Good evening, everyone. This is Vijit Jain from Citi Research. Welcome to FSN E-Commerce Ventures Limited 4Q FY 2022 earnings call. From the management at Nykaa, we have Falguni Nayar, Executive Chairperson, Managing Director and Chief Executive Officer. We have Anchit Nayar, Chief Executive Officer, Beauty eCommerce. Adwaita Nayar, the Co-founder and CEO of Fashion, and Arvind Agarwal, CFO, will also join the call shortly. I'll now hand over the call to Falguni for opening remarks and the presentation, and then we'll open it up to Q&A. Over to you, Falguni.
Yeah. Thank you, Vijit. I just... I'm really happy to be here in front of the investors and analysts for this call today. While I take you through our detailed presentation, I just wanted to say that we have made an extra effort to share additional information on a number of additional areas, including separate unit economics for beauty and fashion, as well as our new business growth, as well as some additional information on our new business, I mean, on businesses like physical retail and others. I hope that enables a better understanding of our business for each of you. Some of the KPIs that we normally share have also been shared, and there are a few more KPIs which probably will be shared on an annual basis.
With that, I'll start with the fact that we do believe that it's been a strong performance through the year with our GMV growth at 71%, which is a year-on-year growth which has taken our GMV to INR 6,933 crores. Our revenue growth has been 55% at INR 3,774 crores. I want to point out once again that our business in beauty business, we are inventory-led and hence we book our sales, whereas in case of fashion, we are a market-based business, and we only book our commission income. It was this need for differential accounting that we saw that we need to share additional information, which we've shared, and we'll see it later.
As far as gross profit is concerned, our gross profit is at INR 1,644 crores, which is a 73% year-on-year growth, and our gross margins have come out at 43.6%, which is a very healthy growth, gross margin for the consolidated form. On the EBITDA side, our EBITDA has come out at INR 163 crores, just about a 4% growth year-on-year, and the margins are at 4.3%. We believe that there are three big reasons for this. One is accelerated customer acquisition leading to higher marketing costs, some adversity on fulfillment costs during the year, and we've had strategies to counter that, and I'll talk later about those.
Also emerging mix, where we are investing in new businesses, where fashion we have clearly made an investment, as well as in our new businesses of the Superstore and, Nykaa Man, and I think that's also clearly spelled out in later slides. Since we're talking about it here, I'll come to it then. On the PAT side, our PAT came out at just, INR 41 crore, almost 33% de-growth. However. The margins is at 1.1%, but this is also reflective of the fact that we have now accelerated our store rollout, with, and also warehouse rollout with its associated, hit in terms of depreciation and amortization. Next. This all.
We believe that this is a great performance in the midst of macro challenges like rising inflation, reduction in discretionary spend by the consumers, as well as COVID uncertainty. There were two rounds of COVID uncertainty, first being in April, May, June. All of you are aware that the Delta variant was very, very adverse, and there were lots of fears, and India suffered. Nykaa continued to do business in that adverse condition. There were impact on supply chain as well as warehouse network and further rollout of our warehouses during that period, affecting some amount of fulfillment costs in the beginning part of the year.
Similarly, in January, again, there were COVID fears for Omicron and a lot of celebratory weddings and many other things were canceled, leading to, again, some amount of subdued demand in that quarter. Rising inflation is affecting to a certain extent, and consumer companies are passing on higher prices to the consumer. We do believe that there is some impact of rising inflation and reduction in consumer discretionary spend in our categories also. However, we do, we feel that we've come out with strong result in spite of that. This is a very big point, that Nykaa is pursuing diversification to address larger total addressable market. If you look at our business in 2019, we had 98% of the business coming from beauty.
Our GMV was INR 1,650 crores. We have grown it since then to almost INR 6,933 crores, and total addressable market has also grown. Our growth has accelerated to 71% year-on-year. This has been achieved through fashion, which now accounts for 25% of our GMV. Now we are doing a similar growth ambition by introducing our Superstore business as well as Nykaa Man. If you go to the next slide, I will talk a little bit about this diversification strategy. Like you can see that in beauty, we are going deeper. Beauty TAM, likely TAM in 2025 is $28 billion.
Composition is not just dot-com, but also organized retail will also grow from 19% to 30%-35%. Towards that, our answer is through our own store rollout, where Nykaa retail stores under three formats are servicing and catering, and we are again expanding our network. We've also entered GTMT distribution space, though it will grow or degrow from 72% to 41-50% of the market, but it is still a large business. To that effect, we have entered into Superstore, which is allowing our brand partners to sell their brands through GTMT network throughout the country. We'll talk a bit more about this later.
On the fashion side, entering fashion market was addressing a larger TAM, and we of course started with dotcom business, which will address almost 22%-27% of the market going forward. Even if we have a small market share, it'll be a substantial business. We have only one store on Nykaa Fashion side right now, but we will be going into some amount of physical retail with the right format that makes sense. At the moment, we are not considering the GTMT business on the fashion side, except for some individual brands like Nykaa. Next. This has led to a very strong growth on our GMV. Like you can see, our consolidated GMV came out at 71%, highest in last three years, and CAGR is also 61%.
On the beauty side, our GMV has grown 49% this year. We do believe that fashion GMV, which grew at 168%, allowed us to deliver superior growth. We are scaling very well in a highly competitive category like fashion. In beauty also, we do believe we are strengthening market share, because this is a very healthy growth in GMV in the beauty business. On a consolidated business through diversification, we are accelerating our growth. Others includes the new business verticals, where we are now at INR 183 crores of GMV, but these will grow going forward. You can see that on a small base, these businesses are growing rapidly.
Coming to our key growth strategy, I think you have to say our number one growth strategy has been driving customer acquisition and retention across the funnel journey, and I'll come in into the details of those. Here you can see that, we continue to grow our app downloads, which are now for beauty alone, they are at 47.3 million app downloads in aggregate. On the visit side, again, we have accelerated the visits, and they have grown at about 34% on a year-on-year basis. Our monthly active users have grown very nicely to almost 20.8 million monthly active users on beauty alone. A huge growth of 54% from the previous year. Number of orders have also grown to 58% year-on-year, from a year ago.
I think, just we'll comment on 2020-2021, the number of orders grew small, like you can see hardly any growth, and a lot of investors asked me for that. I think at that point, Nykaa took a conscious decision to make our shipping policy and our minimum order policy stringent because in a COVID impacted year where we wanted to conserve both our expenses as well as our physical warehouse capacities were limited. We took a conscious call to not allow marginal low AOV orders. However, that does have some impact on customer acquisition, and now our shipping policies are back to normal levels, pre-COVID levels.
On the new customer acquisition, I think that has accelerated in beauty, where we had a 4.4 million new customers acquired over this is a 49% growth over last year. Our trailing twelve-month customer numbers have also grown by a similar 49%. It now stands at 8.4 million customers have bought on Nykaa platform over last twelve months. On the AOV side, there's a slight dip because of the shipping policy now going back. We obviously had huge gains during COVID time, like you can see where our AOV had gone up by 36%. We have tried to maintain most of that gain, and in spite of lenient shipping policy, it's just come down slightly.
Our existing and new customer mix, and this is not new versus repeat, but it's new customers are all customers acquired within a year. They have accounted for 27% of our GMV share in beauty business, with 73% coming from pre-existing customers. If we go further to fashion business, here app downloads are now at 25 million lifetime app downloads, up from 10.9 million a year ago. Visits are up 156% to 441 million visits. Monthly active users stand at 15.3 million versus 5.8 million a year ago. Again, a very healthy growth. All of that resulting in order growth of 120%, from 2.4 million to 5.2 million.
