Good evening, everyone. This is Garima Mishra from Kotak Securities. Welcome to FSN E-Commerce Ventures Limited 1Q FY23 earnings call. We have with us the management team from Nykaa, represented by Miss Falguni Nayar, Executive Chairperson, MD and CEO. Anchit Nayar, Executive Director and CEO, Beauty E-Commerce. Adwaita Nayar, Executive Director, Co-founder, CEO, Fashion. And Arvind Agarwal, Chief Financial Officer. I'll now hand over the call to Falguni for her opening remarks, following which we'll open the floor for Q&A. Falguni, over to you.
Welcome, everyone. It's a pleasure and a delight to be with all of you here, and really happy to present our results for the quarter. I think I'll begin with a short presentation, and I think through that I would prefer to give the commentary. Can someone project the presentation? May I request Anchit? I'll just take few minutes. I think this is a slide all of you are very much aware about, macro indicators, which have had challenges of rising inflation and increasing interest rate, as well as maybe likely reduction in discretionary consumer spend.
However, there has been also fair amount of positive noise in the area of GST collection, as well as some amount of demand recovery as evident in certain industry, as well as purchasing, management, manufacturing PMI has been increasing. Our results have to be seen in the backdrop of this kind of challenges, a mix, mixed signals that are coming from the market. They're clearly challenges, but at the same time, Indian market doesn't seem to be as impacted as many global markets. With that, really happy to announce our key areas of key numbers. I think happy to announce that our GMV for this quarter has come out at INR 2,156 crores, which is a 47% year-on-year growth.
The revenue has also grown at 41% year-on-year and stands at INR 1,148 crores. What we are happy about is that the gross profit has shown stronger momentum than GMV and the revenue, and it grew at 54% year-on-year, and now stands at about INR 509 crores, almost INR 510 crores. EBITDA has grown, of course, from a year-on-year growth perspective at 71% at INR 46 crores, and now the EBITDA margin stands at 4%. Profit before tax has come out at INR 8.3 crores, which is a 165% year-on-year growth and a PBT margin of 0.7%.
PAT margin is coming out at 0.4%, and PAT stands at INR 5 crore with a 42% year-on-year growth. The difference is that many of the loss protection that we enjoyed in the company is running away, and we end up now having to pay taxes in line with our profits. Next. Just talking a little bit more about the consolidated GMV growth over the last few years. As all of you are aware that our GMV growth has been strong. The year ended financial year 2022 showed 71% GMV growth. And the current year growth has to be seen in light of that that on a strong year-on-year growth, we are continuing to deliver further growth.
The quarter one of financial year 2023 has shown 47% GMV growth, and GMV stands at INR 2,156 crores. Moving on to talk about this, various, business, growth. Beauty GMV, BPC GMV has grown at 39% on a year-over-year basis, coming out at INR 1,489 crores. This comes on the back of 49% growth that we had seen in the last year. Fashion GMV is growing at 59% year-over-year and now stands at INR 582 crores in the first quarter of financial year 2023, and this is on the back of 168% growth that we experienced last year.
On the other businesses, you are all aware that last quarter was the first time we started splitting out our new businesses, which we call as our investment businesses. These businesses are also growing strongly, and the quarterly growth for this business is at 153% year-over-year. The quarter one number is INR 85 crores. These businesses are at an early stage exhibiting pretty strong growth in GMV. Talking about some of the business highlights. I'll request Anchit to come in on the Beauty side.
Yeah. Hi. Thank you very much. I'll quickly take you all through the BPC highlights for the quarter one ending March 31st. Five quick highlights. The first is Nykaa's launch of the Nykaa Everyday value proposition, which is a one-stop destination for all of our consumers to buy their everyday essentials when it comes to beauty and personal care. This is with a clear idea to increase the frequency with which our consumers interact with the platform. The second big milestone for the quarter was our partnership with The Estée Lauder Companies to bring the much awaited and incredibly popular global skincare brand known as The Ordinary into India, and this brand is available.
On Nykaa.com as well as in Nykaa stores for sale in the Indian market. The third is, Nykaa did also launch multiple international brands besides The Ordinary. These include brands such as Victoria's Secret, as well as Pat McGrath Labs, which are well-known, globally renowned brands. I think this is testament to the fact that despite already having 3,000+ brands in the platform, we continue to find new and trending global brands to add to the choice that we provide our consumers. Fourth, with regards to our offline physical retail business, we managed to open eight additional stores this quarter. These stores were based in towns, cities such as Pune, Coimbatore, Delhi, Ranchi, Ahmedabad, and Kolkata.
This takes our total store count to 112 stores across 52 cities as of June 30th. Again, a testament to our commitment to the physical retail business and the opportunity that we see in the offline market. Finally, during the quarter, during the first quarter of FY 2023, we also hosted our Nykaa Summer Super Saver Days Sale, an NSSSD sale from May 3- May 8. This is one of the flagship sales which we do in the quarter, where we have incredible commercial support and offers from over 1,200 brand partners, including both global and domestic brands. Next slide, please. As we've always discussed, content remains a key driver of engagement, a key driver of education and awareness for our consumers.
We believe that it has a very positive impact in terms of conversion and therefore commerce. We create a tremendous amount of content across various platforms. These are just a couple of examples of some of the kind of high quality content that was created by us in this past quarter. This includes content in collaboration with our brand partners, such as, on the left-hand side of the page, you'll see, live streaming that we enable on our app with influencers, some grade A influencers, as well as with Nicola Kilner, who is the founder and CEO of The Ordinary. We hosted a live stream with her on our app as well as on Instagram. We also partnered with the L'Oréal Group to create content for Cannes, for their L'Oréal Paris's Fashion Week in Cannes.
We partnered with them there to create content as well as commercial strategies around that. Finally, we create flagship content such as the ones I just spoke about, but we also create a tremendous amount of content on a daily basis to help educate our consumers on product usage as well as on new launches. Next, please. Now, coming to the first two slides I spoke were covered mostly our multi-brand omni-channel retail business. I come to our house of brands business within the BPC vertical. Today, the GMV of our own brands, which now consists of roughly 10 brands in the portfolio, stood at INR 166 crore of GMV as of Q1 FY 2023.
This accounted for roughly 11.2% of the total Nykaa.com, Nykaa GMV, Nykaa BPC GMV, and t his was a 95% growth year-over-year. Strong growth from our own brands portfolio. In terms of channel presence, our own brands are available across multiple of our own e-commerce channels such as Nykaa.com as well as Nykaaman.com. They're also available on their own direct-to-consumer websites such as dotandkey.com and earthrhythm.com. A handful of them are also available on third-party platforms such as some of the other horizontal marketplaces as well. When I look at the offline distribution of our own brands, as mentioned earlier, they are available across our own physical store network. They are also available across general trade and modern trade outlets.
To be precise, we have more than 1,820 doors of general trade and 134 doors of modern trade across 138 cities that carry some of our own brands. We have also expanded the distribution across other retailers through our eB2B superstore app as well. Really leveraging that new business to build out our distribution for our own brands. Finally, there is also an expansion of some of our brands into international markets such as the UAE, Mauritius, and the United States. Just continuing on that, with regards to our house of brands, we had a variety of new launches, new product launches that came out of both Nykaa from Nykaa Cosmetics as well as Dot & Key, Earth Rhythm, and SKINRX.
We had some very interesting new launches across categories, whether it was makeup or skincare or haircare. As we go deeper in terms of product availability and assortment, we also ensure that we are creating very interesting, unique content to support our new launches and support our own brands through digital and non-digital marketing campaigns, some of which you can see on the bottom of the screen. Next, please. Finally, just coming to some of the key metrics that we track for the beauty and personal care business. I'll walk you through the slide left to right. On the left-hand side, you can see that the total transacting customer base, trailing 12- month customer base for BPC stood at 8.6 million for the quarter ended June 30th.
