India Inc eyes a festive boom, but the bottom line holds a twist

Festive shopping may be gaining momentum, but whether people are spending more or simply shopping on a budget remains an open question. For companies, there's another catch: even when sales come in, rising costs and festive discounts can eat into the money they take home. Early sales numbers offer a first glimpse of how the season is shaping up.

Online platforms clocked an estimated Rs 24,200 crore in gross merchandise value (GMV) in the first two days of festive sales on October 8 and 9, according to Redseer Strategy Consultants. An estimated 8-9 crore orders were placed, with mobile phones accounting for the largest share by value. Around two-thirds of shoppers came from Tier II cities and rural markets.

Datum Intelligence estimates online festive sales at Rs 1.50-1.55 lakh crore this year, up 25-29% from Rs 1.2 lakh crore in 2025. The number of shoppers is expected to rise 14.5% to 158 million, but average order value is forecast to fall 1.5% to Rs 1,554.

The spending outlook, however, comes with a caveat. Among 2,000 online adults surveyed by Datum, 72% said they planned to spend more this festive season. But 57% cited deals and discounts as a reason to shop, while 51% pointed to affordable EMIs — seven percentage points more than in the previous survey.

Amazon India, meanwhile, is seeing strong interest across categories, with easy payment options also playing a role. “We are seeing strong customer interest across categories, with our recently conducted Best in Tech Survey reinforcing strong upgrade intent in consumer electronic with almost half of smartphone owners planning to upgrade during Amazon Great Indian Festival 2026, starting October 8,” an Amazon India spokesperson told ET Online.

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Demand is showing up beyond e-commerce. Haier India reported sales growth of more than 30% year-on-year in the first three days of the festive season, while Wonderchef sales rose around 20%, led by premium products. Parle Products chief marketing officer Mayank Shah told ET Bureau that packaged food sales had increased 45-50%, led by mid-sized and large packs. Quick-commerce average bill values were up 15-20% in urban areas, he said, while smaller towns were seeing first-time buyers.

The pressure on company margins

The sales momentum, however, comes against a backdrop of mounting cost pressure on companies. ICRA expects aggregate operating margins for its sample of 2,756 listed companies to contract by 100-150 basis points year-on-year in Q2 FY2027, even as revenue grows in the low to mid-teens. Margins had already contracted by 171 basis points year-on-year in Q1 FY2027.

“Inflation in raw material, freight, fuel and packaging costs is affecting most of the sectors, although with varying intensity,” said Kinjal Shah, senior vice-president and co-group head, corporate ratings, ICRA.

Fast-moving consumer goods (FMCG)companies face higher prices of palm oil, tea, coffee and sugar, alongside rising packaging and logistics costs linked to crude oil. Automakers are exposed to steel, aluminium, rubber and precious-metal prices, while apparel companies face higher raw-material, wage, logistics, rent and promotional costs, ICRA told ET Online.

ICRA expects pressure on margins to persist into Q3 FY2027, partly because of the higher cost base following the onset of the West Asia crisis in February.

Input costs are rising on multiple fronts. The West Asia conflict has pushed up energy, freight and insurance costs, while higher crude prices feed into plastics, chemicals and packaging. FMCG makers are also grappling with higher edible oil, tea, coffee and sugar prices amid El Niño-related weather risks. Meanwhile automakers and appliance manufacturers remain exposed to swings in steel, copper and aluminium prices.

“Companies are likely to follow a calibrated, category-specific pass-through strategy, prioritising volume and competitive positioning in the festive period while absorbing a part of the increased cost temporarily,” Shah said.

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ICRA said that FMCG makers are using selective price hikes, grammage reductions and product-mix improvements. Automakers and consumer-durable companies are gradually passing on costs, while apparel companies may absorb some of the pressure.

Affordability and pricing challenges

Companies are balancing demand, consumer affordability and rising input costs as they approach the season.

Mahindra & Mahindra is counting on fresh launches, product refreshes and GST-led affordability gains to bring buyers into showrooms.