Moving forward, on the new customers, we acquired 1.6 million new customers in fashion, compared to 0.6 million last year. The trailing 12 month customers now stand at a healthy 1.8 million against 0.6 million last year. Again, growth of 182%. AOV in fashion continues to improve, even on a high base, and all of you know that this is far higher than the competitor's AOVs. Even in beauty, our AOVs are higher than the industry AOVs. On existing and new customer mix, 74% of the business GMV came from new customers, with 26% coming from existing customers. Next. We also wanted to develop deep relationship with diverse set of domestic and international brands. May I request Anchit to come in on this? Or I'll just take it for now.
We have more than 3,000 brand partners on the beauty side, and we are continuing to bring international brands into the country. We have introduced more than 22 global brands through our imports business, and more come through other distributors and retailers. We are also very focused on what we call as ESG strategies, and we now have a Conscious at Nykaa catalog. You know, we have a Conscious at Nykaa curation on the website, where conscious products which are classified into whether they are you know whether they're nasties free or whether they are you know not tested on animals. A number of those strategies are being reflected on each of the products.
There is this Conscious at Nykaa tag on all our brands and their SKUs. We also are helping customers discover new niche brands through Hidden Gems, as well as through Beauty Bazaar. We are helping them discover Made in India brands. What is interesting on the right-hand side is that our GMV mix has been very healthy, and each of our categories growing very nicely. Makeup, which is our biggest category, has also grown by 40% year-on-year. Skin has grown by 50% year-on-year. It's become a very large category, sometimes at par with makeup. On the hair side, we are growing at 60% year-on-year, including bringing professional offering to the customers. Many other categories like fragrance, mom and baby, health and wellness, and appliance, which we cater.
We add together, they have grown by 80% year-on-year. With that, I think on the fashion side, may I request Adwaita to come in on the short term.
Perfect. I'll jump in. You know, folks, it's been about three years of really trying to build this business. A large part of our strategy over the last two years has been very aggressive brand onboarding, making sure that we have the absolute best assortment for our customers. We continued with that momentum of aggressive brand onboarding last year. You know, I think another big pillar for the fashion business remains curation. That is one of our big differentiators. We launched a couple of different properties that helps us bring very interesting pegs to the customer. Things like Hidden Gems, where we travel the country to get, you know, very interesting, unique brands to the customers. A huge emphasis on sustainability and responsible fashion, and also plus size fashion.
The table on the right just gives you a sense of the sheer size and scale of the catalog. That is one of the differences between fashion and beauty. There's just a lot of products and style out there that is, you know, proliferates across a whole bunch of brands and subcategories. A big decision we took this past year was beyond women, can we also have a play in men, kids, and home? All divisions that we ramped up this past year. Today we see that those new divisions, as we call emerging divisions within our teams, is growing very fast, much faster than the women's business. While women's remains a majority, we're pretty confident that these will be good growth levels in the future. That is men, kids, and home. Moving on.
I think, going on the theme of penetrating through the value chain, I think we are expanding our physical store network. This is just an image of one of our stores. Here you can see that Nykaa has expanded the physical store network to 105 stores by the end of March 2022, and these are in 49 cities. Our physical retail has grown at 72% GMV year-on-year. The GMV share of physical retail has ended at 7.5% in the quarter four of 2022. Full year is still at 6.6 because, like I pointed out, there were many factors that impacted the physical store performance in the first half of the year, mainly COVID related.
We've also for the first time shared our GMV per square feet in our stores, which runs at 3,442 INR per sq uare feet per month, and the average size of our stores is about 940 sq ft per store. The second strategy has been to continue to expand our fulfillment centers. We now have 23 warehouses in 11 cities with 8.2 lakh sq ft of capacity. We have added almost 2.4 lakh sq ft in financial year 2022, which is about 40% year-on-year growth. This regional warehouse capacity expansion is a strategy which will help us save fulfillment costs through savings in air shipment as well as, you know, faster order to delivery for the customer, resulting in, you know, better customer experience.
We are now able to service almost 98% of pin codes in the country, and almost 95% of orders are delivered within five days. In fact, in metro and other areas, a lot of orders are delivered within 48 hours also. Next. I think this is about our Superstore business, which we launched about six months ago. I think here we are trying to be vertically focused on beauty and personal care and wellness brands, where we are trying to play a distributor and a wholesaler role, selling these products to retailers with the margins that is passed on to them. Here we are trying to serve underserved retailers like beauty stores, pharmacies, salons, and kirana stores, more premium kirana stores.
We already have about 18,800 transacting retailers on this platform by the end of quarter four in 302 cities, and the number of brands listed are 134. I would say that these are very early days. We've just launched it, and the platform seems to be doing well, and lots of growth, a long journey ahead, as the addressable TAM is very large. I think all of you are aware that Nykaa has believed in creating, acquiring, and scaling a portfolio of independent and new age consumer first brands. In makeup, you know that Nykaa has a number of own brands that we've launched over the last five years, six years, beginning with Nykaa Cosmetics, later Kay Beauty, which is our first celebrity beauty brand.
On the skincare side, we now have Aderma a skincare brand called Nykaa SKINRX, as well as a Korean beauty brand called Nykaa Skin Secrets. On the haircare side, under Nykaa Naturals, we have an extensive haircare range. Going to the next page, we also have a Wanderlust range, which is our bath and body range. We've gone in for acquisition of three businesses on the beauty side. One is Dot & Key, where we now own 51%. It's a premium skincare brand and with very specific solution for customers. We have also invested in a sustainable skincare and personal care brand called Earth Rhythm. We have a smaller share here. We are jointly promoting a nutraceutical beauty brand called Nudge, which is towards superfoods.
This is with a partner. On these brands, our own brands account for more than 10% of GMV of BPC beauty and personal care business in the financial year 2022. This doesn't include the acquired brands, just the own brands. This is the first time we are sharing this number. On the fashion side, we have a number of brands. Like we have a brand called Twenty Dresses, which was acquired a while ago, and we have scaled it up. RSVP is an apparel, footwear, and bags brand that has launched an evening wear label. Nykd is also an in-house brand for lingerie and athleisure.
We had acquired earlier a jewelry and accessory brand called Pipa Bella. Then Indian wear brand, Gajra Gang, was launched last year. Again, fashion GMV from our own brand is now at about 7%. The list continues with Likha for curated Indian wear. A bag and footwear brand called IYKYK, which has had a good acceptance. We recently acquired a brand called Kica, which is a premium women's activewear. We are not going and acquiring any brand, but I think we have a clear strategy towards the market gaps and a brand perspective that we'd like to fill, and it's those brands that we have gone ahead and acquired or created ourselves. Next.
I think we are also very focused on new ways of selling and holistic consumer connect. You're aware of number of TV campaigns that were done last year to again bring larger number of customers through upper funnel marketing. We also continue to do tech implementation of virtual makeover tools like L'Oréal's virtual tool that was integrated on Nykaa platform. As well as live streaming is very much part of the Nykaa platform. On the content side, all of you are aware that we have more than 13 million social media followers through number of handles, both on Instagram as well as YouTube and Facebook. We also have a very large influencer network and connect, and we have a network to pay them on for the contribution of the business to Nykaa platform.
We have another explore, watch and buy feature, where customers can watch the videos and based on the education they can buy. There has been a number of new ways of selling that has been introduced by Nykaa. Then I would like to request Arvind to take on the financial performance slides.
Thank you, Falguni. I'll talk about the financial performance and, I'll first talk about the full year performance. Talking about revenue, you can see that in FY 2022, we have reported revenue of INR 3,773 crore, which is a growth of 55% year-over-year. In fact, this is fastest growth in last three years despite two COVID waves. It's quite impressive and, you know, strong growth momentum. If you look at three-year CAGR, it is at 48%. Added to that, if you look at gross profit chart, the growth in gross profit is even higher than revenue growth. It's about 73% in terms of absolute to absolute growth.