This was a 33% growth year-over-year. If I look at the number of orders, 8.1 million orders were placed in the quarter on the platform, which represented a 40% growth year-over-year. If I look at the GMV, the business, the BPC segment closed at INR 1,488 crores of GMV for Q1, and this was a 39% growth year-over-year. Finally, average order value at the bottom of the page roughly in line with the previous quarters. I think what we're seeing is there has been an improved order conversion per visit over the past couple of quarters.
This, coupled with our consistent average order values is, I think, a testament to the improved high quality of traffic which we are now driving to our platform in a very deliberate fashion. Next, please. With that, I will hand the deck over to Adwaita, who'll take you through fashion.
Hi, everyone. I look forward to talking to you about the fashion business today. In terms of highlights, you know, the first thing that we're really excited about is that we've launched something called the Global Store. This is a property where we bring some of the world's best brands to the country, and we're actively traveling the world to bring some of these brands. We've launched brands from Turkey, from Europe, and some of these are listed here on this slide. We do believe that this will be a strong way for us to differentiate our merchandise going forward. The second highlight is we continue to be focused on building our house of brands, so these are our own brands. We like for these brands not to be considered private labels, but truly brands in and of themselves.
This quarter, we've added four more brands to our portfolio, taking our count from seven to 11 brands. As you'll see later in the deck, this strategy is playing out nicely as our house of brands are starting to contribute a larger percentage of our overall business quarter on quarter. Third, we continue to really try to focus on building a platform that is differentiated and very curated. We remain focused on wanting to continue to shift the conversation away from a discount more to trend. We built another very strong property this quarter called First in Fashion, where we're trying to build and bring the latest styles and the latest fashion from all the brands to our consumers first.
A big metric that we track internally is what percentage of sales is coming from new season merchandise, and we do hear from our brand partners that this is a metric where our platform is over-indexing versus competition. Fourth, we're starting to explore some offline events, and that will be a part of our focus going forward. We do believe that offline events are a great way to build brand. This quarter, we had one strong offline event where we again highlighted some of our interesting brands in Mumbai. With that, we can move on. Content continues to be our focus. It's the same playbook that we have in beauty. On this slide, you can see that this quarter we actually did a very strong TV campaign with Alaya, who continues to be our ambassador.
We brought Bhumi Pednekar on for Nykd, which is one of our own brands in the lingerie space, and I think that has been really accretive to the brand. We continue to build very strong buying experiences on the website, whether it's about teaching you how to buy the right bedding, whether it's about showing you and highlighting star design talent across the country, or whether it's teaching you how to style the latest look. With that, we can move on. I do believe that fashion is the ultimate discovery problem. Fashion has so many products, far more than beauty. So how do you really show the right thing to the right person at the right time? That remains a focus for us.
Of course, content, which you saw on the previous slide, is a big part of helping you create the right discovery. There's a lot that one can do on the technology side, in terms of product features to create the right level of discovery, and that's what this slide shows here. For example, on the left, you can now tap, you know, looks, and you can be told what are the products in that look, which can help increase average bill size. Next, you know, we're integrating video and other content more strongly into the platform, and we continue to double down on a service called Style Advice, where we have stylists who give you advice on WhatsApp in terms of how you want to.
For any questions you might have in terms of your styling requirements. Moving on. I briefly mentioned how the House of Brands portfolio is really starting to, you know, develop and take shape, and this slide focuses on that. On the left-hand side, you can see how the GMV coming from own brands has been steadily increasing. In Q1 this year, it was INR 70 crores. Importantly, right below that in the red box, you can see how as a percentage of the overall Nykaa Fashion business, own brands are now up to 12%, up from about, you know, 5% or so a year ago on this date.
With every quarter, we're seeing that this is rapidly expanding, and this is both a signal that these brands are working with the consumers, and it also does improve our gross margin profile for the overall fashion business. On the right-hand side, again, I briefly mentioned these own brands are not private labels, so we do want them to have lives of their own. Here we talk about the types of ways we're distributing these brands. It's not just limited to the Nykaa platforms, but they all have their own D2C websites, and many of them list on third-party platforms.
Some of them even have offline presence, whether it's Twenty Dresses, which is now live across 33 MBO channels, or whether it's Nykd, our lingerie brand, which has 330 general trade outlets in over 70 cities. This slide just visually shows you the 11 brands that we're building and how some of them are being acquired, built internally, and you know, which categories we're starting to comprehensively cover. Can move on. We can move on. Again, this just shows the plethora of marketing activities we're doing to build these private labels. Can proceed? Perfect. Coming to some numbers. Here we talk about just how the fashion business has been growing from a numerical point of view. On the left-hand side, you can see the trailing twelve-month customers. We're now at two million customers for...
In terms of TTM, this is up from one million, you know, the prior year's Q1, and that's about a 99% growth year-on-year. In terms of orders, similarly, about 1.1 million orders this quarter, which has grown at about 58% year-on-year. I think an important point to note, which you can see in the text box right below that, is that, you know, obviously the order volume has improved, the AOV's have improved. Something that's not mentioned here, but I think it's really important to note, is that our conversion rates across the platforms have improved very well. That's why we're being able to just, you know, drive more orders from similar levels of visits.
In terms of AOV, which is the chart right below that, we continue to be proud of our AOV, which is at INR 4,300, and again, this is far higher than what we hear the market sees typically, and it's a mark of really trying to build something a bit differentiated and curated. On the right-hand side, we can see you know here what we're trying to do is show you that our fashion business, which we present as a consolidated number, really is made up of two things. Nykaafashion.com, which is the platform, which is the app that some of you may have. The second is something what we call other platforms, which is where we list fashion products both on Nykaa.com, and also we list our private labels on many other third-party platforms and stores that I mentioned prior.
As you can see here, the Nykaafashion.com business itself is growing at 74%, and the other platforms are growing at about 10%, which is at the bottom. Overall, in consolidation, fashion consolidated for Q1 was INR 582 crore, which is a 58% growth year-on-year from the prior Q1 of FY 2022. With that, I'll hand over to Arvind to take us through the consolidated financial performance.
Thanks, Adwaita, and good evening and big hello to everyone. Thanks for joining the call. I'll take you through the financial performance in brief so that we have enough time for Q&A. Let me first talk about revenue growth for the quarter, which is impressive growth at 41%. In fact, you can see that our trajectory of growth is better than last couple of quarters, which was in the range of 30%-35%. That's coming at the back of all verticals showing good growth momentum. The core business of beauty and fashion is on steady pace of growth. At the same time, the new businesses have started picking pace. Also because the retail business has delivered very good numbers this quarter, but that is also because of the base effect.
These are the three factors due to which we have delivered 41% revenue growth. Talking about the gross profit margin, we have improved it sequentially by almost 70 basis points, primarily driven by improvement in advertisement revenue and a consistent trajectory. In terms of EBITDA, we are reporting 4% margin, INR 38 crore, which is similar to last quarter, but 70 basis points better year-on-year. That's because beauty business has improved its unit economics and it has delivered better EBITDA while fashion has maintained its unit economics. We have basically invested improvement in EBITDA from beauty business into new businesses. It kind of balances out, and that's why the margin is 4% at EBITDA level.
If you look at the last chart, that's on profit before tax, and I'll also explain to you profit after tax. PBT is something you can see that we are reporting INR 8.3 crore this quarter, which is higher versus last quarter and much higher versus last year same quarter. Some of the EBITDA improvement in absolute is also flowing down to PBT number. Moving on. Let me talk about few trends, and that's a blended number of key unit economics parameters here. Like I said, gross margin is a consistent trajectory. We are maintaining good gross margin. In fact, we have improved sequentially by 70 basis points. Year-on-year it's some almost 380 basis points improvement, which is a factor of own brand share going up, and advertisement revenue has shown improvement.
