Major online retailers in India are trimming back on deep discounts to prioritise profit margins amid slowing sales growth and rising operational costs, signalling a significant shift in the country’s retail landscape.
India’s biggest e-commerce platforms are pulling back from the deep, broad-based discounts that helped power earlier growth, as they place greater weight on profitability and cash generation. Industry estimates now point to sales growth of about 8% to 10% during major promotional periods, down sharply from the 20% to 25% expansion once expected, according to reporting on the sector.
The retreat from heavy price cuts reflects a wider shift in retail. Consumer goods makers and store chains are also reducing promotions as higher input costs and volatile raw material prices squeeze margins. The Economic Times reported that average price incentives are now 5 to 10 percentage points lower than a year ago across online and offline channels, while electronics and smartphone brands have trimmed direct discounts, cashback offers and card-linked deals.
Rather than blanketing entire sites with markdowns, platforms are increasingly relying on tighter, category-specific offers aimed at converting buyers who are already shopping for a particular product. That approach is designed to protect margins after years in which aggressive promotions often boosted sales volume while eroding profits. Retailers including Aditya Birla Fashion and Retail, Arvind and V-Mart have taken a similar view, with Madura Fashion said to have cut discounts by 500 basis points in the previous fiscal year to support profitable growth.
The more cautious pricing environment comes as shoppers become selective about discretionary purchases. Higher living costs have softened demand for big-ticket items such as smartphones and laptops, even where total sales value holds up. At the same time, quick commerce is taking a larger share of smaller, urgent purchases such as gifts, toys and electronics, forcing traditional e-commerce firms to compete more on delivery speed and service as well as price.
The pressure to improve unit economics is also being shaped by funding conditions. The India Phygital Report 2024 says e-commerce already accounts for 8% to 10% of India’s total retail market and could reach 14% by 2026-27, but private equity and venture capital inflows have been declining. That leaves platforms with less room to subsidise growth, even as logistics, fulfilment and reverse logistics costs remain heavy and return rates in fashion and electronics can run as high as 25% to 40%, according to the industry summary. For investors, the key question is whether the new discipline can produce durable profits without handing market share to more aggressive rivals.
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