India’s cosmetics and personal-care market reaches roughly USD 23.8–24.0 billion in 2024 and continues to expand. That growth attracts new entrants and heavier competition across price tiers. Even so, a few headline names show mixed outcomes: Nykaa and Honasa (Mamaearth) posted improvements in revenue and margins in 2024–2025, but investors keep a close watch and reward consistency. In one recent quarter Honasa reported a profit of about ₹39 crore, while Nykaa recorded a substantial profit increase around September 2025. Those results show recovery potential, but they also reveal how fragile success remains for many brands.
The core reasons Indian beauty brands stumble
I break the problem into clear, actionable causes. For each, I explain what happens, why it matters, and how brands tend to fail because of it.
1. Too many look-alike launches: differentiation failure
Since 2020 entrepreneurs launched thousands of D2C beauty brands. Many founders focused on aesthetics — glossy packaging, trendy names, and influencer reels — without differentiating their product performance. When shoppers see a dozen similar face washes or “natural” serums, they compare prices and promotions rather than ingredients or results. Brands that lack real product advantages compete on discounts and short-term promotions, which drains cash and destroys margin.
Why it matters: Customers buy outcomes, not images. If a product fails to deliver distinct, measurable benefits, customers stop repurchasing and shift to cheaper alternatives.
2. Rising customer acquisition costs (CAC) and the broken virality playbook
Platforms changed. Meta ad costs climbed between 2022 and 2025. Short viral cycles on social apps grew harder to engineer and sustain. Many founders relied on a single viral moment or heavy paid social spending to scale. That approach works briefly, then CAC jumps and returns fall.
Why it matters: Brands that measure only top-of-funnel traction fail to build the retention systems that earn back CAC over months. Without solid reorders or subscriptions, a high CAC kills profitability.
3. Unit economics collapse because of returns, fulfillment, and SKUs
Beauty products generate returns for many reasons: wrong shade, allergic reaction, or unmet expectations. Indian logistics and multi-SKU complexity amplify shipping and warehousing costs. Brands sell on discounts to drive volume, but those discounts erode gross margins. When a brand’s contribution margin cannot cover fulfillment and marketing, the unit economics collapse.
Why it matters: A company can grow revenue rapidly but still burn cash. Scaling without knowing per-SKU profitability results in inventory write-downs and painful margin corrections.
4. Consumers grew smarter — trust and quality matter more
Shoppers now read ingredient lists and compare formulations. Regulators and industry bodies tightened rules around influencer disclosures and misleading advertising. When a brand overclaims benefits or fails QC, public backlash spreads quickly. Consumers react harshly to inconsistent quality, and they rarely forgive repeated disappointments.
Why it matters: Reputation forms slowly and disappears in a day. Brands that promise miracle results and then fail lose the one currency that builds loyal shoppers: trust.
5. Channel conflicts and the offline expansion trap
Brands that scaled online often tried to jump into offline retail too quickly. Opening brick-and-mortar stores or supplying large multi-brand retailers requires different strengths: category buy, store economics, and inventory forecasting. Many founders treated offline as a marketing billboard rather than an operations challenge. They stuffed retailers with inventory or offered unsustainable trade terms, which led to returns, deep discounts, and cash pressure.
Why it matters: Offline can increase trust and margins when it works, but it demands capital discipline and retail know-how. Treating offline like online marketing kills cash flows.
6. Global incumbents sharpen their India play
Large multinational companies keep investing in India. They bring decades of formulation expertise, global R&D, and deep distribution networks. Global brands now offer localized assortments at competitive prices or tap premium segments with aspirational marketing. That pressure squeezes mid-tier Indian brands that lack either science-backed products or distinctive branding.
Why it matters: Competing with deep-pocketed global players requires either a clear niche or superior operations. Many local brands try to be everything and end up with thin differentiation.
7. Markets re-price growth dreams — investor patience shortened
The initial D2C funding wave rewarded rapid top-line growth. After a few public listings and some disappointing returns, investors shifted to value discipline. Markets now favor companies that show predictable unit economics and profitable growth. When a public or growth-stage company misses expectations, the stock reacts sharply and fundraising becomes harder.
Why it matters: Brands that scaled on perpetual funding suddenly face realistic capital limits. They must either show profitability levers or downsize growth plans.