Also because Luxe and Makeup category has also shown better traction this quarter. If I talk about other cost line, marketing cost is kind of flat, 12%. It's a line that we do very measured decision. It's also a discretionary line. This quarter, in fact, we have done some brand campaign. We did not do it last quarter. Despite that, we have maintained 12%, which means that the underlying cost on digital marketing has come down, which shows some efficiency. In talking about the fulfillment cost, it's showing a structural benefit. So it's a sub-10% cost line. In fact, it has come down further to 9.11% this quarter.
Because of the fulfillment network expansion that we explained during Investor Day in detail, is having some unit cost advantage on a sustained basis. Talking about next line, which is employee cost, or maybe before that I'll talk about S&D line, which is green line over there in the last. S&D line is 4.2%. We have published it for the first time as a separate line. What I wanted to explain here, that new business like eB2B, there's a lot of field staff recruitment that we have done, which shows up into this line. This line consists of selling commission on third party platform and also the associates, beauty advisors and field staff who are working on the general trade, modern trade and eB2B business.
Because we started the scaling up eEB2B only middle of last year, this line has shown increase, but it's flat versus last quarter. Finally, on the employee cost line, it shows an increase from 9.3%-10%. That's because we continue to hire ahead of the curve to invest into new growth verticals. At the same time, this is also a quarter where increments take effect because the appraisal cycle kicks off from April. That is kind of a step up here, but that will show a leverage over remaining quarters because we get the scale for rest of the year. Moving on. Yeah. This is a slice of how we track unit economics across business verticals. If you remember, we had done this split for the first time during our annual results.
We are trying to also maintain that disclosure even during the quarter results, except that we are restricting it to contribution profit. The reason behind that we discussed this with our auditors. You know, looking at the lines below contribution, especially the employee cost, is more like a fungible resource that we use dynamically across verticals. It's very difficult to allocate it on a consistent basis quarter-over-quarter. In fact, the CODM, Falguni also reviews and allocates resources fungibly across business verticals. It's the right way to track unit economics up to contribution level.
If you look at contribution margin, if I first talk about the big picture or aggregate number, quarter on quarter, it has improved from 17.9%- 19.9%, almost 200 bps improvement. Then if you look at BPC, that is where the most, you know, the biggest improvement is showing up from 20.7% - 22.9%. That comes from these all the lines that are listed here. You can see that there's an improvement in gross margin. At the same time, there is also improvement in fulfillment cost. Also there is small improvement even in the marketing line, 30 bps, and S&D is also showing 30 bps improvement. Overall, it's a good, healthy improvement in the unit economics of Beauty business.
If you look at fashion, it has maintained or slightly improved its contribution profit from 4.5% last quarter to 5.4% this quarter. Even fashion continues to enjoy good unit economics. Of course, at EBITDA level it is still negative, because it is in the investment phase where we are building capabilities and hiring people in technology functions and fulfillment function so that we can scale it even faster. Finally, in case of others, which is a combination of Nykaa Man and eB2B, we are at -30% contribution margin. It's INR 10 crore loss because, S&D line, which I spoke earlier, there's a big buildup there so that we can penetrate deeper in the country and that will get leverage over time. That's on the unit economics.
I'll now move on to overall P&L, aggregate P&L. Since I spoke about quarter-on-quarter, here I would like to focus more on year-on-year numbers. Just in summary, our revenue has grown 41% year-on-year. If you look at gross margin, it has improved by 380 basis points from 40.6%- 44.4%. Rest of the lines which I explained as a trend, fulfillment cost has increased only by 12%. That shows that we are able to get better unit economics while we scale faster. We have incrementally lesser unit cost to spend. Marketing line is almost in line with gross profit growth, 52%. It's a very calibrated approach that we have there, but it's an investment into growth.
Selling and distribution line has grown disproportionately 1 49% because like I said, we are hiring for GT, MT and eB2B businesses. Employee benefit expense is 58%. That is combination of two factors. We have hired more people to build our new verticals and also on technology functions. Almost 40%, 38%- 40% of increase in headcount is a big part of this cost increase. The remaining is also because of mix impact and also inflation, which comes out of increments. Obviously it gets leveraged over year. Like we had reported last year, we improved our employee cost to revenue ratio by almost 100 bps . Other expense is, you know, combination of overhead and technology expenses.
That has also grown higher than the revenue growth rate because last year we had wave two, and it was kind of a low activity levels in the offices. Now we have expanded the office capacity and people are also coming back and traveling, and average in general has gone up. Obviously, in the midterm it will behave more like a fixed cost, and it should give us some operating leverage as well. Finally, on EBITDA, we are at 4%, 71 bps better than last year when it was 3.3%.
Talking about PBT, it is INR 8.3 crore versus INR 3.1 crore last year, so 165% growth. Some of the lines that you see in between the depreciation and amortization and finance costs, those are primarily driven by expansion into physical store network and also warehouses. The lease cost comes here, as well as the CapEx come, because CapEx element comes into the depreciation line. The finance cost has increased because there is working capital investment, which is because inventory-led businesses are showing good growth, and also because marginal increase in cost of financing after the repo rate increase, but still much better than two years back when we had almost 10% kind of cost. Now it's trading around 7.5%.
That gives us good profit before tax. Finally, on net profit after tax, it is INR 5.7 crore before consolidation of associate, versus INR 3.5 crore last year. You also see a line, which is share of loss of associate, which comes out of the acquisition that we had made in Earth Rhythm. We are consolidating it as an associate number. INR 5 crore is the final PAT for the quarter, which is 42% growth year-over-year. I'll now pause, and I'll hand it over back to Falguni, for remaining sections.
Talking about our new businesses. I think we are quite happy that our Superstore business continues to get fair amount of momentum on the GMV growth and the costs of doing that business in terms of the you know the people rollout that we need to create to reach about. We now reach about 100,000 retailers. To do that, we are. At the end of quarter one of financial year 2023, there were 45,000 transacting retailers, and the reach is higher. I think we are in 516 cities, and we are investing towards that business. We are happy with the controlled expansion that we're doing.
There are almost 165 brands listed on the SuperStore app, and we are also doing development of technologies that allow us to manage our people who are doing this business and also help them support business development effort that allows them to sell more to the stores. I think this business is building out as per plan, and we are happy with the GMV growth that is going on. These are early days. Like everything Nykaa does, we're very focused on trying to get to the right unit economics. Towards that, we are focused on expanding the fulfillment center to increase its reach and penetration in such a way that the fulfillment, variable fulfillment costs of shipment, per shipment costs are under control. We are working on developing the right network towards that.
We are also making baby steps into international business, where we wanna take many of our own brands in beauty and personal care area to countries like Mauritius. We've also done some listing in the Middle East on noon.com in UAE. Nykaa Arabia social media handle was started, and there are plans for more in the Middle East, because we see it as an attractive market for our private labels, including K- Beauty. Also on Nykaa Naturals, where we wanna take our hair and bath and body ranges into the U.S. through Amazon.com. As far as the warehouse capacity is concerned, we are continuing to build a larger network of warehouses.
In fact, there are now 30 fulfillment centers in 14 cities with a total capacity of 10.5 lakh sq ft, as of June 30, 2022. We are continuing to expand this network in such a way that we are closer to our customers, the delivery timelines to the customers improve, the last mile delivery costs come down. We also reduce certain amount of air shipment and split shipment, which were resulting in this kind of longer shipping and as a result, higher shipping fulfillment costs. If all of you remember, about a year ago or so, impacted by COVID, our fulfillment costs were higher. Over last two, three quarters, we have had a concerted effort to bring them down.
