Synopsis
Rising input costs and shrinking demand are squeezing smaller brands, with consumer spending projected to drop 5-6% next quarter. D2C brands face pressure as inflation and a weakening rupee push consumers towards essential purchases, impacting discretionary spending and average order values. Companies are absorbing costs or planning price hikes up to 10%.Listen to this article in summarized format
After the cost of aluminium cans for beverages and glass perfume bottles surged 25-30%, now local logistics is expected to be under pressure with rise in fuel prices.
Large conglomerates and fast moving consumer goods (FMCG) companies like Hindustan Unilever Limited (HUL) hiking prices by 8-10% and the rupee plummeting to fresh lows is likely to push consumers to pull back on discretionary spending in the coming months.
“When consumers start to downgrade, the story around premiumisation gets hit. We could see a 5-6% drop in consumer spending on a quarterly basis,” said Arvind Singhal, chairman, The Knowledge Company, a Gurugram-based management consulting firm.
Companies have started to feel the heat and the coming quarter could make things considerably harder for those who need steady working capital flow, say experts.
“Brands with strong funding support and better gross margins can navigate a weak demand environment for a few quarters, while cash-burning players with limited balance sheet flexibility could face pressure,” said Sandeep Abhange, research analyst, LKP Securities, a Mumbai-based brokerage.
Founders said that the shift in consumer behaviour is showing up in order patterns in recent weeks.
Sujata Biswas, cofounder of ethnic wear brand Suta, said buyers are pulling back in the offline stores. "Growth has definitely fallen. The average order value (AOV) has reduced, which means that people who used to buy two or three pieces are only buying one," she said. For Suta, offline footfall, already dented by the summer heat, has fallen around 10% in April compared to March 2026.
Deepak Gupta, cofounder of premium grooming brand Bombay Shaving Company, said the firm is beginning to see early signs of consumers becoming more cautious. Customers are prioritising essential purchases while discretionary spending has slowed, indicating a broader trend of people choosing to save more rather than spend on non-essential items.
More price hike
Multiple D2C brand founders told ET that they are looking to pass on the input cost hike to consumers or change the packaging to allow for better margins.
“Some part of this price rise and inflationary costing is being absorbed by the brands, but a part of it is being passed to the consumer,” said Aman Gupta, head of marketing, Farmley.
For instance, grooming and personal care brand Pilgrim is evaluating hiking the cost of its products after absorbing it for the past few weeks. “As raw material, labour, and logistics costs increase, we are looking at increasing the price of our products in the coming months. While it depends on the category, it will be within 10%,” said the company’s founder Anurag Kedia.
He added that anticipating global uncertainties to continue, brands are placing orders for raw materials in bulk.
Ecommerce sales
This year Amazon Prime Day is set to happen in July, when other platforms like Flipkart and Myntra also launch their mid-year sales.
Traditionally, these drive consumer demand. However, analysts have divided opinions this time.
“Anticipating further price hikes, consumers could buy appliances, electronics, and essentials during the upcoming ecommerce sales because of high discounts and offers,” said Satish Meena, founder, Datum Intelligence.
However, according to Singhal, the sheer number of online sales happening across ecommerce and quick commerce platforms is likely to soften the excitement.
"I think consumers are very smart now. They realise that there is a sale around the corner — you miss this one, you go to the next one. They are also getting cautious about spending money; they would rather conserve it,” he explained.
“The sales season will definitely drive traffic and short-term demand, but the quality of demand will be important to watch,” said Abhange.