The margins has actually improved from 38.9% to 43.6%, close to 400 bps improvement. Part of it is improvement because B2B revenue, which is advertisement, has scaled very well this year versus last year. Also because own brand share has bounced back to pre-COVID level. Also part of it is also mix effect because of fashion, which is reported differently. Talking about EBITDA, we have reported EBITDA of INR 163 crore, FY 2022, which is a margin of 4.3%. It appears that EBITDA is kind of flat or just 4% growth in terms of absolute number. It appears that EBITDA margin have dipped by almost 200 bps.
Let me explain you the levers in terms of investment that we have made this year, and Falguni spoke about some of them. In terms of nonlinear growth initiative, we continue to invest into fashion, which is scaling very well. We have also started investing into new initiatives such as Superstore by Nykaa and Nykaa Man and International. I have a slide to give you some breakouts which we are sharing for the first time. That's one reason that some of our internal accruals generated out of beauty verticals have been invested into these nonlinear growth initiatives.
Added to that, we have also accelerated our new customer acquisition, which is also supported by higher investment into marketing, which is again, you know, impacting our EBITDA. The third one is we have also expanded our fulfillment capacity and moved closer to customer. Some of these are ahead of the curve investment. In fact, we have also started expanding to physical retail. Last year it was kind of a muted expansion that we had done due to COVID disruption. All these investments are funded out of internal accruals, which is why at a blended level, EBITDA margin have dipped to 4.3%. Talking about the PAT number, we have reported INR 41.3 crore of profit after tax this year, which is 1.1% of the revenue.
Again, the impact of EBITDA dip of 200 basis points is partly offset by better leverage on financing costs and also on depreciation and amortization. Net dip in PAT margin is about 140 basis points versus 200 basis points in EBITDA. I have a slide which I want to take you next, which is to talk about these verticals. As you can see here, we have given the break up of three verticals here, BPC, which is our largest business, fashion, which is already scaling up very well, and others. Others here comprises of new initiatives such as Superstore, which is the EB2B vertical, and Nykaa Man, and some initial investment into international. These new initiatives are all bucketed under others.
As they scale up, we might separate them as well over time, but as of now, they are bucketed under others. If you look at this chart, in terms of GMV, we have grown 71% year-over-year, which is quite healthy growth in a year which was disrupted by COVID. If you look at revenue from operation, already spoke about it, we grew 55% year-over-year. In terms of gross profit, we grew 73% year-over-year at a blended level, and the margins have improved from 38.9% to 43.6%. Part of it is also mix effect due to fashion growing faster than BPC because it is reported as a on a marketplace model.
Margins are reported as revenue, so the reporting framework is a bit different. There is a mix effect in that. If I talk about EBITDA, and I wanted to invite attention here to the break up of EBITDA numbers. If you look at beauty as a vertical, the EBITDA margins are 8.2%, which is quite similar to last year. Last year it was 8.3% as a percentage of revenue. It's kind of flat, despite making heavy investments into marketing to accelerate the customer acquisition, and despite making significant expansion into fulfillment network, which in the short term brings more cost to the P&L, but the benefit of freight costs coming down gets realized over time.
Despite that, beauty has maintained its EBITDA at 8.2%. In terms of fashion, because it is reported differently, we have also given a different metric here, which you can see at the bottom. That's NSV, net sales value. Because net sales value is net of returns, taxation and cancellation. At that level, it becomes quite comparable to BPC. If you look at the gross margin for fashion, it is about 44.6%, similar to BPC. In terms of fulfillment cost, it is 11% versus 10.6% in BPC.
If you look at marketing costs, that's significantly higher versus BPC, because fashion is obviously an early stage of building the business, and the ratio of new customer contribution to GMV is much higher than the repeat customer. We did acquire 1.6 million customer this year. In terms of employee benefit expense, I also want to highlight that if you look at BPC, the employee benefit expense is 8% versus 9.2% last year. There is already an operating leverage which is playing favorably here. If you look at fashion, it is 11.3%. Again, that will get scale over time and start playing as operating leverage.
If you look at others, which are new verticals, they are really a kind of a seed investment this year. Obviously, the ratio of employee cost is much higher than versus the revenue and NSV. The impact of investment into fashion and other segments, incrementally we have invested almost INR 80 crore from our internal accruals, which shows up as a cost in the blended numbers, it shows up almost 200 basis points kind of investment and therefore our EBITDA has come down as a margin percentage from 6.4% to 4.3%. Moving on. This is just to show the long-term trend and why we feel so confident about continuing to invest into fashion, which are already scaling very well in a very hyper competitive market.
It was launched in FY 2019, but it started scaling up post-COVID. We see that fashion has reached to the same scale as beauty in four years, versus, let's say BPC reached to same scale in five years. It's really building up well. Moving on. I also wanted to give a color on marketing cost a bit, and there are two charts here, BPC and fashion. If you look at cost as a percentage to NSV, which is the net sales value, in case of BPC, it is at 9.5% FY 2022. Last year was actually an aberration, and we spent only 5.9% to NSV ratio. That was because in H1 we were quite conservative in spending marketing money due to COVID environment.
If you look at the increase in new customer acquisition versus last year, from 3 million to 4.4 million, almost 49% increase in new customer acquisition. If you look at as a long-term trajectory, marketing cost as a percentage to NSV is actually quite better versus FY 2019, 13.7 versus 9.5. That goes back to the chart that Falguni explained earlier, that 73% of our business in BPC comes from existing customer. While we continue to acquire many new customers, our cohort is quite healthy and, you know, over time, we get a leverage in marketing costs.
Versus 55% share of repeat customers in FY 2019, we are at 73% in FY 2022, and that shows up in marketing costs as a percentage to NSV as a leverage. If you look at fashion chart, this is scaling up last two years, and this has acquired 1.6 million customer versus 0.6 million customer last year, which is a 157% growth. In terms of marketing spend, we have consciously stepped up spends and it is at 27.4% to NSV ratio. That also obviously has a mixed impact in our overall marketing cost to revenue and marketing cost to NSV ratios as well. These are conscious choices looking at the future growth prospects in this large categories and large TAM. Moving on.
This is summary of our results. I already talked about annual results, so I will probably talk about quarterly results here. In this quarter, we have reported revenue of INR 973 crore, which is year-over-year growth of 31%. Although sequentially it is lower by 11% versus quarter three, but that was expected because quarter three is seasonally the best quarter and peak quarter in terms of sales because of festive season, and it was also free from any COVID disruption. Versus this quarter when in January, due to Omicron, there was some impact on sales, especially in physical retail stores. 31% growth there, but we believe that we have grown ahead of the market and we are strengthening our market share.
In terms of gross margin, we have reported 43.7% gross margin for this quarter, which is better by 254 basis points versus last year same quarter. Although it is lower by 263 basis points previous quarter sequentially, which again is a seasonality. Last quarter was benefited due to higher advertisement income from brands, because brands do spend aggressively in quarter three from their marketing budget. We got benefited out of that. Talking about EBITDA margin, we have reported 4% EBITDA this quarter, which is 200 basis points lower than last year, due to the investment that I already talked about in terms of fulfillment, in terms of customer acquisition, and some of the percentage cost is shown in the table below. Those are the trends which we already spoke about.
I also wanted to highlight that in terms of fulfillment cost and marketing cost versus previous quarter, you can see that, versus 10.6%, last quarter, we have spent 9.7% on fulfillment costs. The benefit of expansion of warehousing capacity, regionally has started playing in terms of lower freight costs, and that shows up in these numbers. That's a healthy trend. In terms of marketing also it has come down from 13.7%-12% because we did spend on brand building last quarter, and it was also a sale quarter, so obviously marketing spends were at much higher level. It has come down to 12%.
