beauty surged due to significant investments, but there has been a notable change. “Now we are on a very high base and all the companies are under pressure to turn profitable,” he remarked, adding that the growth rate for e-commerce channels has slowed to 20-25% annually, down from previously recorded rates of 50-60%. Despite these challenges, Pilgrim experienced a fourfold revenue increase in fiscal year 2023, achieving Rs 76.4 crore. Similar trends are evident with other companies. For instance, Plum Goodness celebrated a revenue growth of 71% in 2023, yet its topline growth dwindled to just 22% the following year, accumulating Rs 327 crore in FY24. Honasa Consumer, the parent company of Mamaearth, observed only a 29% topline growth in FY24 compared to a remarkable 58% the prior year. Additionally, Wow Skin Science faced a decline in revenue for the second consecutive year in FY24, while Mumbai-based Purplle also reported a decrease in growth rate after a more than doubling of topline in FY23, now at 43% for FY24. The deceleration in growth rates has affected omnichannel retailers such as Nykaa, which noted BPC segment growth slowed to 25% in FY24 from 32% in the previous year. Satish Meena, an e-commerce analyst at Datum Intelligence, noted the market’s saturation due to an influx of new brands necessitating expansion into quick commerce and traditional retail avenues as a means for companies to diversify their consumer reach. This strategic pivot towards quick commerce has garnered positive investor attention, with Purplle recently closing a funding round led by the Abu Dhabi Investment Authority, raising Rs 500 crore to complete a total of Rs 1,500 crore in financing. Moreover, brands such as Foxtale and Traya have successfully secured investments, highlighting the market’s resilience and potential for growth despite current challenges. According to an investor from a Bengaluru-based venture capital firm, “Many new categories have hit the market with interesting growth levers” suggesting a reinvigoration of market dynamics through innovative product offerings. Foxtale, a nascent skincare brand, marked significant growth with revenues reaching Rs 84.4 crore in FY24, although it also reported a threefold increase in losses. In contrast, Minimalist achieved doubled profits to Rs 10.8 crore alongside an 86% revenue increase to roughly Rs 350 crore, illustrating the variable impacts of market fluctuations. Industry analysts anticipate the emergence of several beauty brands exceeding the Rs 400-500 crore revenue benchmark in India, while established players like Nykaa, Myntra, and Reliance’s Ajio continue to enhance their footprint within the beauty sector.
The beauty industry has experienced a significant shift in dynamics, moving from rapid growth phases characterized by high e-commerce sales to a more challenging environment where profitability is now paramount. The proliferation of direct-to-consumer brands has intensified competition, leading to market saturation and necessitating a reevaluation of growth strategies. Companies are now compelled to diversify their channels, exploring opportunities in quick commerce and offline retailing to broaden their customer base amid declining growth rates in traditional e-commerce platforms.
In conclusion, the beauty industry’s current state reflects a critical transition from aggressive growth primarily driven by e-commerce to a more cautious approach focused on profitability and diverse sales channels. The rise in competitiveness and the saturation of e-commerce platforms have prompted brands to seek alternative means of reaching consumers, such as quick commerce and offline expansion. Despite the sluggish growth rates reported, the market remains vibrant, with several emerging brands poised for significant success and investor interest.
Original Source: m.economictimes.com
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