Rising digital ad costs push brands to rethink e-commerce growth strategy

Consumer brands are reshaping their e-commerce marketing strategies as digital advertising becomes more expensive as incremental reach diminishes, leading to a move away from scale growth at all costs.

Rather than relying heavily on the market (Due to advertising and aggressive discounting (like Amazon, Flipkart, etc.), smaller brands in categories like food and personal care are now spreading their spend across platforms, including their own websites, investing more in brand building and focusing on customer retention.

“It becomes very expensive to advertise at scale because you don’t have enough incremental reach,” said Jatan Bawa, co-founder of Sauce VC-backed oral care brand Perfora.

At the same time, brands like The Organic World are also rethinking their productivity metrics. “We are now much more focused on channel quality, group behavior and long-term value rather than just top-level purchasing metrics,” said Gaurav Manchanda, founder and director of Nimida Group, parent company of The Organic World.

“With rising advertising costs, we have become more selective. We test campaigns first and scale only those that work. The focus is on efficiency, not just reach,” said Gaurav Kwatra, marketing manager at the packaged food maker. iD Fresh told Mint.

India’s e-commerce market is expected to grow from $140 billion currently to $300 billion by 2030, according to a February 2026 report by Boston Consulting Group.

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However, while online shopping continues to grow rapidly, brands are having difficulty making money from this growth. According to a report shared exclusively by Shop Culture, advertising returns have decreased by nearly 30% over the past few years as advertising costs have risen and competition has intensified.Mint. Shop Culture is a consultancy that helps businesses grow on e-commerce platforms.

This means companies spend more to acquire customers, but the return on that investment is lower. However, India’s advertising market is projected to converge and overall ad spending continues to rise ₹2 trillion by 2026, led by retail media and connected TV, according to WPP Media’s December 2025 report, underlining the clear mismatch between growth and profitability. Small brands are also among the biggest spenders in e-commerce and flash commerce channels, making it important to keep track of their strategies.

“The e-commerce industry was still stuck in the 2022 mindset. Back then, brands could scale by listing aggressively and spending heavily. [e-commerce] ads. “By 2025, this playbook is starting to show its cracks,” said Subarna Mukherjee, founder and CEO of Shop Culture.

Rebalancing the marketing mix

The changing economics of digital advertising are forcing brands to rethink how they allocate marketing budgets. Heavy spending on e-commerce performance marketing is no longer providing the same return, pushing companies to diversify beyond marketplaces.

“As brands grow, the audience on e-commerce platforms begins to dry out,” he said. Perfora’s Bawa. “It becomes very expensive to advertise because you don’t have enough incremental reach.”

Perfora, for example, reduced its reliance on e-commerce platform advertising from 35-45% of its annual marketing spend to around 20% and directed almost 80% to channels like YouTube and Instagram to raise awareness and reach new consumers.

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“Rising customer acquisition costs have helped us focus on building a stronger product and overall brand appeal, so we are not overly reliant on paid channels to drive growth,” said iD Fresh’s Kwatra.

This marks a departure from previous strategies that tied spending closely to revenue by channel. According to Bawa, brands today are prioritizing reach and discovery to create a broader funnel rather than chasing immediate conversions.

Change is also happening at a broader level. By expanding into markets and focusing on stronger apps, brands are rethinking not just where they spend but also how they grow, according to Shop Culture’s Mukherjee. “Better execution, not just higher spending, becomes the key differentiator.”

Efficiency in focus

As costs increase, brands are focusing more on efficiency. While customer acquisition costs have increased by 10-15%, competition has intensified and both acquisition and retention have become more expensive.

“Simply increasing ad spend no longer means proportional growth,” said The Organic World’s Manchanda.

This encourages a more disciplined approach to marketing. Instead of increasing spend, brands are becoming more selective about channels and focusing on improving conversion quality and customer retention.

The change in the way marketing is evaluated is clearly visible at Perfora. While performance marketing remains a core part of that mix, its share has become more prolific over time as organic demand and brand recall improve, Bawa said.

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Repetitions and retention are critical for iD Fresh. “We are constantly working on supply chain efficiency, because in a category like fresh, a good product experience is what brings consumers back,” Kwatra added.

At the same time, brands are exploring new methods to protect their margins. The Store Culture report points out that express commerce is one such opportunity, offering faster growth and, in some cases, better pricing power than traditional marketplaces.

Companies are also investing in first-party data and AI-powered optimization, but with a clearer understanding of their limitations. “AI is not a growth strategy, it is an amplifier. It enhances strong systems and exposes weak ones,” Mukherjee added.