Daybreak - Are Reliance's deep pockets enough for Tira to steal Nykaa's crown?

Episode Date: June 25, 2024

Nothing about Nykaa is strictly its own anymore. Back when it went public, it had no real rivals in the beauty space. But since then, things have changed. Last year, India’s largest retailer, Reliance Retail, officially entered the beauty space. It launched an omnichannel beauty retail platform called TiraReliance isn’t playing around. In the last year, it has made one thing clear: it wants to completely shake up the country’s  beauty segment. But even the Reliance legacy to back it up, Tira’s success in this space isn’t a given. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. There was once a time not very long ago when lifestyle e-tailer Nica could do no wrong.

Up until about 2021 when the company went public, it seemed to have everything going for it. To begin with, it literally created a category for beauty and personal care products online. Now, this was huge because before NICA entered the picture back in 2012, none of the other e-commerce giants like Flipkart or Amazon seemed to take cosmetics seriously. But when Nica started growing faster than most other VC-funded startups out there, everyone realized the power of selling lipstick and moisturizer online. Suddenly, e-commerce retailers recognize that beauty and personal care

was not a market they could afford to overlook. All thanks to NICA. But now, NICA seems to be becoming a victim of its own success. And it all started when the company went public three years ago. You see, the NICA IPO was a landmark moment in India's startup history. The response to it was phenomenal, its shares soared, and its valuation went up to about $14 billion. But as investor pressure grew, crack started showing up. Growth started slowing down. And don't get me wrong, Nika hasn't had a single loss-making quarter since it went public, but in the year ended March 2024, its profits were the same as two years earlier. 40 crore rupees. And all of this is actually just a symptom of a much bigger problem. The Kent Sita Ramanji puts it quite plainly in a recent

edition of his newsletter trade tricks. He said that there's nothing about Nica that is strictly its own anymore. And this largely has to do with the fact that back when it went public, it had no real rivals in the beauty space. Since then, things have changed. Just last year, in fact, India's largest retailer, Reliance Retail, officially entered the beauty space. It launched an Omni-Channel beauty retail platform called Tira.

It also acquired the rights to operate local stores of Sephora, the French beauty retailer. Basically, Reliance isn't playing around. In the last year, it has made one thing clear. It wants to completely shake up the country's beauty segment. But even with the Reliance legacy to back it up, Tira's success in the space isn't a given. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahil Philippos and I'll be joining Snigda every week to bring you one business story that is worth understanding and worth your time. Today is Tuesday. The 25th of June. Reliance retail may be India's biggest retailer,

but that doesn't mean Tira's success of the beauty space is a given. Because slow growth or not, Nike is still a formidable competitor. It still holds over 30% of the beauty market. And then, of course, there are other players like Flipkart-owned Mintra that have also entered the space. So if it really wants to shake things up, Tira has to figure out how to stand out in the space.

And that seems to be what it's trying to do. Straight of the bat, it has positioned itself as an omni-channel platform for premium brands, meaning it isn't an online first marketplace like Nike was when it started out back in 2012. Tira wants to be on an equal footing for its offline and online shoppers. This is because the company believes that the chances of getting a repeat customer are higher after a trial at stores. So they've gone all out to make the in-store experience, a customer can never forget. Today, the company has about 11 outlets across the country.

The very first store, of course, was a 4,300 square foot outlet in Mumbai's high-end Geo World Drive Mall. If you've been to a Tira outlet, you would know it's not your typical beauty store. It has really tried to differentiate its in-store experience. So it offers things like a skin analysis, virtual makeup trial tool, an interactive fragrance finder, a vending machine for free samples, though work.

They've pulled out all the stops in a way that only a reliance-run company can. But regardless of the Instrod experience, what really makes or breaks a beauty marketplace is obviously the variety of brands it has to offer. And Tira is doing pretty well in that department. In just a year, it's been able to onboard nearly 800 brands. About nine of them, like Deepika Parricone's brand, 82 East, US-based Laura Mercier, Blessed Moon, and allies of skin are exclusively offered on Tira. It has also managed to introduce some private labels.

It's launched about three so far. A Kind, a skincare brand, Nails Art Way, a nail care brand, and Tira Tools, which offers beauty accessories. But a reliance company or not, Tira is still the new kid on the blog. It has a long way to go before it catches up with NICA. Nica has more than 3,000 brands on offer. It has exclusive partnerships with 15 top-of-the-line interest. international brands like Charlotte Tilbury, the ordinary, and most recently global pop star Rihanna's

makeup line Fenty Beauty. Here's what's interesting. If Tira wanted, it could really am things up. Launch more stores, offer more discounts, go all out. It has the deep pockets to be able to do something like that. But it seems to deliberately be taking things slow. More on that in the next segment. Tira seems to be taking a conservative approach. At least that's what Satchan Dixit, lead analyst for internet companies at GM Financial had to say. Sachin said Tira is trying not to burn too much money. Perhaps that's because of Reliance Retail's public listing plans. In that sense, the brand stands out in the Reliance Industries empire.

It could easily offer discounts and freebies like Mintra has done in the last two years or open more stores, but Tira does neither, even though it needs to expand its premium portfolio and acquire well-to-do customers. You see, Tira is mostly focused on customers seeking premium brands. So it targets Metro and Tier 1 cities. A NICA brand manager said brands looking to tap customers in Metro cities or the Tier 1 market may lean towards Tira. But on the flip side, more affordable brands

that have a market in Tier 2 or 3 or regional markets will likely be biased towards NICA. For instance, in the case of Minimalist, a homegrown actives-based brand that is affordable for consumers in smaller markets. It'll go for NICA as it can get engagement from the platform's online reach while also being available in their offline stores in these regions. Now, when it comes to offering the best deal on products, Reliance took a very conscious call, never to fund discounts from their own pocket.

Instead, a Tira brand manager said Reliance would make them negotiate heavily with brands on discounts so they would be at par with Nica. All said and done, the Reliance legacy is an undeniable asset for Tira. And it's one that it continues to rely heavily on while bringing brands on board. You see, Reliance is able to provide its ecosystem and backing in terms of reach, stores and technology. In turn, Tira is able to provide social media support, on-ground and online marketing and better customer experience for these brands.

And then, of course, there is Reliance Reindeer. retail's huge offline presence. It has a network of more than 19,000 stores across 7,000 towns and cities. And if leveraged properly, this can come in handy for Tira. So what's next for the brand? Stay tuned to find out. With the way things stand right now, Tira has a long way to go. In fact, currently, NICA could potentially face more of a threat from Mintra.

The e-commerce platform has been going all out trying to get its customers to purchase more beauty products. its strong penetration in the fashion space is really working in its favor here. There's a lesson for Tira here. A former Tira manager said the company could do with taking a page from Mintra's playbook, particularly when it comes to competitive pricing. Like Mintra tapped, its massive customer base for fashion to try and expand in the beauty space, Tira seems to be trying something similar. This is where Aji O, the Reliance-owned fashion platform, plays a pivotal role.

Tira plans to tap into the user base of AGO, 20 million monthly active users, by providing an offering called Beauty by Tira, within the latter's app and website. But industry insiders say just that isn't enough. It's important for Tira not to limit itself to premium brands. Tira will also need to do what NICA does, cater to an audience that buys Mastige products. And for that, it would have to stop avoiding brands like Lotus, Himalia, or any of the HUL brands like LACME altogether and do more.

And only if Tira manages to pull that off, will it stand a chance. Only then can it become another reliance company disrupting another sector. Only this time, it'll be the makeup world. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted by Rahil Filippos, produced by me Snigda Sharma and edited by Rajiv Sien.