These warehouses are an important part of that strategy toward that. Moving on. You're also aware of some of the acquisitions we've done in the first quarter. Earth Rhythm is basically a science-focused beauty brand, and we've invested about INR 41.7 crores for an 18.5% stake. We do believe that their research-oriented and result-oriented products are, and especially because they are sustainable and it's an inclusive brand, and we do believe that this brand will have a lot of potential. The second venture we signed off in the first quarter was Onesto Labs. It's a joint venture with a company where we are together gonna produce a wellness brand. Nykaa owns 16% stake for a consideration of INR 3.6 crores.
Onesto Lab, with whom we've joined hands, will use their own expertise in creating ingredient-conscious products with the brand name Nudge. It will be addressing the nutricosmetics as well as nutraceutical needs. Third acquisition was Kica. Nykaa has acquired Kica, an activewear brand for women, for an aggregate consideration of INR 4.5 crores. Through this acquisition, Nykaa aims to connect with the growing activewear community of athletes and everyday fitness seekers with great variety and curation in this category. Next. Yeah, that's the broad picture.
I think if I may summarize the results before I open it up to Q&A, is that I think given all the adversity that exists, I think we are happy with the growth that we are experiencing, and we do remain optimistic about the quarter going ahead as we go into seasonally strong quarters. We also do believe that Nykaa has done a lot of hard work in optimizing its fulfillment costs and marketing costs, and that benefit of that is already coming through. Definitely, the advantage and progress is more in established business like beauty and in fashion, there's some more work to do. Even in fashion business, we do believe that we should be able to optimize our marketing costs and fulfillment costs further, and we will continue to work towards it.
There's no guarantee, but I think Nykaa will continue to work hard towards it. From a new business perspective, we are quite happy with the momentum we are seeing in the SuperStore and in Nykaa Man. There is a reasonable growth and you know, international is something where we are taking baby steps, as I've always said. What we remain most excited is the whole portfolio of brands we've created, both for beauty and fashion. We've been talking more about it over the last couple of quarters and sharing more information. As like you can see, we have a number of exciting brands both in beauty and fashion space that are getting a lot of customer attention and acceptance, and we are really focusing a lot on rolling out those.
All of the channels are being used, not just on Nykaa sales, but also physical retail as well as GT/MT distribution. If there is an opportunity to list on third-party platforms, then sometimes we are considering that. With that, we also remain very, very excited about our house of brands strategy, which can pay a big benefit going forward. With that, I think, that's all I wanted to share here, and I remain open to answering question answers. The whole team is here to answer your questions.
Thanks, Falguni.
Yeah.
Anyone who has a question, please raise your hand and we'll take your questions in order. Please limit yourself to maximum of two questions initially, so we can accommodate as many questions as possible.
Garima, I'll just come in. One thing is I don't wanna miss out. We also just cleared at the board, and we have announced through the exchanges that Nykaa is considering acquisition of a content brand called LBB, and that announcement has been made. However, the definitive documents are in the process of getting signed, and it may take a day or two to complete those and report to SEBI. We'll be again reporting to SEBI that the transaction is complete.
Noted.
Not SEBI, but exchanges. Yeah.
Yes.
I'm...
Noted.
Thank you.
With that, participants can raise your hands, and we'll take as many questions as possible. I see the first question from Sachin Dixit. Yeah. Sachin, you can ask your question.
Sure. Thanks, Garima. Thanks Nykaa team for giving us an opportunity. Congrats on the brilliant results. My first question is with regard to fashion. While I do appreciate that we are growing at roughly 20% Q-on-Q this quarter, but the growth still on a smaller base does not look as attractive. I just wanted to check, is the reason for this the competitive intensity as well as, say, Ajio Luxe coming into picture, Tata CLiQ Luxury also coming into picture? That's my first question.
I think.
Okay.
Yeah. Adwaita, why don't you answer, and then I'd also like to come in terms of our optimization strategy. Sorry.
Sure. Sounds good. I think, you know, to be honest, Sachin, we're pleased with the growth in terms of quarter-on-quarter and year-on-year. You know, I think, remain very focused on the positioning, remain very focused on the value proposition that we're trying to provide customers. Is it possible to grow faster than this? Yes, obviously. We're always trying to take the right calls from a marketing perspective. I think that's what even, Falguni was alluding to in terms of optimization. I think for us it's very important quarter-on-quarter to make sure that we're showing contribution margin positive, that we're continuing to set the business up for a trajectory which is going to be, you know, very clearly on the path of profitability in the near future.
For that, we always take these calls on a month-to-month basis of sometimes just focusing on getting the right cost structure in place, focusing on getting the right types of orders in place and for that, you may see growth just. We're not gonna just grow at the cost of just growing. We'll always be trying to keep the bottom line in mind as well. I remain very bullish on the fashion space overall, and every quarter that kind of bullishness is just increasing. I'm very much drawn to just how large the market is. We're very much getting a lot of positive signals from our brand partners that we're becoming a very meaningful player in the ecosystem.
Getting a lot of positive signals from the customer, which you can see in the, you know, conversion rate as well. Overall, I think a lot of other metrics as well are giving confidence that the strategy is playing out well.
Sure. Yeah. Should I go for my second question?
Yes.
On second question, I do understand that the other fashion category continues to be investment phase. Can you please elaborate on the top line, at least like the GMV to NSV fall? How is it happening and as well as the recognition of revenue in this category?
I think, Sachin, it's really early days. I think we just started reporting the GMV, and I think at this early stage there are a lot of things to be built. Like, if I may tell you, there was a month or two when our warehouses were just very full. There was no place to take inventory, and we had to give up on certain amount of growth for that one or two months, you know. At this point, we are rolling out new warehouses and stuff like that. I think really at the appropriate time we'd be very happy to share. I think at the moment we just at least wanted you all to see that both the GMV and the costs are under control at some level, you know.
I mean, of course it will be a loss-making business initially as we invest, but we wanted to share that with you so that, the community has a good sense of, you know, the composition of our three big focus areas, beauty, fashion, and new businesses.
Sure. Thank you. If a housekeeping question I can quickly squeeze in, on slide 28 and 29, marketing expense is slightly different. Is it because there is some marketing expense that's being counted below contribution profit or what's the reason for that?
Yes. For example, we do brand building expenses. We have decided to take it at below contribution level.
Sure. Thank you.
Because the businesses don't have control on those marketing spends.
Got it. Yeah. Thanks.
Sir, that's correct. That's about 100 basis points, so, you know, it's a corporate branding, which is why it is part of EBITDA, not part of contribution.
Thank you.
Next question is from Sachin Salgaonkar. You may please ask your question.
Thanks, Garima. You know, congratulations for a good set of numbers, especially on the revenue Nykaa team. I have two questions. One is a generic question on inflation. Clearly, the rising inflation doesn't appear to have had much impact on your overall revenue and GMV growth, and maybe it has to do with the higher or the high end of the consumers, who are sort of, you know, currently on the platform. The question out here is how should one look at the impact going ahead when we end up adding incremental new customers? And are we seeing a change in customer preference in terms of, you know, what kind of products they are buying in the current environment?
Anchit, do you wanna take that first? Or should I take it?
No, I can kick it off with some color on beauty and then maybe, Arvind, then you can also add. Yeah, I think, Sachin, you're right. It's the inflationary pressures on consumer demand hasn't shown up in our numbers, and nor in, you know, in our consumer information that we track. It doesn't seem to have shown up in Q1. Yes, maybe it is a result of the fact that our consumers are slightly more premium. That could be one of the drivers.