Employee expense, though, has gone up as a percentage from 8.5% to 9.3%, but that's more a leverage, deleverage because of lower scale of revenue. If you compare the absolute cost, it is at INR 90.8 crore versus INR 93.3 crore last quarter. No major change in terms of this fixed cost aspect. That's on financials. In terms of P&L, I can quickly talk about balance sheet. In terms of non-current assets, we have made investments in expanding physical stores and fulfillment centers, so that shows up in our PPE line. There is also impact on ROU assets because of the lease liability as well as assets that come in the balance sheet due to long-term nature of these leases.
We also did investment in Dot & Key. We acquired 51% stake, so that shows in goodwill, and part of it is also sitting in other intangible asset in form of brand value. Deferred tax asset is a function of losses in Nykaa Fashion and we believe that we can offset these losses against future profits, so we have recognized deferred tax asset, and it's a continuing position which we had last year as well. In terms of current assets, you can see the investment is almost double of last year. It's primarily coming from inventories, which is a function of natural business growth. As well as, we also built up larger inventory to offset some of the supply chain disruptions that we have seen. It was a strategic call.
We believe we are at a healthy level of inventory with 66 days versus 71 days last year. Overall, other part of the current assets is cash, increase in cash balance. We are at almost INR 700 crore of cash in the balance sheet, which is benefited from primarily in the IPO as well as some pre-IPO placement we had done. Talking about the equities, our net worth base has gone up from INR 490 crore to INR 1,345 crore. In terms of non-current and current liabilities, there are no major movements except that borrowings, bank borrowings have gone up from INR 185 crore to INR 332 crore. That is in tandem with working capital investment that we have done.
I have a cash flow to explain how we have funded the increase in current assets. We are good on receivables, payables and overall working capital cycle is maintained at last year level. Let's move. In terms of cash flow, I want to highlight the line called operating profit before working capital changes. Which is at INR 183 crore, which is almost similar to last year in terms of absolute value. That is despite making investment into growth verticals, which I spoke earlier. There is almost INR 80 crore incremental investment into fashion and new businesses put together. Despite that, we have generated same amount of operating cash flow before working capital. Of course, we have made a higher investment to working capital, which I explained earlier as part of the balance sheet explanation.
We are paying our suppliers faster, but we are also securing inventories so that we don't face any supply chain disruptions and there's no out of stock. Due to that, inventory investments have gone up during this period. Talking about investing activity, because of investment into stores and warehouses, we have invested INR 94 crore versus INR 42 crore last year, so that's more than double of investment. Rest of the cash flow is more a representation thing. We have cash balance of INR 705 crore, which is shown in different lines due to the maturity period. We have some deposits which are longer than twelve months, so that those are shown in investment in fixed deposits. But we also have some short-term deposits.
We are at a healthy cash balance of INR 705 crore. Moving on. This was my last slide. Maybe I'll relate back to Falguni for Q&A.
Yeah. Just to summarize, really, we do feel that we've really worked hard to deliver good results, which are a balance between long-term growth and a good eye on our unit cost economics for each of the new businesses that we are building, so that eventually there is path to profitability in each of the business. This is being done while supporting and maintaining our profitability on the main beauty business, the larger business. Yes, we are clearly investing in customer acquisition. We are investing in new business initiatives, and we are investing in greater fulfillment capacity, going closer to our customers, so that we are more future ready in terms of, you know, our customer promise and delivery.
This has been the big trend, and these results have to be seen in light of slight adversity in the environment. Clearly, we had two waves of COVID during the year, and they have impacted to certain extent whether our physical retail business or taken slightly off the table in certain segments of our beauty business or fashion business. I think overall, we do believe that company's worked hard to preserve and deliver to the investor capital, and we will continue to do the same approach going forward.
Thank you, Falguni. We'll now open it up to Q&A. Anyone who has a question, please raise your hand and we'll take your question in order. Please limit yourself to maximum two questions so we can accommodate as many as possible. Operator, can we unmute the line of Sachin Salgaonkar from BofA first?
Yes, sure.
Thank you.
Hi. Thank you for the opportunity. Falguni and team, thanks a lot for, you know, those incremental disclosures. You know, definitely helps. A couple of questions. First question, just wanted to understand 4Q. Apart from seasonality and Omicron, did we face any impact from, let's say, higher inflation and, you know, related issues? And of course, the same question is around going ahead, which is, rising inflation at some level has an impact on discretionary spends as well as has an impact on costs, especially the fuel cost impacting, you know, the delivery charges. Just want to understand how you guys look at it.
I'll take that question. To be honest, you know, I mean, this whole two years of COVID has been very, very difficult to really re-read into the trends. If I may say so, April or May, June of 2020 was massively affected, where we could only do essentials only business. As a result, the first quarter of April, May, June, 2021 was very, very strong on growth. You know, you can see that in our quarter on quarter growth, very strong growth. Even though that, you know, the strong strength in growth it came little bit differently for different sectors. You know, skincare grows at a certain point in time.
Personal care grows at a certain point in time. Then suddenly, you know, stores open up and you see a huge revival in makeup demand. To be honest, even if for someone who's watching for year-on-year growth trends, quarter on quarter, I think quarter on quarter is not the right way to look at it because our business clearly has seasonality. Year-on-year numbers for a similar quarter also, exact comparisons are not available. What we've done in this deck is we've told you that, I think, the company's working very hard to grow each of the categories. While makeup is our largest category, it has grown at 40% year-on-year. Skincare has grown 50% year-on-year. Haircare has grown 60% year-on-year.
All other categories have grown 80% year-on-year. So I think, company's definitely, taking, making an effort to continue to tap into the market opportunities and deliver on growth, is what I would say. Is it easy? I don't know how to translate that because there are clearly periods of very strong demand that you can see, you know, in terms of even physical retail. I think, October to December quarter was quite strong from consumer demand perspective, but it was also strong from competitive activity perspective. Then you find that, yes, there are certain months when demand is strong and certain months when demand is not strong, even within the quarter. Sometimes the demand shifts from e-commerce to physical and physical to e-commerce. Similar trends, even fashion.
We had very, very strong growth in the first quarter of last year. This first quarter this year, you know, first quarter of last year to this year was a very strong growth. Then there were a couple of quarters where we felt that marketing costs were too high and we were trying to control our marketing costs to a better level. I wouldn't say it's easy. I wouldn't say that things are very bad where we are not able to grow at all, but it is a tricky environment.
Any thoughts on the discretionary spending? Do you see that getting impacted for fashion and cosmetics?
See, there is a certain amount of your discretionary spending that comes in line with wedding season in both these categories. Clearly, you know, the wedding season came out very strong in the October to December quarter. Because it was like, after two years the weddings were picking up and then suddenly the threat of Omicron came and a number of weddings which were being planned in, you know, from Jan to March were either downsized or pushed out. Many of them downsized rather than pushed out and some pushed out to the summer season. At the margin, if you say that is it impacted, some amount of demand is definitely being impacted.
If you ask, you know, it's very variable, you know, for the highest income category which many of the Nykaa customers are. There is not that much of a difference. We also see big changes from category to category. I wouldn't call it any of it is so adverse that you can't grow or you just don't achieve the numbers. It's very variable and there are periods of strong demand followed by periods of little bit weak demand.
Thank you. Second question is on fashion, both on, you know, AOV and marketing spends. Your AOV, Falguni, is, you know, inching up every quarter and it's almost, you know, all-time high. At some level do you guys see a risk that, you know, it's turning out to be perhaps a niche high-end market for fashion? The related question is, you know, on the comment what Arvind made, which is on marketing spends there is a conscious effort to spend a bit high. Globally we are seeing most other companies actually pulling back on, you know, selling and marketing discretionary spends. Just wanted to understand, you know, the outlook out here.
