Tata is in talks with global brands and plans to open 20 Beauty Tech outlets

To compete with domestic rival Nykaa (1) and LVMH's Sephora (2) for a piece of the rapidly expanding $16 billion beauty and personal care business in the second-most populated nation on earth, Tata aims to launch a brand whose interests range from jewelry to automobiles.

The insider paper also names The Honest Company (3), Ellis Brooklyn (4), and Gallinee (5) as potential partners. It describes Tata as a "beauty devotee" in India for people between 18 and 45 who enjoy purchasing Western brands like Estee Lauder's M.A.C. and Bobbi Brown (6).

According to a person who knows the situation, Tata (7) is also in discussions to provide exclusive goods to the new stores with more than a dozen businesses and brands. Tata declined to comment on the proposed beauty boutiques and the information in the memo obtained by Reuters.

Ellis Brooklyn, Gallinee, and representatives of The Honest Company did not reply to requests for comments from Reuters. After the recent release of Tata's cosmetic purchasing app, the Tata CLiQ Palette, the plans for the store opening are still a secret.

In India, where it has a joint venture partnership with well-known international brands like Starbucks and Zara, the company is already engaged in the brick-and-mortar retail industry. According to the Tata document, 70% of the items sold in the stores will be skincare and makeup. The stores will also have a bright red facade displaying the Tata CLiQ Palette branding.

Tata also intends to install technology inside the shops so that customers can virtually test a variety of lipstick shades on screens and receive digital skin analyses to determine which products might be most effective for them.

Other beauty retailers across the world already employ the technology. Experiential shopping is still very new in Indian malls and high-street stores. According to Pankaj Renjhen, joint managing director at India's Anarock Retail consultancy, experiential retail is expected to be the next big thing in India as more customers are planning to spend their free time there.

Experiential retail aids in triggering impulse purchases and can entice customers into the premium category, where they search for things other than price. However, if the brand and goods are not high-quality and exclusive, the buyer won't buy from them again. He noted that this is how retail now operates.

Tata plans to attract relatively young and affluent clients who want to shop in comfortable settings and are willing to pay the sticker price for top international goods as India's economy is expanding and people are returning to stores after the pandemic.

In the document, Tata refers to these clients as "non-bargainers," in contrast to most Indians who purchase local brands of skin creams or lipsticks at discount prices from small mom-and-pop beauty shops, where asking for deals is customary.

The company targets customers with an annual revenue of at least 600,000 rupees ($7,358), which is more than three times the average income of India's 1.4 billion people, which is $2,000 per year. The Tata paper states that the new location should "boost sales across channels as a premier beauty tech destination for Gen Z and Millennials."

Compared to China's $92 billion market (8), India's $16 billion market for cosmetics and personal care is substantially smaller. However, the Indian beauty market is far from saturated; according to market research firm Euromonitor, the country will increase by an average of 7% annually over the next few years.

Tata confronts fierce competition to capitalize on the anticipated development; therefore, investing for the long term with greater income profiles and changing lifestyles in mind has a long runway ahead of it. There are 26 Sephora locations in India, where the company has been doing business for about ten years.

According to a source familiar with the matter, Reliance (9), the company that Mukesh Ambani, a billionaire, leads, has a long-term plan for opening 400 beauty stores, with the first potentially opening inside a Mumbai mall next month. But when contacted for a comment, Reliance remained silent.

Nykaa, an Indian cosmetic retailer, has announced ambitions to expand from its 124 locations to as many as 300. Nykaa is supported by private equity firm T.P.G., asset management firm Fidelity, and the endorsement of two Bollywood celebrities.

The 10-year-old business began as an online-only retailer. It gained industry attention last year when its shares doubled after it was listed on the Mumbai stock exchange, valuing the business at $14 billion.

What obstacles must Tata overcome?

According to a source with knowledge of the matter, the first Tata Beauty Tech store will probably open by March. Further expansion continuing into the following fiscal year beginning in April could see it open as many as 40 stores. The source added that the company would start with bigger cities like New Delhi before considering smaller places.

However, Tata needs help convincing owners of small malls to expand by adding a new beauty shop where there is already one, especially if the existing store has enough exclusive products or another differentiating feature to draw in new customers and boost foot traffic across the mall.

A skin analyzer, which Tata calls it, is a device with a mirror that can interpret and analyze a customer's skin to reveal 25 to 30 attributes that can help them choose products. It is one of the tech tools that will be available in-store. Tata is focusing on in-store technology in addition to exclusive product launches.

There will be virtual try-on stations for eye and face makeup, and one of these stations will have a circular stand with lipsticks slotted in. As someone lifts one, a digital mirror screen in front will activate, spotlighting how the color or shade will appear on the face, removing the need for repeated manual try-on before a purchase.

Tata is also experimenting with geofencing technology (10) to enable its staff to recognize when customers using its application enter and share their purchase history and wish list with staff to improve recommendations.