The second, though, is that we do believe that beauty as a category is a bit more essential than discretionary in the sense that a lot of categories such as skincare, haircare, and other categories like that are daily essential items. We haven't seen consumers cutting back on demand for those categories. You asked in terms of product, the kind of products we sold, so I think the question maybe is a reference to down trading, that we have also not seen really in our numbers nor in our mix of business. We haven't seen though that impact yet. If it might come in the subsequent quarters, I don't think any of us have a magic ball to see what happens.
To us, we feel our consumers are resilient. It is a category that seems to also be slightly more resilient to inflation. Yes, our consumers are slightly more urban than rural and slightly more premium. That's on the beauty side. I'll see if Arvind and then Falguni may add.
Yeah. I'd like to come in and say that, definitely, the results are good in the backdrop of that, how I started, there were a lot of adversities. Having said that, could one experience better growth for both beauty and fashion should the adversity of some amount of inflationary pressures and consumer sentiment not have been there? Definitely. I think it is what we call an off-season from a beauty and fashion consumption perspective. With some early signs which are not so bad, we are very optimistic about the season, which is over the next two quarters. Let us remain optimistic, but that'll truly show how the consumers perform.
Thank you. The second question is on fashion. While Adwaita did mention that, the own brands has started to contribute now 12%, but when we look at the fashion gross margin on a QOQ basis, it appears to have been dipped from 47% - 45.7%. Any particular reason which has led to the dip in that margin?
You know, I think technically Q4 has some earnings that we get from brands when we hit certain targets that they set. It's sort of like turnover incentives. Actually if you normalize for that, we're seeing much more of a stable and steady margin profile. If one were to normalize for that, we're not seeing that sort of dip.
Yeah, that's correct. You know, March quarter is where we also look at our annual targets that we have committed to brands, and they give us some incentive against that, which was recognized in Q4. Obviously, annual phenomenon and not necessarily to be accrued in every quarter. Yeah, pretty much stable gross margin in fashion as well.
Got it. Thank you all.
Yeah. We have a next question from Percy Panthaki. Please go ahead.
Hi, am I audible?
Yes. Yeah.
Yeah.
For many of the consumer companies, both on discretionary and staples, we are nowadays looking at the 3-year CAGR growth because of the base being disrupted by COVID, et cetera. Would you be able to tell us for the BPC GMV, what is your 3-year CAGR growth for Q1 FY 2023 and what it was for Q4 FY 2022? What I'm looking for is there any acceleration in the 3-year CAGR growth? If you can't tell me the exact numbers, that's also fine, but if you can give some flavor over whether the 3-year CAGR growth accelerated in June quarter versus what you saw in the March quarter. In the BPC GMV.
Maybe I'll come in. I think 3-year CAGR number quarter-on-quarter is probably not making so much sense, especially in a business which has seasonality. We had reported three-year CAGR as part of our annual report, and I think in BPC it was close to 50%. That was the three-year CAGR from FY 2019 - FY 2022.
Arvind, I think this.
Percy, I know what you're asking. I don't have the number because we haven't looked at it. We can easily calculate that. Yes, you are right that there has been slight acceleration in the beauty BPC growth in this quarter.
Okay. What would you attribute that acceleration to?
Honestly, like, I do feel that the coming quarter can be even stronger, so it's very difficult to say. I think if you look at the last quarter, January, February, March, it was a very mixed quarter because I think the COVID incidence was very high. Like, I mean, it was not very fatal or anything, but a lot of people had COVID. There was some impact in January and February where a lot of things got postponed, you know. A lot of events got postponed, if you remember. I think so compared to that, you know, everyone is out and about.
There is that, you know, opening up and people going to social events and work and all that leads to certain amount of consumption strength.
Yeah. I think to add to that, one is obviously macro, but the second is also just general co-commercial intensity from our brand partners, you know. Obviously we work with thousands of brand partners and, you know, they have their own budgets, their own constraints. I think this is a quarter where we, as I mentioned, we did do a big sale, the Nykaa SSSD sale. It's not our biggest sale, but it's a mid-sized sale that for which our brand partners contribute in terms of the kind of commercial offers that they will participate with. I think as Falguni said, we have our biggest sale of the year obviously is in November, so that's in Q3.
Q2 has our second biggest sale of the year, which is our hot pink sale. Yeah, I think Q2, Q3 will, you know, and the rest of the year looks promising based on the commercial intensity of the calendar, let alone the macro tailwinds that we see.
I think from what I understand, Percy, you wanna try and understand, removing all the seasonality, you wanna understand whether the momentum is stronger. It is. Honestly, like, there is not adequate. There's so much of COVID in different quarters, you know, and it has impacted in different ways. The clear patterns are not emerging. Yes, there's a slight improvement in the growth.
Right. My second question is on the other businesses. Could you give us an idea if you internally have some kind of a number as to the absolute losses that you're willing to tolerate in the other businesses? As your business scales up, probably, and I'm guessing, I might be wrong, probably the percentage losses may or may not come down, but the absolute losses may increase for a while before coming down. Is there a ceiling in terms of the absolute amount of losses that you're willing to tolerate?
We want to pursue a path to profitability like we've done in other businesses, which means that first and foremost, the business should have adequate gross margin. It's a B2B business, so it cannot have the gross margin for a B2C business, so that we must remember. It needs to first rein in its fulfillment cost structure, which also is currently just being put in place, you know. I think current losses are not an indication of what we are ready to tolerate, you know. This is a business where we believe that there won't be too much of marketing costs or digital marketing costs, but that is replaced by feet on street costs and the productivity of those workers and then the repeat customer business that they can get through their network are the two critical areas of success.
Being only six to -9 months off scale in this business, it's difficult to judge. I won't call it big scale, but just picking up. You know, while we will have guidance and we will manage it in a very kind of surgical way, I think at the moment it's difficult for us to give you guidance on this.
Okay. That's all from me. Thanks and all the best.
Thanks.
Our next question is from Nihal Jham. Please go ahead.
Yes. Good evening. Am I audible?
Yes.
Thank you so much. A couple of questions from my side. First on the BPC side, while you did allude to, you know, there being a big sale, just wanted to understand that the number of sale days or activation was similar for this quarter versus last, or did you do higher number of sale days?
No, I think, Nihal, it's very difficult to say that. But what we do three big sales in a year, and they are in. Like, there is a medium-sized sale in this quarter. There's a bigger sale in July to September quarter, and the biggest sale is in October to December quarter, in line with the Indian festive season. In the past, in the January to March quarter, there were no significant sales.
Sure, ma'am. There were no sale which came in which was traditionally not slotted for this quarter for this year?
No.
Is that right?
If you were to do year-on-year comparison, there would not be that. That would not be the case.
That is helpful.
Year-over-year is comparable.
Sure. That is it. The second question was on the fashion business and, you know, if I look at our number of visits or the unique visitors, now that as a number has stayed constant, whereas our conversions have only kept increasing quarter-on-quarter. Is it right to assume at this point that, you know, this 16 million-20 million kind of visitors is our target set and our focus is only to increase conversions AOV from this very set? A related part to that is that there's been an improvement in private label. Maybe the thought process on the fashion business is about, you know, maximizing the potential of these 20 million customers.
I'll come in, and then Adwaita can join. I think the point is not. We are not making that statement for the long run. What we are seeing is that at different. This is the guidance we wanna give, also to investors, that, you know, there could be periods when we may invest in upper funnel and there could be periods that we may decide to focus on middle and lower funnel to get more out of the customers who are anyway visiting us. I think we are looking at marketing as an optimization rather than us having to do and grow everything, you know? I think conversion remains the key. Last quarter has been very focused on conversion, both for beauty and fashion business. Conversions have improved even for beauty business and also for fashion.