I can take it, you know, the fashion question at least. Starting with that in terms of AOV, you know, yes, I think we're pleased with the high AOV of INR 3,200 which is, you know, far higher than what we see in the market. There are a couple of things at play here. The first is, and you know something, the components of what we were selling is shifting. You could say that clothing and apparel is becoming a lot larger as a portion of sales. In the early days of fashion there was a lot more accessories and lingerie and sort of cheaper items that were selling. It's not that the assortment is getting more premium. In fact, I feel that the assortment is getting more accessible.
It's just that the types of products that are selling are skewing to, you know, higher average selling price products. Point number one. Point number two is we're definitely seeing basket sizes go up. That is again something that's affecting average order value and that is the nature of, you know, just adding a lot more categories. There's just a lot more for the customer to add to their cart. You also mentioned on marketing you wanted some sort of insight. Yes, the marketing numbers are appearing less efficient this year compared to last year. Again last year was, you know, a COVID year where I do believe that the marketing numbers were not sort of representative of really what the situation is, now.
Number two, I think, one thing is that this year we spent a lot on brand building. It's the first year we did TV commercials. It's the first year we did celebrities. A lot of that is baked into the marketing numbers that you see which wouldn't be comparable year-on-year as well.
Going ahead also there is an inclination to spend more on marketing?
You know, I think we're very focused on driving fashion to a profitable state. There is, you know, strong profitability DNA here. What I'm really focused on is really nailing that dynamic between growth and profitability. I do feel, you know, that we remain focused on getting to that right mix of growth and profitability.
I'd like to comment on the marketing costs. You know, what I find is that if you acquire the right customer, very often in beauty, again, you know, we break even on the second order, and typical customer buys three to four orders in a year. I think as far as you're doing marketing at an efficient scale, which I think on beauty we are clearly doing, then I feel that there is a certain customer acquisition strategy we wanna follow. Because Nykaa's never chased just customer acquisition for sake of customer acquisition.
At the same time, you know, we are at a very early growth stage where Nykaa may have only, like, around, you know, 15 million customers who may have ever bought on beauty, whereas the size of e-commerce customer base is larger. So in a very prudent manner, we want to continue doing customer acquisition, but in an accretive manner, with a big focus on, long-term value of those customers that we are acquiring. In fashion, we are a little bit at an early stage of growth, where the mix of repeat to, you know, new customer to repeat customer ratios are still low, and they will pan out over time. The fashion as a platform will grow much wider. I think our width of platform is.
Like, if you see beauty itself is 3,000+ brands, whereas fashion is still at 1,500 brands. We do believe that fashion has more growing to do in terms of bringing additional brands and categories online, and there's more work to do. As we do that, in fashion, a lot of customer visits are already coming in, a lot of customer downloads are happening. Through the funnel, we need to convert more through our wider catalog, you know. That is clearly gonna happen. In general, Nykaa believes in premiumization both for beauty and fashion, and we don't see any desire and need to rush to the bottom in terms of acquiring the lowest rung customers.
I think we'll be selective, and we will look at the long-term value of the customers that we acquire. There'll be a balance between long-term growth and short-term profitability objectives.
Thank you. We take the next.
Vijit, we have next question from Percy, so.
Yeah. Please go ahead.
Percy, can you please unmute yourself and ask your question? Thank you.
Yes. My first question is on the BPC margins. Thank you very much for giving this clarity on segmental margins. That's a really good disclosure that you have done. My question is this. See, most of the Street is expecting BPC margins in the long term to trend anywhere between 15%-20%. Now, I don't expect you to comment on whether this is a reasonable expectation or not, but in light of this expectation, my question is: Where do you see leverage for margin expansion in BPC?
I mean, given your main costs of ad spend, fulfillment, et cetera, I'm assuming that at a 44% gross profit to NSV ratio, you're fairly settled or fairly doing fairly well there, and I would assume there would not be a huge leverage there. What are the other costs in terms of fulfillment, marketing expenses, et cetera, your main costs, employee costs? How much further over a really longer period of horizon do you think these costs can go?
If I may come in, I think on the gross profit margin itself, it can increase from this percentage because of ad income, and Nykaa can be a big platform with the number of visits and how valuable those visits are from a beauty and personal care customer perspective. You know, any brand can acquire a lot of new customers on our platform. For doing that, they may continue to spend on marketing on our platform. We also have customers on average has four and a half and five items in a cart, which means that we can deliver new customer acquisition to brands, which is much higher than the new customer acquisition at the firm level. I do believe that.
I'm not saying we would definitely do that, but to assume that there won't be any improvement in gross profit margin, I do not agree. There is generally a large proliferation in brands in beauty and personal care, like globally also, and that in a way gives power to the platforms and retailers, where brands need the platform and retailers to build their brands. On fulfillment costs, yes, they can go down slightly, but yes, a lot of gain is already there. It can't go down much more than 50-100 basis points. Marketing and fulfillment costs in the long run for a very mature platform can be again lower, but it's already running at about 9.5%. You can see that in a COVID-impacted year it had come down for us as low as 5.9%.
That year we did not grow that much new customer. We didn't acquire too many new customers. The customer acquisition was 3 million, which was at similar level as previous year, but this year we've accelerated customer acquisition. Marketing and advertising is a truly variable cost, and it depends on our objectives of customer acquisition and also some amount of money we also have to spend on bringing back the returning customers. On employee benefit, of course, with the size and scale, there will continue to be some benefit. I think long-term EBITDA margin, most investors believe can be higher in this business, in the multi-brand specialty beauty retail business. Long-term EBITDA margins can be higher than the current EBITDA. Do you want to hear about fashion and other consolidated also?
The long and short is that we believe in having the right unit cost economics or unit cost metric for each business. Currently, fashion is at 11.9% negative EBITDA margin, most of it due to marketing and advertisement expense, which we believe that being almost third year of our scale-up, fourth year since launch for fashion business, there is some more ground to cover before our repeat and new customer ratio emerge in an area where we can control our marketing and advertisement costs at a better level. Because the market is very large and we have ground to cover in acquiring and converting the customer visits, we will continue to do that. In a very mindful way, so that we can, we over time, become positive on our.
I mean, break even on EBITDA margin.
Right. I think one thing to just add there, you know, Ankita, if you can hover over the gross profit margin on NSC, which is apples to apples for, you know, beauty and fashion in terms of a base, you can see that the gross margin percentage is looking very similar across both businesses. That too at a very early stage in the lifetime of the fashion journey.
Other businesses, which is mainly Nykaa Man and EB2B business, they are very new. Nykaa Man is about a year and a half old, and EB2B business is not even six months old. We will continue to invest in those businesses. That's why we have started giving segmental, not really segmental, but we've started giving vertical focus EBITDA, so that you can see that while the beauty business EBITDA was INR 277 crores, we've invested as much as INR 110 crores between fashion and our new businesses.
Right. I think, you know, one thing that we were trying to hover on, it's the last note on this slide, which is that the fashion contribution margin has been positive this year. We calculate that really it's fully loaded with all the costs, fulfillment, marketing, selling expenses. Under that, you know, we've got the employee costs and the indirect and the overhead. We've been able to achieve contribution profit positive for this year.
I hope we've answered your questions. Next.
Thank you.
Yeah. The next question is from the line of Siddharth Bothra. Operator, can we unmute him?
Yes. Siddharth, can you please unmute yourself.
Siddharth, can you please unmute yourself and ask your question? Siddharth Bothra? Maybe we'll take the next question, from the line of Kapil Singh. Kapil, can you unmute it?
Hello. Can you hear me?
Yes.
Okay. I have two questions. Firstly, while you've been largely solving for online users, you are gradually now addressing the offline stores also, where the opportunity potentially is higher. How aggressive is the strategy going to be in the offline compared to online business?