“We expect a strong festive season, fuelled by robust demand across the portfolio thanks to a fresh line-up of products and refreshes. The GST reforms continue to support affordability despite inflationary pressures, while we are also seeing customers gravitate towards higher-end variants,” Nalinikanth Gollagunta, CEO of Mahindra's automotive division, told ET Online.

The company has built inventory ahead of the festive period to meet the expected increase in demand, he said. Higher-end variants could support realisations, although the benefit to profits will depend on input costs and the incentives needed to close sales.

Škoda Auto India is also expecting festive demand to build on its recent momentum, supported by new products and improved affordability. However, rising input costs have prompted the carmaker to revise prices by up to 1.2% from October 1, capped at Rs 20,000 depending on the model and variant.

“We remain conscious of the value proposition we offer customers, particularly during the festive season. Initiatives such as FanFest allow us to offer relevant benefits to customers in a calibrated manner, while balancing competitive pricing and customer value with the need to maintain a sustainable business for Škoda and our dealer partners,” said Ashish Gupta, Brand Director, Škoda Auto India.

“Affordability remains an important consideration, but customers are increasingly willing to stretch when they see meaningful value,” Gupta told ET Online.

Away from the auto showrooms, discretionary retailers have their own approach to pricing. Umashan Naidoo, Chief Creative Officer & Beauty, Trent, told ET Online that the company follows the “first price, right price” ethos, which emphasises getting the price right upfront rather than relying entirely on promotional cuts to attract shoppers.

Ajit Mishra, senior vice-president of research at Religare Broking, meanwhile, expects consumer durables, passenger vehicles, premium two-wheelers, organised retail and e-commerce to see stronger traction. Mass FMCG, entry-level two-wheelers and value-oriented discretionary categories could remain subdued.

“Elevated household expenses may constrain purchasing power, particularly in rural and lower-income markets, keeping consumers focused on value, smaller packs and promotional offers,” Mishra said.

Apparel manufacturers are already feeling the trade-off. A Clothing Manufacturers Association of India (CMAI) survey found that 52% of members expected sales to rise year-on-year, while another 32% expected them to match last year's performance. Yet 54% said they were absorbing higher input costs through lower margins, while around 35% had raised prices, CMAI chief mentor Rahul Mehta told ET Online.

“Manufacturers are trying to protect demands at a time when consumers remain value conscious, and many are choosing to carry the cost themselves. This means a stronger festive season may come with continued pressure on profitability,” Mehta said.

Discounts can eat into the gains

Promotions can help convert enquiries into purchases, but they also reduce the benefit of stronger sales. ICRA expects discounting to dilute some of the gains from festive revenues, particularly in automobiles, apparel and online-led retail.

In passenger vehicles, cash, exchange and loyalty benefits can help close sales but may reduce realised prices for manufacturers or dealers. Fashion retailers are expected to spend more on advertising and promotions to attract shoppers and clear inventory, Shah said.

Mishra said premium categories such as passenger vehicles, consumer electronics and organised jewellery have greater pricing flexibility. Mass-market FMCG and apparel businesses, by contrast, may absorb part of the cost pressure to protect volumes and market share.

Devender Singhal, senior fund manager at Kotak Mutual Fund, expects festive demand to support earnings, but cautioned that “sales growth could outpace profit growth”. Companies will need to balance price increases and productivity improvements with financing schemes and promotional offers, he said.

For Neeraj Gaurh, director and fund manager at Anand Rathi AMC, festive discounting is a “double-edged sword”. Promotions can drive revenue and clear inventory, but higher customer-acquisition and marketing costs can erode the gains. Companies with stronger brands, pricing power and tighter cost controls are likely to be better placed to protect profitability.

The festive season may bring more shoppers and higher revenues, but the gains will not be shared equally. Companies that can attract buyers without giving away too much through discounts or absorbing too much in costs will be better placed to turn festive demand into earnings.