That will be the focus area for a while till we feel that, yes, we do now need to consider. It's not that anything stops. We continue to acquire new customers. We continue to acquire new source of visit. It's the relative importance of spends on each of the part of the funnel. With that, Adwaita, you wanna come in?
No, I think you covered it perfectly. It's definitely not a blanket statement that we can make, you know, into perpetuity that we're happy with this number. It was more just we really wanted to focus on getting conversion up to a healthier level. From here, again, we can think about focusing on scaling the visits number. I think both our beauty and fashion journey has shown us over the last decade that there are just periods that the company and the website goes through where you focus on different metrics at different times, just reset new normals and then scale from there.
Just one follow-up.
Having said that, we are definitely doing a little more TV because we feel that that was also needed. You've seen that over last two quarters.
Absolutely. The only reason I'm asking that was because it's been four quarters since, you know, that number has stayed stable. You're saying that incrementally you still want to look at, you know, improving that number as you move forward?
Yes, we would. I think it's all a question of optimizing for the right mix. I think the thing is that, like all of you all are aware, there were a couple of quarters when the marketing costs had become very adverse. We are trying to rein in from those levels. That was also the time when the iOS reporting was a problem and there were things that needed to be fixed. I mean, the quarter that has gone by has been improvement in marketing, digital marketing efficiency and with that, you know, creating a little more money to acquire new customers and to do some more, the voice across the audience. I think there have been various strategies.
Like Adwaita said, we tend to be more optimization focused and bringing in various elements rather than see the need to do everything.
That's helpful. I wish all the best. Thank you, sir.
Next, we have a question from Karan Bhanti. Please go ahead. Karan, you can ask your question. There is no response, so we'll move on to the next question from Vijit Jain.
Thank you for the opportunity, Garima. Hello. Can you hear me?
Yes.
Sorry.
Yes, we can hear you.
Hi, Falguni. Congratulations on a great set of numbers again. I have two questions. One, within the fashion business, I just want to understand, are we moving to an approach where, you know, the entire own brand obviously is an inventory model and all external brands will be largely marketplace model? Is that the kind of thing we are doing there? In that context, just wondering the NSV to GMV ratio for the fashion business looks like it went down, right? I'm just trying to get a sense of what we're seeing there. That's my first question. I'll just follow up with the second question. Thank you.
Sure. I'll take both those questions. In terms of, you know, as I've stated in previous calls, we have been a predominantly marketplace-focused business. Yes, our private labels and our own brands are working on inventory. I wouldn't say that the split is just that black and white. There are definitely third-party brands as well that we would be willing and are exploring taking on inventory if it allows us to give a better customer experience. In a nutshell, if I had to summarize, we will be predominantly marketplace, but we will also start taking some more inventory bets as and when it helps us, you know, provide the right customer experience. In terms of your next question, the NSV to GMV ratio has worsened when you look at it year-on-year.
Again, one thing I'd like to bring your attention to is Q1 of last year was a very unique quarter in the sense that it was, you know, sort of peak COVID, as you might remember. That was a time when returns across the whole industry were extremely low, and that's because a lot of customers were obviously not returning, and even us as retailers and brands were not really accepting returns because of the hygiene risks. Off of that base, it's not really an apples to apples comparison. I think the NSV to GMV ratio you see now is definitely a little bit more reflective of the market. That being said, our focus is very much on working on, you know, just any opportunity that we can find to just improve the health of that ratio, we continue to be very focused on.
All right . Thanks, Adwaita. My next question is, in the beauty space in general with the partners, especially the local D2C space partners, are you seeing some kind of a slowdown for those partners specifically in India this year versus maybe last year? Any change that you see in their behaviors overall, that'll be great. Thank you.
I think short answer is not really. I mean, I think the direct-to-consumer brands who have managed to create a niche for themselves last year are continuing to do well, and they continue to participate very actively on our platform. I can't speak for their participation on other platforms, but I think they value Nykaa's customer base, and they value the kind of business that they get on Nykaa. Obviously, it's very sticky and it's, you know, you've seen our average order values, you've seen the kind of consumers who shop on our platform. I can't speak for how they're participating broadly in the ecosystem, but with us, they continue to remain highly engaged. No changes there really, especially from the meaningful, you know, the larger, more meaningful, more established direct-to-consumer brands.
Thank you so much. If I can sandwich in one last question from my side. In just the other categories, do we have any marketing spend at all for eB2B or, you know, in that split eB2B, is mostly reflected in sales and selling and distribution expenses?
I don't think we got your question clearly. You're saying that all selling and distribution is only eB2B? No. There is a Nykaa Beauty private label, which also has on contract, you know, they have on contract beauty advisors which come in there, as well as some of our warehouse on contract staff comes in there. Actually, our S&D definition right now does not include the say, employees working in our stores, or it doesn't include certain staff in warehouse that may be on our rolls. Maybe we'll come in future with a more comprehensive, you know, definition that can be comprehensive. Right now it's off rolls for-
All right.
...sales and distribution.
All right.
It also includes when we sell on third-party platforms, the commission that we give there.
Got it. Thank you.
Basically all variable headcount is in S&D, and all.
Okay.
Fixed headcount is in employee expense.
Thank you. Actually, the first part of that question was, is there any marketing spend you require for the eB2B business at all?
Right now we are not spending.
Got it.
I think when we can afford to spend, we'll spend.
Okay. Thank you. Those were my questions. Thank you so much.
Next question we have from Ankit Agarwal. Please go ahead.
Yeah. Thank you for the opportunity and, congrats, Team Nykaa for this wonderful result. My question is, do we have any plans for ONDC? Are we looking to participate in this?
At the moment, we don't have plans.
Okay. All right. Thank you.
Next question we have from Siddharth Bera. Please, go ahead.
Thanks for the opportunity. My first question is generally on this growth aspect. If I look at the frequency of orders placed by each customer across the BPC and Fashion, do you think there will be scope to improve that even further or probably it is largely at the levels where you would actually want it to be?
Sorry, are you talking about frequency of orders on BPC?
Yeah, BPC and Fashion both.
Maybe I'll take BPC first. Yes, I think it was one of the business highlights which I had pointed out on one of our slides, which is Nykaa Everyday. There is a concerted effort on our end to increase the basket size, but also increase the frequency with which our existing customers shop on the platform. I think predominantly makeup and premium skincare have been the categories which have overindexed for us, and we are market leaders there. But we also want to start selling a lot more everyday skincare, haircare products to our consumers, like shampoos and shower gels that are consumed on a much more frequent basis. We think it could have a...
Because basically our consumers, we want them to interact with us more frequently. It's also a great way for us to acquire new customers to beauty through some of these other non-premium skincare and makeup categories. We think that's the big push on the beauty side.
Yeah.
Fash- that was-
I'll jump in on Fashion. I think absolutely feel that there's still a ton of potential to expand the orders per customer in a year. I will say that if I really think about the merchandise that we have today, we're probably at 60% of where we need to be, 60%-70% of where we need to be, both in terms of category completion, but also in terms of price point. I do believe that there are opportunities and pockets of price point that we need to get into without diluting our positioning. Both those things will allow us to increase our repeat behavior in a pretty dramatic way, I believe.
Got it. In terms of again in terms of the channels specifically for Fashion, like you said, Adwaita, you are exploring multiple other options in terms of the retailers and in terms of third party channels. Overall, if you look at the channel mix, probably say three to four years down the line, any idea about how will it look compared to currently where you are? Will that have any sort of impact on profitability?
I'll comment on that. I think basically for fashion brand, we do believe that or any brand, you know. I think in cosmetics we started calling our brand Nykaa, so we didn't want to share that name with other e-commerce platform. I think most of the brands benefit by being more widely available in physical retail as well as in larger, wider channels of distribution. I think that if you were to look at brands' own objectives of being more well-established, it depends on the type of brand also. For most brands it may make sense to be more widely distributed. Sometimes wider distribution does come at a slightly inferior unit economics from that channel because those are not Nykaa owned channels and the unit economics of Nykaa channel is better.