Maybe I'll kick it off and then others can add. I think we've always been very sure that omni-channel retail is the only solution for a country like India. That's why you can see that, you know, we've managed to grow our physical retail footprint quite significantly in the last 5 years, and today we're sitting at 105 retail stores. As we've shown this time for the first time, you know, we've disclosed what the GMV is in terms of GMV as a % of the total GMV, so that the online versus offline split. It goes to show you that our physical retail business is growing very well and we see it as a massive opportunity, as you said.
The potential is there for us to expand the footprint, continue to expand the footprint, not only across a larger number of cities, but also increase the concentration within cities. It remains a large part of the strategy. I think in terms of GMV share, it will probably, the reality is online is a very fast growing business, so the GMV share will always remain at this, maybe single digits or low double digits. Online will remain a majority of the business, in large part because the two are not apples to apples comparison. Online you've got 3,000+ brands available, whereas in physical stores only about 80-100 brands. It's also not totally the right comparison.
Otherwise, I think based on the metrics and the results that we're seeing, it's something that we will continue to expand meaningfully in the coming years.
Okay. Thank you. The second question is on the Superstore. Can you just talk about what exactly are you looking to do? Just a compare and contrast of the online BPC business versus Superstore. Is it something new that you are trying out or do you believe you already have a model which has right to win? Because, you know, you've already covered 98% of the PIN codes. I'm just thinking aloud, what are we solving for here? How the operating economics will be different, you know, things like working capital, store marketing, et cetera.
I'll come in here. If you look at the traditional, the traditional way. I mean, before going to the TAM, I just want to talk about the business. If you look at the traditional distribution that FMCG companies use, they would the brand and manufacturers would sell their product to distributors and wholesalers who would onward sell it to retailer. Nykaa started selling directly to the consumer and basically started playing the role of distributor, wholesaler cum retailer, and that is direct to consumer model. What we do believe that, you know, in spite of e-commerce being quite large and growing, I think the rest of the market will also continue. The physical GTMT market will continue, and Nykaa wants to backward integrate into solving for supplying to these retailers.
We have deep relationship with our brands and manufacturers of FMCG companies, because we retail for them online. Now what we are doing is we are extending that as this GTMT distribution network that we have created that any brand can buy. If you look at it traditionally, like the FMCG companies kept their distribution only in-house, and Hindustan Unilever or ITC or any of the brands like P&G would use their distribution network only for their brands. Now what Nykaa is doing is creating the GTMT distribution network, but it is available to any new brand, any growing brand, any international brand that wants to come into the country. I do believe that we are serving a very special needs, and many of these brands are picking up that, you know, third-party distribution network that is available.
We are winning brands very quickly, you know, we just launched it six months ago, and we already have 134 brands listed, and we are already creating a presence in 302 cities, and we are transacting with almost 81,900 retailers. This does need feet on the street to get the retailers to sign up, and there is some amount of investment required. Nykaa will do it right, keeping the same unit economic metrics in mind. Of course it falls into place over a couple of years. Initially we would have to invest some amount of money in this business, but it will be again balanced with the view to short-term profitability and long-term growth objectives of this business. I do strongly believe that Nykaa has a right to win.
We have a very interesting and excellent app, and we have great relationship with our brand partners who will give us the right to win in this segment.
Thank you. Falguni, just a quick question. We are almost at time. If it's okay with you to extend this by another maybe 15 minutes.
Yeah, we can do that.
I have five questions.
Yeah, we could do that.
Great. Thank you. The next question is from Raj Gopal Thampi. Can you please unmute yourself and ask your question? Thank you. Please limit. Raj Gopal, can you please unmute yourself and go ahead. Maybe we'll just take the next question from Manish Adukia from Goldman Sachs. Manish, please go ahead.
Yes. Hi. Good evening. Thank you so much for taking my questions. My first question is if you can just help us understand what's happening in the competitive landscape, and this is across both beauty and fashion. Now, in beauty we keep reading that some of the larger Indian conglomerates are getting slightly more aggressive on the beauty side. So are you seeing any signs of that in your business at all, or given you just the differentiation that you talk about, there's really not any material impact. Same question on fashion as well. I think when you look at the quarter and you call out this definite seasonality in your business, but fashion business GMV was flat quarter-over-quarter.
Is part of that also a function of the fact that competition potentially has been a lot more aggressive? I mean, we know that, for example, Reliance certainly has been very aggressive in the fashion side. Are you seeing any impact of that on the growth as well? Would love to get your thoughts on both those verticals.
Yeah. Honestly, I think many of you all are in a better position to judge competitive landscape than us. All I can say is that what we hear from our brand partners mostly, in terms of our role, relative to other competitors' role, we do hear that on the beauty side, many of the large partners continue to want to work with Nykaa because of the size and scale and the organized manner in which Nykaa works with them to deliver their numbers. I can ask Anchit to comment more on that. Anchit, would you like to comment?
Yeah, sure. Again, I think we can just share, you know, whatever we have from whatever we hear from our partners and whatever we see in the business day to day. What I would say is that, look, we've always said the horizontals, like, the horizontal marketplaces have been around since, you know, since 2012, 2013, so they're not new. Then you've got some of the direct to consumer guys who were, you know, who I think made a big push earlier in the first half of this year, as well as some of the other smaller, vertically specialized beauty retailers. I think what's happened is that there was a lot of noise, especially around November, December, when we were going public.
I think a lot of competitors used it as a time to relook at the beauty space, and to throw their hat into the ring. I would say that from what we're seeing on the ground, the competitive intensity seems to have reduced actually, since then. You know, our hypothesis is that there are probably larger markets for the larger horizontals to fight for. We believe obviously groceries, electronics, fashion are larger addressable markets, and I think that's where a lot of the horizontals and some of the new entrants, as you mentioned, will probably focus their time and energy. There was some additional focus on beauty from the larger players in the interim, but that seems to have receded.
Now, if some of the local, you know, companies that you mentioned do decide to get into beauty in a big way like we've all seen in the news, I actually think it's going to be a good thing for the market. You know, till date, Nykaa has single-handedly built the beauty industry in India, obviously with the support of our brand partners. It's the only retailer of size and scale in the market and retailer focused on education and building awareness for beauty consumption. You know, we've helped build the market to where it is today.
It, you know, in our point of view, some healthy competition, and companies who are willing to invest in the Indian beauty ecosystem and help to grow the market could in fact have a positive impact on us. That is a short, I guess a long answer, but try to explain to you the different parts of the competitive spectrum.
I think, jumping in on fashion, you know, the way I sort of look at it is first and foremost just taking a step back, the massive size and opportunity of the fashion market. You're talking about a $125 billion industry by 2025. You're talking about 25% online penetration. You know, internally, the way we think of it is even if you're able to get five, 10, 15% of that online pie, this is a very, very sizable business for Nykaa. At least for us personally, we're not, you know, lifting our heads and looking at competition left and right. I think we're really focused on trying to build something that is differentiated. At least for me, maintaining and protecting that differentiation is the number one priority, and that's our right to win.
I'm not obsessed with, you know, gaining market share at the cost of the other folks. It's more about let's get the part of the pie that we really like and we really believe in. You know, moving forward, you sort of touched on what about the growth over the last couple of quarters. I personally am trying to look at the business on a year-on-year basis rather than a sequential quarter basis. I think on a year-on-year basis, we're talking about 168% GMV growth. We showed you some slides that compared the fashion journey to the beauty journey. By any metric, the fashion growth has been explosive over the last couple of years. I personally kind of look at it on year-on-year. The thing with sequential quarters is that there's always one seasonality at play.
