Revamping E-Commerce Strategies Amid Rising Advertising Costs
Consumer brands are recalibrating their e-commerce marketing approaches as the landscape of digital advertising encounters escalating expenses alongside a decline in incremental reach. This has catalyzed a pivot from the former emphasis on rapid, large-scale growth.
Rather than overly depending on marketplace advertisements—such as those on Amazon and Flipkart—and aggressive discount schemes, emerging brands in sectors like food and personal care are now disseminating their budgets across diverse platforms. They are investing significantly in brand cultivation and honing their focus on customer retention.
“At scale, advertising costs become exorbitant as there isn’t sufficient incremental reach available,” remarked Jatan Bawa, co-founder of the Sauce VC-backed oral care brand Perfora.
Concurrently, enterprises like The Organic World are reevaluating their metrics of efficiency. “We are increasingly concentrating on channel quality, cohort behavior, and long-term value, rather than merely scrutinizing top-line acquisition metrics,” stated Gaurav Manchanda, founder and director of the Nimida Group, the parent entity of The Organic World.
“With the escalation of advertising costs, we are now more discerning. We conduct tests on campaigns first, scaling only initiatives that demonstrate efficacy. The emphasis has shifted towards efficiency rather than mere reach,” commented Gaurav Kwatra, chief marketing officer at iD Fresh, a packaged foods manufacturer.
India’s e-commerce sector is projected to explode to $300 billion by 2030, up from the current $140 billion, according to a February 2026 report by the Boston Consulting Group.
However, while online shopping ascends rapidly, brands are grappling with diminished profitability from this surge.
Returns on advertising have plummeted by nearly 30% in recent years, as advertising costs swell and competition intensifies, as highlighted in a report by Shop Culture, shared exclusively with Mint. Shop Culture is a consultancy specializing in enabling businesses to thrive on e-commerce platforms.
This environment means companies now allocate more resources toward customer acquisition, yet observe diminishing returns on this investment.
Despite this, overall advertising expenditure is on the rise, with India’s advertising market expected to exceed ₹2 trillion by 2026, primarily driven by retail media and connected television.
This trend reveals a stark disconnect between growth and profitability, with small brands frequently emerging as major investors in e-commerce and quick commerce channels, making it imperative to monitor their evolving strategies.
“The e-commerce sector is still mired in the mindset of 2022. Back then, aggressive listings and substantial ad expenditure could propel brands forward. As we approach 2025, the limitations of that strategy are becoming increasingly evident,” noted Subarna Mukherjee, founder and CEO of Shop Culture.
Reassessing Marketing Allocation
The shifting economics of digital advertising compel brands to reconsider how they distribute their marketing budgets. High expenditure on e-commerce performance marketing is no longer yielding commensurate returns, driving companies to diversify their strategies beyond traditional marketplace advertising.
“As brands expand, the audience reachable on e-commerce platforms becomes fatigued,” Bawa emphasized. “Advertising costs escalate because there isn’t enough incremental reach to leverage.”
For instance, Perfora has reduced its reliance on e-commerce platform advertisements from 35–45% of its annual marketing expenditures to approximately 20%, reallocating nearly 80% towards channels like YouTube and Instagram to bolster awareness and attract new consumers.
“The rising costs of customer acquisition have driven us to concentrate on enhancing product strength and brand appeal overall, ensuring we’re not excessively reliant on paid channels for growth,” asserted Kwatra of iD Fresh.
This signifies a departure from previous strategies that tightly correlated spending with revenue by channel. Presently, brands are prioritizing reach and discovery to assemble a broader consumer funnel, instead of merely pursuing immediate conversions, as articulated by Bawa.
Moreover, a broader trend is evident; brands are reevaluating not only their expenditure but also their growth strategies, expanding into various markets while prioritizing execution excellence, according to Mukherjee of Shop Culture. “Superior execution, rather than merely increased spending, is becoming a crucial differentiator.”
Prioritizing Efficiency
As costs rise, brands are intensifying their focus on efficiency. Customer acquisition costs have surged by 10–15%, coupled with escalating competition, which renders both acquisition and retention more costly.
“Simply amplifying ad spending does not equate to proportional growth any longer,” remarked Manchanda from The Organic World.
This realization is inspiring a more prudent approach to marketing. Instead of recklessly increasing expenditures, brands are becoming more judicious regarding channel selection, enhancing conversion quality, and fortifying customer retention.
At Perfora, this shift is evident in their marketing assessment methodology. While performance marketing remains integral, its proportion has evolved to be more efficient as brand recall and organic demand improve, Bawa explained.
For iD Fresh, repeat purchases and customer retention are vital. “We are consistently striving for supply chain efficiency, as, in a category like fresh products, a positive product experience is pivotal in encouraging consumers to return,” Kwatra added.
Simultaneously, brands are exploring innovative avenues to safeguard their profit margins. The Shop Culture report highlights quick commerce as one such promising opportunity, offering accelerated growth and, in certain instances, better pricing leverage than conventional marketplaces.
Companies are also investing in first-party data and AI-driven optimization, albeit with a more nuanced understanding of their limitations.
“AI should not be perceived as a growth strategy; it serves as an amplifier. It heightens the effectiveness of robust systems while revealing weaknesses in others,” Mukherjee remarked.
Source link: Livemint.com.