I think we are looking at our business from a multi-brand retailer perspective. A multi-brand retailer also benefits from a lot of. Like, there is a lot of brand proliferation in beauty and fashion, so many, many brands are gonna come. That doesn't mean that, you know, it doesn't have to be all maximized to our own brands.
So-
We are trying to do what is right for both. We are trying to do what is right for the multi-brand retailer, and we are also trying to do what is right for the brand.
Will it be fair to say that in BPC also we might explore some of these things, or will it be limited to fashion only?
Yeah, we already do. Like for example, Nykaa Cosmetics as well as Kay Beauty are retailed in Lifestyle stores, you know, in retail. They're increasingly being retailed even in GT/MT through our eB2B distribution.
Okay, got it. Thanks a lot.
Next question is from Vivek Maheshwari. Please go ahead.
Hi, good evening. My first question is, if I look at your fashion AOV, for the last eight quarters it has consistently been moving up. One is that, you know, how that is possible? Is it the supply side, you know, driver? Is it the, you know, the, let's say, the portfolio mix? How are you ensuring this is moving up? Second is, what is the sweet spot over here? If I just compare it with, let's say, the BPC side of things, that number has yo-yoed in the last eight, nine quarters. How is this possible that, you know, it is just moving up one way?
Okay. I can take that. I think a couple of things. I do feel that there's a little bit of a category mix story here. You know, also fashion is a very young business, but in the last 2.5, three years or so since we started, in the early days we were selling a lot more of just accessories and lingerie, which are, you know, cheaper products. As that category mix has shifted more to apparel and Indian wear and Western wear, you're seeing the AOV climb. The second trend that we're seeing is obviously the basket size is increasing, so the people are just buying more items per cart. Again, as we continue to add category and add merchandise. You know, it's a previous answer I gave.
Again, you can expect some ABS movement, average bill size movement here. It's a category shift, it's a number of items in cart movement, and it's us also being, you know, quite focused on the positioning. AOV is something that I'm quite focused on holding as long as I can.
Also, very consciously, we are not going to the lower end of the market in terms of assortment. There is the lowest, one-fourth price point assortment that we are consciously not bringing to our platform.
Sure. You know, if I look at, let's say, second quarter or first quarter, FY 2021, that number was about 2,200-2,300, which has jumped up to about 3,700. Where do you think this number then settles at? Are you happy with where it is right now or it moves up further?
No, I think I don't know if you're aware, but we had launched our fashion as a pop-up on the beauty website, where very different items used to sell, like mostly because there the buyers are for beauty and our whole thought process was that fashion discovery needs to be done differently. On the beauty, of much lower AOVs used to be there, and we decided to de-emphasize that business. We have been de-emphasizing over last three, four quarters. Benefit of that has come partly in AOV, though all of it cannot be explained by only that. It's a combination of some of this. There is some more AOV to gain, but we are not really working on an AOV gain.
AOV gain is just indicative of the fact that the business is healthy and, you know, there's a choice that customer is making of buying a differentiated product on our website. As we go larger and larger, there could be some amount of AOV dilution.
Yeah. I think just to top that up, you know, I think great that Falguni gave you the context of where it started, and that's why you saw that sharp jump in the early months. You know, now you know, the last couple of quarters, which are more stable in terms of where bulk of the business is coming from, which is that Nykaa Fashion app, I do think we'll see this AOV sort of steady now for a bit. There will always be pressures pushing the AOV up, which is, you know, people adding more things to their cart. There'll be pressures pushing the AOV down, which is that as you're acquiring more customers, you're obviously not just getting, you know, the top premium customers. There'll be pressure both up and down.
I think for the foreseeable future, we'll just be trying to hold this.
Like, we have not emphasized, because of even catalog also, there's a execution thing. We are not focused on categories like just T-shirts and, you know, as we get more and look more and more like overall market, definitely avoiding the very low price point. It may emerge a little differently, you know.
Interesting. Okay. The other question, Falguni, is with the tough and tight liquidity conditions right now in the market, are you seeing that as an opportunity to, let's say, you know, acquire brands, the early-stage D2Cs, is that or are you getting more offers, given that you have a focus on house of brands strategy and your own brands?
Yeah, I mean, you're aware of all the acquisitions that we've done, and of course, there could be more. I think we are very thoughtful about what we wanna add to our portfolio, and we are not looking at ourselves as a basically as a fund who wants to invest for a gain in that value of the investment we make. I think we are very carefully evaluating that is this a brand that can be part of our house of brands portfolio, and does it bring something incremental? This doesn't mean we may not have two brands in the same segment, like Nykd and Kica have both sportswear. I think basically a brand has to come in with more of a strategic objective rather than just because we wanna ride it.
Got it. Last question, if I may, Falguni. The other point is, your presence now, let's say, on Amazon or your Amazon.com or let's say, your expansion into international geographies. What is the thought process or what is your right to win that you see, you know, which will make you successful in those markets?
I mean, it will be basically the brand. I mean, we are doing this only for the brands that we own. If our brand has something to appeal to a certain set of customers, then it can succeed. We do have brands like Kay Beauty, which we do believe can do well in the international market. We also have a certain bath and body range that can do well. Or sometimes it could be brands that focuses on Indian ingredients that may do well. There are a lot of ingredient-led brands that are doing well in the U.S. market. These are all baby steps being taken right now. These are early days, but I think there is definitely one thing we are seeing globally, that global consumer is looking at interesting brand from different countries.
There is a belief, and Anchit can talk a little bit here, but there is a belief that some of the most successful brands of the future will come out of India. Anchit, do you wanna say that, say something on that with your beauty and your experience?
I think, you know, some of you might have read about the new venture which we are doing in partnership with Estée Lauder's new incubation venture, which is kind of their venture capital arm out of New York. We're launching a program where we will accept applications and then identify brands early on in their journeys being built in India that are truly unique and that can potentially carry the, what we like to say is carry the flag of Indian beauty globally. You know, we've seen Korean beauty do incredibly well, Japanese beauty do well, French pharmacy beauty. We do think that it's time for us to identify the next set of Indian brands who will go international.
You know, we have great traditions of beauty in India, including Ayurveda, that we think could be a big benefit to the global markets. We're looking to identify the next set of brands who we can help foster, mentor, fund, and then take them global. That's in partnership with Estée Lauder.
Got it. Thank you and wish you all the best.
I'll come in with a question of mine here. If we see your growth plans, essentially we can divide those into two, right? You will need investments into your organic strategies, you know, retail store expansion, warehouses, et cetera. But also invest into inorganic strategies, brand acquisitions, et cetera. For the next two or three years, how well capitalized do you think you are in terms of all the cash flows that you generate from the core business and the investments that you need to make on the other side to fund this growth?
I think for a company like ours, you know, efficiency of digital marketing and marketing efficiency determines a lot of our profitability. Also there is a balance between growth and profitability. At any point in time, if we were to reduce the customer acquisition ambition, we can become quite profitable. I think generating enough resources for our ambition, if they were to exclude any major acquisition, I think most of the smaller needs of our own, CapEx as well as any small acquisition that we may want to make or fund couple of businesses that we are very carefully choosing, that we are balanced vis-à-vis what our ability to fund those businesses is, you know. We are not someone who's entering XYZ business without considering that can be funded, you know, from our internal resources.
I think all this is balanced, and our efficiency on marketing determines everything. There are periods when we could, if there is not adequate efficiency in marketing, we could compromise on our growth of customer acquisition. It's a balance, so we feel confident that we can manage all of this.