Two, there are always judgments you take every quarter when you're trying to, you know, again, balance the profitability and growth equation. Three, in every quarter, I'm always trying to set up the right marketing metrics that takes us into the next year, and refuels us for the next year. You know, not sort of saying that the sequential growth that you've seen is what you will continue to see at all, but just saying that I'm trying to look at it on a year-on-year basis.
Thank you. The next question is from the line of Rohit Chordia. Rohit, please go ahead.
Yeah, thanks, Vijit, and good evening, everyone. Just three small questions, just trying to understand your numbers better. One, the bridge between your NSV and revenue from ops for various segments. If my understanding is right, the bridge in fashion, sorry, in the BPC segment would primarily be ad revenues. Fashion would be two elements, ads, which is, you know, a kicker and then there is a take rate element. If you could just throw some light on, you know, this bridge in the two segments.
Yeah, I think that's correct. NSV, so BPC is an inventory-led model, so revenue is quite similar to NSV, except that there's an incremental revenue on advertisement which is not part of the product revenue. That's correct. In terms of fashion, yes, NSV is a number which is, what customer pays net of taxes. What we get in P&L is, commission that we earn from the brands, because it's a predominantly market-based business. We also get some revenue on advertisement, even in fashion. We also get some revenue on shipping fee, et cetera.
That's what I want. Thank you. Second question, how has, you know, this metrics shipments per order moved? Let's say against the 32 million orders last year across the two segments, what were the number of shipments? I'm just trying to understand, are you know, still breaking your orders into multiple shipments to ensure, you know, better consumer experience?
I would.
I think we have some data on that. We do send, you know, the lux orders separately. However, if you see during beginning of the year, because of COVID, April, May, June, our split shipment ratio was very adverse, which has since been brought down. There is improvement in that. Plus, we also now have regional warehouses and thereby reducing our air shipment costs. We are doing a fair amount of work to manage our fulfillment costs better, and you will see the benefit of that going forward. Arvind, do you want to comment?
Yeah, I just wanted to add one thing. I think, you know, actually we believe that split shipment, you know, consumer getting multiple packages for the same order is not a good consumer experience. We've always been focused on bringing that split shipment ratio down. What I would say is it was never that adverse for us. We've never been a company that has had a very adverse split shipment ratio. I think it was slightly more adverse than usual in the first couple of months of the year because of the COVID impact. All of the investment we've made in building out a good regional network of warehouses and also reducing
Also, better inventory management across our warehouses, I think that is the investment that you've seen in the fulfillment expense numbers in terms of building out the capacity. You will see we're starting to see the benefit of that in terms of the split shipment ratio coming to very, very healthy levels in the past couple of months. As a result, the consumer experience is obviously better, and of course, the fulfillment expenses also are trending lower.
Just quick last question, if you could, give us a sense of the breakdown of your marketing spends, you know, between performance and brand.
That is not there in this presentation, and unfortunately, as a result, we won't be able to share it. But I don't know how to guide you on that, but because, you know, it's not just performance and brand. There are also support and fixed costs of managing the MarTech function. Unfortunately, we won't be able to. But as a philosophy, we would like to spend predominantly on our performance marketing with some conscious budgets towards brand marketing so that we have a healthy upper funnel growth.
Thank you. The next question is from the line of Sachin Dixit. Sachin, please go ahead.
Hey, hi, thanks for taking my question. I quickly had a question regarding AOVs in BPC in particular, right? If we use the last three quarter numbers and we look at the annual AOV that has been released, AOV seems to have dipped quite sharply in Q4. Like it has dipped to INR 1,660, roughly, if my math is right, from somewhere like INR 1,960 sort of a number in Q3. Is that normal? Or there are some other factors that are driving that?
Yeah. Maybe I'll come in here. I think there is obviously a seasonality in AOV numbers also. If you look at quarter four AOV, INR 1,763 BPC, which is quite similar to last year's same quarter. Last year also it was INR 1,732. Part of it is seasonality, part of it also because we have actually invested back the efficiency that we realized into fulfillment network expansion, right? We spoke about moving from national fulfillment strategy to regional fulfillment strategy by expanding fulfillment centers regionally closer to customer. That has brought down our cost of shipment, so our unit economics has improved. Some part of it we are plowing back by reducing the minimum shipping value that a customer can book a free shipping for.
In quarter four, we have reduced our shipping threshold to make it more affordable to, let's say tier two, tier three or mass customer who is conscious about shipping charges. That also brings down little bit of AOV versus what we were having in, let's say in H1. This is a bit neutral in a way that, you know, the efficiency that we get from fulfillment cost reduction, we are plowing it back to make it more affordable to customers, reaching deeper and nearer to customers.
Got it. Thanks. Just one more question quickly on ordering frequency. So in fashion, for example, we do understand, like, there are number of new users who came into picture in FY 2022 which could have driven the ordering frequency down to something like a 2.97 for the year. How do you see this ordering frequency panning out over time? Like, do you see this will mature at somewhere around this three and three half a year sort of a range, or it can go up to something like 5 like this?
To be honest, you know, from a consumer cohort behavior perspective on beauty, we had a very sticky and very valuable cohort. We used to see all individual cohorts behave in a similar way, making us believe that that was an inherent customer behavior. To some extent, it was little bit affected during COVID period because mainly makeup having been affected, you know, out of that cohort, and skin and hair and personal care had gained a bit. There were these contrasting trends.
However, that beauty cohort behavior is coming back to pre-COVID levels, but still a little more way to go for COVID, you know, the entire amount of large celebration and the entire all the patterns of out-of-home behavior coming back in full scale, you know. As they come back in full scale, you'll see more positive impact. Definitely fashion is in very early stage of our growth journey, with fashion customer cohort reasonably good in terms of repeat customer behavior, but needs a lot more working on to get them to the level of repeat customer behavior that we see in beauty. We will work on it.
We do believe that fashion is also a category where consumers engage with the category pretty similar number of times as beauty, I would think, and hence, they should be similar in the long run.
I'll supplement that. I think frequency of ordering could actually go up because of two reasons. As we spoke earlier, some of the adjacent categories are growing faster because of better focus and assortment that we have brought out there. And some of it is coming through personal care as well. And in those kind of category it is generally higher frequency versus makeup, skincare, hair in terms of order, pattern of ordering. That could expand frequency of ordering. Also because we have brought down the shipping threshold to 300 INR, so many customers might put smaller orders, but more frequently. Like I said, we are giving more assortment and choice and getting closer to customers, so we believe that getting more orders and more frequently will not strain the P&L.
Rather on an annual consumption value basis, I think we will be positive to get larger wallet share from the customers.
Thank you. The next question is from Nihal Jham. Nihal, please go ahead.
Hi, good evening everyone.
Yes, please go ahead.
Yes, thank you so much. First of all, congratulations on the strong performance. A couple of questions from my side. First, on the fashion business, I just had this observation. I know we're looking at it on an annual basis, that our monthly average users has been more or less similar at around 16 million, whereas the transacting users is something that has been increasing every quarter. Even in the previous quarter we did mention on the focus on conversion. I just wanted to confirm again that even this quarter the same thought process continued, that the focus is on conversion rather than getting customers into the funnel at this point in time.
Oh, yeah, it's a very interesting question, Nihal, and I will tell you that, as a company, we are very focused on upper funnel. We are very focused on middle funnel and also lower funnel. While our primary objective is to focus on conversions also, but we also have to keep an eye on adding healthily on the upper and middle funnel, you know. Multiple objectives, but very good stronghold on marketing, both from data perspective and what we are doing perspective, so that we are able to optimize the best outcomes.
Sure.
What I would not say is that, you know, TV ads never make sense because they're upper funnel. I think every type of marketing has a role to play, and we would do a mix. There is a very big emphasis on CRM because for a large customer database, which is very active for us, you know, in beauty, CRM should be a very big focus and so should it be for other areas also.