Recent, illustrative examples (what happened and what they mean)
- Honasa (Mamaearth). The company turned a corner in a recent quarter and reported approximately ₹39 crore in profit. That result shows a path back to profitability when management focuses on distribution discipline and tighter cost controls.
- Nykaa. The company posted a significant profit increase around September 2025, driven by premium brand assortment and controlled inventory. Nykaa’s story shows that careful curation and mixed online-offline channels can restore healthier margins.
- Smaller D2C brands. Many small labels either shuttered, pivoted to smaller markets, or accepted acqui-hires. Their common failure modes included overreliance on influencers, poor QC, and weak inventory controls.
Those examples illustrate two key truths. First, recovery remains possible for brands that change tactics. Second, the market already prunes operators who ignore unit economics.
Why some brands still win: the playbook that works
I see five capabilities that winners consistently deliver:
- Performance-first products. Leading brands back claims with lab tests, clinical validations, or demonstrable outcomes. Those investments reduce returns and create strong word-of-mouth.
- Multi-channel discipline. Successful brands mix marketplaces, their own websites, and selective offline presence. They adjust assortments by channel to protect margins and reduce overstock.
- Retention engines. Winners build subscription models, refills, and loyalty programs that convert initial buyers into repeat customers. That strategy spreads CAC over many purchases and increases customer lifetime value (CLTV).
- Transparent communication. Strong brands disclose full ingredient lists, explain use cases clearly, and manage influencer partnerships responsibly. That transparency reduces the risk of regulatory or PR blows.
- Operational rigor. Top brands forecast demand, rationalize SKUs, and negotiate logistics and packaging costs aggressively. They treat supply chain and inventory as strategic assets rather than back-office headaches.
When teams combine these five capabilities, they transform a beautiful Instagram story into a stable company.
Actionable fixes: what brands should do now
Below I give concrete changes founders or leaders can implement immediately to stabilize the business and improve odds of scale.
Product and R&D
- Narrow your product portfolio to a handful of hero SKUs that deliver the most margin and repurchase.
- Run standard third-party tests or small clinical studies for core claims and publish the summaries. Those tests increase trust and cut returns.
Marketing and growth
- Stop scaling purely on paid ads. Invest in owned channels: email, SMS, community groups, and subscription options.
- Use micro-influencers for sustained storytelling and measure campaigns on 90-day repurchase rates, not just impressions.
Distribution and margin control
- Rationalize SKUs by channel. Put premium SKUs into curated retail and value SKUs on mass marketplaces.
- Negotiate sell-through targets with retail partners and avoid funding indefinite inventory. Tie discounts to true promotional windows.
Operations and finance
- Build an SKU-level P&L and use it to stop unprofitable launches.
- Forecast inventory with simple statistical models and cut safety stock where you can reduce carrying costs.
Compliance and trust
- Publish full ingredient lists and basic testing summaries on product pages.
- Require clear disclosures in influencer content and track compliance. When a complaint arises, respond publicly and fast to show customers you care.
Fundraising and capital allocation
- If you need capital, raise smaller strategic rounds with specific channel expansion goals. Investors reward predictability; show them a clear path to unit profitability before asking for growth capital.
The broader industry trajectory: consolidation and professionalization
Expect consolidation. Larger incumbents, platforms, and private equity will acquire promising brands that show product strength or loyal customer bases. This consolidation helps the sector professionalize: companies will centralize R&D, logistics, and compliance functions to drive higher margins at scale.
Consolidation will not kill innovation. Instead, it will move experimental brands from “launch and hype” to “test, validate, and scale” under more disciplined operational controls.
Final assessment: failing or maturing?
Calling the sector a failure misses the larger trend. The market sits around USD 23.8–24.0 billion, and that size offers many opportunities. However, the D2C boom produced many brands that prioritized speed over substance. Investors reacted to inconsistent public results, and markets now reward discipline over spectacle.
The winners will deliver clear product outcomes, defend healthy unit economics, and build trust through transparency and consistent quality. The rest will either pivot, sell, or disappear. That realignment might look brutal in headlines, but it represents a natural phase of industry maturation.
Also Read – Startups That Expanded Too Fast and Collapsed