Understood. We'll take our next question from the line of Jay Gandhi. Please go ahead.
Hi, am I audible?
Yes.
Yeah.
Yeah, thanks for this. This is on advertisement revenue. I just wanted to understand, given that you're a platform, is there a balance you would like to tread when it comes to ad revenues, you earn in each category? Because beyond a point, it may hinder experience, right?
Yeah. Look, I don't, we don't have a number target, but you're right, we always think about consumer experience first. To give you a sense, today our advertising dollars that we generate on the beauty platform is predominantly for, you know, on-site, for example, homepage banners, and, you know, we sell some assets on social media, but mostly it's on-site and mostly on homepage. We're not really monetizing search, we're not monetizing many various landing pages and listing pages. I think Amazon and others, I mean, you know, other horizontal marketplaces have monetized their inventory and their assets to a much greater extent than we have.
We have been very mindful of consumer experience, and because of that, we have stayed away from certain things. We think our ad revenues today, where they are, we're very comfortable with the consumer experience.
Right. If it still is a sizable portion, if I consider that as part of your profitability, in the sense that in the backdrop of a tough macro, wouldn't a drop in advertising revenue kind of have a sizable hit to profitability?
I think we are not even scratching the surface on what potentially is possible.
Right.
Because all of these platforms convert, you know, I mean, whatever percentage that they convert on unique customer or even on total visits is very small. Basically the eyeballs or you have is so high and conversion is best on platforms like ours, where for relevant brands, and we only give our ad platform to the relevant brands on the platform. We won't even give ad to a brand that doesn't sell well on our platform, even if it technically is a beauty and personal care brand. In many ways, both our advertising and sales are quite integrated, and we don't see it as a. What we do is very small part, if you were to look at entire audience of brands that we have.
Yes, there could be an individual brand partner related issues where they may choose to not spend as much in a year or so because of their own reasons. I think at the industry level that won't happen.
Yeah. I think just to add to that, I think there is probably a shift. You know, I think a lot of beauty brands are looking to find more efficient channels of marketing. You know, obviously initially there was a big switch from non-digital to digital marketing, and now from, you know, Google and Facebook and other digital marketing channels to more platforms like ours, where, as Falguni said, you can see, you know, the conversion can be immediate and, you know, the channel for the conversion is the same as that for the advertising. I think we're just scratching the surface. There's a lot more we can do. We've been very selective in who we, you know, who we even sell advertising real estate to at this point.
Thanks. That's fair. That's fair. Also on the fulfillment gains, especially in BPC, I just want to understand where are they coming from. Is it that the order density at the receiver end, at the consumer end is increasing, or?
That's, you're asking about the efficiency in fulfillment?
Yeah.
Yeah.
He can really give that answer, yeah, Arvind.
Actually, it is primarily coming because we decided to go closer to customer. We are able to, let's say, reach within 300 kilometer radius of customers. It is not as simple as that. It also requires our supply chain to be adjusted and realigned such that we can replicate the inventory closer to customers. This is what we dubbed as a strategic project last year. Due to that, our order to delivery has also improved, so we are delivering faster. Also our air shipments have come down and our unit costs per, or rather freight cost per shipment has also come down, and that's quite a healthy improvement in unit economics. Yeah, there is a potential of, you know, scale efficiency even further.
Right. I just wanted to try to understand you versus a horizontal, or, you know, any other platform who has relatively more order density at the consumer end. I'm assuming, and correct me if I'm wrong, we perhaps as a vertical player won't be able to ever match that order density. Our fulfillment cost per order is likely to be relatively inferior.
Absolutely. I think when we hear about like really hyper local delivery, I don't think if basically our number of items in a cart would be 4.5-5 or sometimes higher. I think when a horizontal tries to match it, even working with the brand partner directly.
Mm-hmm.
I think it's very difficult because you're gonna anyway split it into five orders.
Right. No, fair enough. The last question, if I may ask, I just want to understand the gap between NSV and the revenue from operations in the other business. What is that gap signify?
Yeah, I'll explain. That bit, other, comprises of Nykaa Man and eB2B.
Right.
You know, the mix is changing, and eB2B is growing faster, which is an inventory-led model.
Right.
Which is why NSV is growing faster than GMV in this quarter. The gap is similar, right? The definition of NSV is that it's net of returns, taxes and cancellations.
No, I was saying gap between NSV and revenue from operations.
I think that is because, you know, in fashion, the difference between NSV and revenue from operation is quite large, whereas in beauty it's not much large. The mix also impacts it. In other business also there is Nykaa Man, which also has a mix of beauty and fashion, and that mix can impact it. Like Arvind said, all B2Bs again are inventory-led. Our overall consolidated business is a mix of both, marketplace, which is only where the gap between NSV and revenue is very large, and also beauty and which is where the gap is not very large. This is the thing. That's why we started giving all the parameters on NSVs so that people can compare our margins, fulfillment costs and marketing costs on NSV.
Right. There's no ad revenue in the other business part, right?
There is some, like in-
For Nykaa Man.
Nykaa Man, yeah.
Yeah, there's a small component.
Even eB2B business does intend to earn ad revenues.
Fair, fair. Thanks, thanks for this. Thank you.
Next question is from the line of Karan Danthi. Please go ahead.
Hi, Falguni Nayar. Hi, Anchit Nayar. Many congrats on the results. I have two questions. The first was on how you're planning for, you know, fulfillment capacity this peak season. You know, we've seen in some other countries of the world, Amazon specifically, where there was quite a large shift in consumer behavior, and they sort of misjudged you know, how much fulfillment capacity they would need, and since they've readjusted successfully, but there was a misalignment. So I'm just curious kinda how you're thinking about approaching you know, this festive season. The second question was around market share. I think India is experiencing a unique dynamic where a very few number of companies have gone public.
Karan seems to have dropped off. Would you anyway want to answer the first question that he asked?
I think on the first question is that, yes, we wanna continue opening. We are moving from what we used to call as a regional warehouse strategy to more of a local warehouse. In the sense that in most of the large states where we have large demand, we may now support a warehouse in that state so that, you know, all the last mile delivery within the states are a short distance like Arvind spelled out. Towards that, early beginnings, I think we must have rolled out three, four warehouse towards that, and there are more that will happen. We are definitely investing ahead of the-
Yeah, generally we build our capacity, so we have supply chain forecast. Basically, that we build our capacities ahead of the curve, ahead of the season. There's a cycle of six months that we follow, and try to also improvise the forecast over time as we learn from the consumer trends.
Got it. In the interest of time, we have time for one last question from the line of Sanjay Bhatt. Please go ahead.
Hi. Just a couple of questions. One is, would you be able to help us with the restatement of 0.4 million transacting users in beauty this quarter?
I didn't understand the question, sorry.
In your deck, in the last slide, where your transacting users have in last quarter it was 8.4, it is now eight. There has been a comment that these numbers have been restated. Would you be able to help us where this restatement came from?
Arvind, do you wanna answer that? On beauty?
Yeah, beauty.
I think it's Nykaa Man which was sitting in BPC until we separate it out and now we show it as part of others.
Okay. For beauty additionally, the net revenue is higher than the NSV. Is this the ad revenue which is sitting or what explains this gap?
Yeah.
That's correct. It includes both. NSV includes only product sales, whereas revenue also includes services income such as ad revenue.
Okay. Thanks a lot and all the best.
Thank you.
Well, that was the last question we have for today. I thank Nykaa's management team for their time and for all their clarifications. Thank you everyone for joining, and hope you all have a good weekend.
Thank you, everyone.
Thanks.
Thank you.
Thank you.
Thank you, Garima. Thank you so much.
Thanks. Bye.
Thank you everyone for joining.