Industry Context: Navigating Underpricing Risks While Using Pricing as a Strategic Lever

In India’s fiercely competitive e-commerce landscape, e-commerce pricing remains a critical driver of success. It directly influences profitability, brand perception, and market positioning. Nevertheless, underpricing risks caused by aggressive discounting, VC-fueled growth models, or flawed GTM strategies can threaten long-term sustainability. Moreover, these risks are especially visible in D2C fashion, electronics, and fast-moving consumer goods (FMCG). In these sectors, brands often slash prices to quickly capture market share. Consequently, short-term gains may appear promising, but they often lead to shrinking margins and weaker brand equity. Therefore, pricing should not be viewed as just a marketing tactic. It must function as a strategic lever aligned with sustainable growth goals. Ultimately, building a resilient pricing model helps brands protect margins and strengthen their market position.

The proliferation of digital channels, such as Amazon, Flipkart, and D2C platforms, has heightened consumer expectations for low prices, driven by easy access to price comparison tools. This dynamic amplifies underpricing risks, as brands prioritise short-term sales over sustainable margins, undermining profitability and diluting brand perception in the competitive landscape.

Recent Trends and Underpricing Risks Impacting E-commerce Pricing Strategy

Several trends are reshaping e-commerce pricing strategies in India, compelling brands to address underpricing risks:

• Pricing Intelligence Tools: Competitors increasingly use advanced pricing intelligence platforms to monitor and adjust prices dynamically, intensifying price wars in the competitive landscape.
• ONDC and Price Transparency: The Open Network for Digital Commerce (ONDC) enables seamless price comparisons, increasing pressure on brands to justify their pricing and avoid underpricing risks.
• Post-2023 Funding Crunch: Reduced VC funding since 2023 has forced D2C brands to shift from discount-heavy models to prioritise profitability, challenging traditional GTM approaches.
• Rising Customer Acquisition Costs (CAC): Saturation in performance marketing channels has driven up CAC, making deep discounts unsustainable without modeling against customer lifetime value (LTV).
• DPDP Compliance: The Digital Personal Data Protection (DPDP) Act mandates transparent pricing and promotional claims, requiring brands to align discounting strategies with regulatory standards.
• Consumer Shift to Value: Indian consumers increasingly prioritise quality and value communication over deep discounts, offering brands opportunities to differentiate beyond price.

1. Risks of Underpricing in GTM Strategy

Underpricing risks in a GTM strategy can have severe consequences for e-commerce brands:

• Cannibalisation of Brand Value: Persistent low pricing erodes brand perception, making it challenging to establish a premium or value-led market positioning.
• Erosion of Profitability: Aggressive discounting strategies reduce contribution margins, threatening financial sustainability and operational reinvestment.
• Misalignment with Positioning: Underpricing contradicts efforts to build premium or value-led offerings, confusing customers and weakening brand perception.
• Poor Customer Retention: Discount-driven onboarding attracts price-sensitive customers with low loyalty, increasing CAC and churn rates.
• Operational Strain: Low prices often lead to higher return rates, particularly in fashion and electronics, straining logistics and increasing costs.
• Negative Investor Signals: Chronic underpricing signals financial indiscipline, deterring investors or M&A suitors and limiting growth prospects.

These risks highlight the importance of a GTM strategy that prioritises sustainable e-commerce pricing.

2. GTM Strategy to Manage Underpricing Risks

To mitigate underpricing risks, e-commerce brands must adopt a strategic GTM framework:

• Segmentation: Customise e-commerce pricing to distinct customer segments value-seekers versus brand-conscious buyers. For example, value-seekers may respond to competitive pricing, while premium buyers value exclusivity and quality.
• Positioning: Use storytelling and value communication to emphasise product quality, sustainability, or unique features, reducing reliance on price as a differentiator.
• Channel Strategy: Select digital channels strategically. Marketplaces like Flipkart offer scale but limit pricing control, while D2C platforms enable better margin management and direct customer engagement.
• Promotional Cadence: Replace deep discounts with limited-time bundles, loyalty programs (e.g., subscription discounts), or value-added services to drive sales without sacrificing margins.
• Pricing Stack: Leverage pricing intelligence tools like Pricefx or Zilliant for dynamic pricing and competitive benchmarking. Model CAC against LTV to ensure pricing supports long-term profitability.
• Retention Focus: Drive repurchase through post-sale engagement, such as personalised emails, loyalty rewards, or subscription models, reducing reliance on discounting strategies.
• Influencer & Community Engagement: Partner with micro-influencers and build communities on digital channels to foster brand equity, minimising dependence on discount-led virality.

Illustrative Examples

• GTM Failure: The Pitfall of Underpricing

A D2C apparel brand launched on marketplaces with heavily discounted prices to gain traction. Despite strong initial sales, underpricing risks materialised quickly. Thin margins hindered reinvestment, high return rates strained operations, and the brand struggled to upsell premium products. Within two quarters, financial distress forced a pivot to premium market positioning, but early discount-driven customers were alienated, damaging brand perception.

• GTM Success: Value-Driven Triumph

A D2C skincare startup adopted value-based e-commerce pricing, emphasising ingredient transparency and sustainability. Through robust value communication on digital channels and influencer partnerships, the brand avoided underpricing risks. Though growth was slower initially, this strategy delivered higher profitability, better LTV, and strong brand loyalty, securing a defensible position in the competitive landscape.

Conclusion

In India’s dynamic e-commerce ecosystem, crafting a GTM strategy that mitigates underpricing risks is essential for sustainable success. By aligning e-commerce pricing with customer segmentation, leveraging pricing intelligence, and prioritising value communication, brands can avoid the pitfalls of aggressive discounting strategies. This approach fosters long-term profitability, strengthens brand perception, and ensures a robust market positioning in the competitive landscape. With strategic pricing discipline, e-commerce leaders can build resilient businesses poised for growth.

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