Zepto User Base Plummets for First Time: Falling Growth Puts Squeeze on Rapidly Surging Marketing Costs

Zepto User Base Plummets for First Time: Falling Growth Puts Squeeze on Rapidly Surging Marketing Costs​

Quick commerce leader Zepto has seen its base shrink for the first time, according to a closer reading of the company’s updated Draft Red Herring Prospectus (DRHP). The filing reveals that despite significant increases in advertising expenditure, the company is facing slowing user growth and rapidly escalating customer acquisition challenges. This shift challenges Zepto's standing as one of India’s fastest-growing players in the highly competitive e-commerce space.

Decline in Annual Transacting Users Signals Market Headwinds​

The ATU (Annual Transacting Users) metric tracks the number of unique users who have placed at least one order over the past 12 months. Zepto's reported ATU has fallen from 49.54 million in December 2025 to 47.97 million in March 2026. This represents a decline of 1.57 million users within the three-month period alone.

Cost Spike: Implied Customer Acquisition Costs More Than Triple​

This user slowdown comes despite heavy investment in growth through promotional activities and advertising. Zepto invested Rs 1,389 crore on advertising in FY26, a notable increase from the Rs 1,187 crore spent during FY25. However, new user additions dropped sharply to 9.6 million in FY26, down significantly from 27.8 million in the preceding fiscal year.

Based on these figures, the company's implied customer acquisition cost (CAC) rose substantially. The CAC jumped to roughly Rs 1,448 per new user in FY26, up sharply from Rs 427 per new user in FY25. This sharp increase means that acquiring a single new customer has become over three times more expensive.

Nuances of Marketing Costs and Operational Challenges​

The company uses "Digital Marketing Cost per Order" as a metric, dividing marketing expenditure by total orders on the platform. This differs from the industry-standard CAC, which divides spend only by new customer additions. This operational detail highlights how order volume impacts the cost ratio, irrespective of new customer acquisition difficulty.

Zepto’s RHP acknowledged that multiple factors could lead to user base decline. The firm cited potential changes in user behavior as one possibility. Another major concern raised is intense competition from rivals who are offering attractive pricing, incentives, discounts, and expanded product variety.

Furthermore, the filing pointed out operational risks related to user retention. Users may have experienced negative outcomes on the platform due to issues such as product quality problems, challenges with the return process, or difficulties accessing refunds.