In today’s digital marketplace, coupon codes have become an integral part of the online shopping experience, frequently encountered during transactions on platforms like Paytm, Google Pay, and PhonePe. But how often do consumers actually redeem these offers? Interestingly, while many users might overlook them, the adoption of coupon codes and cashback incentives is growing in parallel with the rise of digital payment systems in India. According to data, UPI transactions surged from 8.03 billion in January 2023 to 13.9 billion by June 2024, with the total transaction volume climbing from Rs12.98 trillion to Rs20.07 trillion in the same period.
Neha Kulwal, Managing Director for India and APAC at Mitgo, shared that 32% of all e-commerce sales during this year’s festive season involved the use of promo codes or cashback. This trend is not isolated to festive periods. Research by Admitad, an affiliate marketing platform, reveals that last year, cashback-driven purchases represented more than 20% of sales, a figure that has grown to 22% in 2024.
Government figures released in October 2023 highlighted a significant shift in payment methods across India, with over 40% of all transactions now made digitally, thanks in large part to UPI. More than 300 million users and over 50 million merchants rely on UPI, which has become the dominant payment method for transactions ranging from street vendors to large retailers. In fact, India now leads the world in digital payments, accounting for nearly 46% of the global share as of 2022. According to Kulwal, this surge in e-commerce and consumer preference for digital shopping platforms is a key factor driving the rise of cashback and coupon industries, which in turn bolster online shopping, encourage digital payment adoption, and influence consumer behavior.
Do UPI users actively engage with these promo codes? Industry experts suggest that they do. Manan Jain, Chief Operating Officer at Good Glamm Group, pointed out that the distribution and usage rates of promo codes typically range from 0.5% to 2.5%, with website conversion rates improving from 4% to 10% depending on the aggressiveness of the offer. Brands like Lenskart have noted that promo codes are often applied before the payment page, making the process seamless for customers who then choose to complete their transactions via UPI.
Many brands are finding that cashback and promo codes are more than just promotional tools; they are key drivers of customer engagement. Akhil Rumandla, Head of D2C Growth at XYXX, sees these initiatives as akin to direct response campaigns, providing brands with a targeted approach to reach the right audience with personalized offers. “This approach not only broadens a brand’s reach but also allows for precise measurement, enabling real-time tracking of campaign effectiveness and a better return on advertising spend,” he explained.
The importance of conversion rates in this landscape cannot be overstated. According to Admitad’s research, conversion rates for cashback offers have risen from 4% to 5% in the 2024 festive season, while those for promo codes have reached 2.5%. Popular product categories for cashback include fashion (28%), electronics (25%), beauty products (8%), and children’s goods (7%). For promo codes, fashion (38%), beauty products (10%), electronics (9%), children’s goods (8%), and gifts & flowers (6%) lead the way.
The role of promo codes and cashback as a marketing tool is becoming increasingly evident. For example, GIVA, a jewelry brand, reported that coupon and cashback strategies account for 30% of their total sales, with this figure rising during festive seasons. By partnering with UPI apps, brands can access a vast, diverse customer base, both banked and unbanked, and use targeted offers to drive conversion. This approach, according to Rumandla, taps into a sense of urgency by creating limited-time offers that encourage consumers to act before the promotion expires.
For Manan Jain of Good Glamm Group, this is all part of a more sophisticated, data-driven marketing strategy. By leveraging consumer purchase history and behavior, brands can deliver tailored offers that resonate with their target audience, creating a highly effective and personalized shopping experience. As digital payments and online shopping continue to dominate, promo codes and cashback incentives are not just novelties; they are crucial levers in shaping the future of e-commerce in India.