I may just follow up that going forward, the focus would be that this number keeps increasing so that it keeps feeding on into transacting customers into the future.
Yeah, absolutely. I think conversion is something that as a, you know, as a company, we're very, very focused on. We wanna do more with the visits that we're getting. As we say internally, conversion is the work of so many things. Relentless focus on assortment, price, availability, along with product, marketing features as well. Yes, that remains a focus. To me, you know, an improvement in conversion is just a constant reflection that you're strengthening the platform and doing the right thing for the customer. That will always be a focus.
Sure. Thanks so much. Oh, I'm so sorry.
Nihal, sorry, if we can just fit in Harit Kapoor, who is the next question here, and then you can jump back into the queue if possible. Can we please take the next question from Harit Kapoor? Hi, am I audible?
Yes.
Thanks for the opportunity. I just wanted to ask one question. I see that, you know, in the balance sheet, the other financial assets have increased considerably this year compared to last year. Is that, you know, primarily a function of, you know, proceeds from the IPO that have gone into your deposits? You know, just, if you could give some color on how you plan to deploy. Are those the same funds from the IPO that, you know, you plan to deploy the same strategy as mentioned during the time of the IPO?
Yes. The IPO funds will be deployed in the same manner as disclosed in the IPO.
Correct
D ocument. We also have funds available through our profits that we are generating, cash flow that we are generating.
Absolutely.
We continue to want to invest in stores, warehouses, you know, and also, some amount of investment is in new businesses and also some amount of investment is in inventory that we need to do our business better. Of course, it's been a tough environment from supply chain perspective, so we've taken a little bit higher inventory bets, you know, so that we don't face supply shortages. Similar as what we've been doing.
Thank you.
Okay. Okay.
Um.
Great. Thanks.
Thank you, Harit. If I can, you know, squeeze in a question of my own, here. You know, I was just looking at the Superstore expansion, the number of
Mm-hmm.
It went from 4,500 to 18,000 in this quarter. You did mention about some feet on the street hirings to, you know, add these retail stores. Just trying to understand, A, are those stores acquired solely through feet on the street, or there's a little bit of self-serve there as well?
There is an element of self-serve also, but these are very early days. also, you know, the business had a good scale up in that quarter. However, when that happens, we also have to keep building infrastructure to service that network. I think in early days it's very difficult for us to predict quarter on quarter growth because sometimes, you know, our networks are slow at expanding in line with the demand that we see. I think in early days of beauty, we learned that one thing we should do is believe in that growth and invest in infrastructure ahead of the growth. I think that is to some extent we are doing it for beauty with our store rollout, with our even physical store rollout as well as our warehouse rollout.
We'll have to do something similar even in the B2B business.
Got it. Thank you. The next question is from the line of Garima Mishra. Garima, please go ahead.
Yeah. Thank you so much for the opportunity. I had a couple of questions on the fashion business. Any timelines that you may have in your mind as far as when this business can become EBITDA positive? And also now that you're seeing a much larger number of transacting customers in Nykaa Fashion, is there any material change you observe as far as customer behavior on order returns are concerned?
I think we can't make forward-looking statement on breakeven. If you know Nykaa, we are always working towards that, magical EBITDA breakeven for each of the businesses as early as possible, but in a manner that we are not depriving the business of a medium to longer term growth. I think it'll be a balance and affordability also in terms of, you know, what we think is something that we would like to spend to build that business. I think, for most of the e-commerce business, you know, showing near-term profitability is a matter of stopping, customer acquisition, but it's not really the right thing. If you're acquiring the right customer, you know, it is worthwhile to acquire that customer from a long-term value creation perspective.
Yeah, I think in terms of, you know, the next question around returns, that's something that, you know, we've not split out, and therefore it'll be difficult for me to comment. What I will say is that, you know, I'm very focused on making sure that we're getting a very high quality customer. We're really trying to keep out, you know, kind of that often fraudulent return behavior that is prevalent across e-commerce in India. Trying to be very focused that the returns that we do get are from high quality customers who are truly struggling with product and size and so forth.
Doing a lot of work on our end, both in terms of attracting the right customer, but then even after that, weeding out the customers that, you know, could potentially have poor return behavior. The result of that is definitely a return rate that is far better than what we hear and see among competition.
Thank you. There's one last question from the line of Nihal Jham, a follow-up. Nihal, please go ahead.
Yes. Thank you so much for that. Just my pending question was that, in the quarter we obviously announced the three investments into, did them in Q2. Just wanted to understand from a perspective of, the plan ahead, is this to build up, the private label portfolio and that's what the thought is? Or could we look at exits for these kind of investments? Would there be more of it, if I were to ask you the same? Thank you so much.
Yeah. I mean, I think what we don't want to do is we don't want to be a fund that invests in consumer companies with a view to exit. I think we would like to build a company which is a consumer company with a number of brands that it owns. Many of the brands are created in-house. I mean, you know, through our own organic efforts. There could be some brands, when we come across certain brands that bring something incremental or they bring something in an area that we don't have a current focus on, then we may acquire those. But with a clear path to control over time.
Wonderful. Thank you so much.
Intention to control. Sometimes the path may not be already laid out, but clear intention to have control over time.
Hi. Sorry, I see one more hand raised, Falguni, if that's okay with you to take this. I know we
Yeah, let's take the last question. Yeah.
Yeah, sure. The question is from Amit Sachdeva. Amit, please go ahead.
Thanks so much, and good evening. Sorry, I got disconnected in between, so my apologies if this has been asked earlier. My question is on the Superstore business. I see that you know in six months there's remarkable progress there as well. If I do a rough math, and you know correct me if I'm wrong, if there are some 18,000 end retailers and revenue, if I just make a rough guess about maybe INR 80-90 crores of revenue has been you know GMV has been reported here. Probably they're you know spending about 1 lakh per outlet or some sort. I just wanna know that basically what could be the ticket size? What is the total addressable market of those?
What is the minimum efficient scale that you need to reach that it becomes a bit more profitable? I would reckon that because the gross margin here would be half of that of your B2C margin because of the trade margins, et cetera. How we should make sense of this business in terms of next four to five years perspective? What could be the size of revenue and probably a trajectory for this business?
Yeah, very interesting question, but these are very early days for us to be able to answer all of your questions with data. A couple of things I can tell you for sure is that this business cannot be done like a B2C business, because like you said, inherently the gross margin available for the business is far lower than what is available for a B2C business. Keeping that in mind, this business will have a very different distribution network. Like, it may have warehouses much closer to the retail centers. It will also not spend on marketing costs for customer acquisition, especially if it is also spending on feet on street to educate and convert the retailers and teach them the art of buying online. I
Strategically, I see, you know, a very big opportunity here because once you are tied to the retailer, the kind of value add you can do to tell him what are the brands, new brands, new products that are likely to sell in his area and what should he equip himself with, and we can also be that conduit for the best offers to them, to the retailer, through our brand partners. Also, educate them on the right conversation that they can engage with their clients and also give them, you know, working capital to buy those products, give them knowledge which products and what quantity to buy. I think it's a very powerful business model.
We see that next 10 years of growth will be in this area, and Nykaa can definitely play this very successfully, first in beauty, where we are backward integrating and we are in front of most of the brands, and we think we truly add value for them. In future we may also consider a couple of other categories that make sense given our business focus.
Thank you. That was the last question we can take today. Thank you, Falguni and Anchit, Adwaita and Arvind for doing this call. Thank you, Anchit. Thanks everyone for joining, and hope you all have a good weekend.
Thank you.
Very well.
Thanks, everyone.
Thank you.
Thanks, everyone.
Thank you, Vijit. Thank you. Thank you everyone for participating.
Thank you.