Why Your ROAS is Dropping: A Deep Dive into Amazon Advertising in India’s Hyper-Competitive Market
In the high-stakes arena of Indian e-commerce, Amazon Advertising in India has undergone a seismic shift. If you are an Amazon seller in 2025, you’ve likely noticed a frustrating trend: your ad spend is climbing, but your Return on Ad Spend (ROAS) is steadily declining. What used to be a “set it and forget it” marketplace has transformed into a sophisticated, AI-driven battlefield.
With over 218,000 active sellers and a product catalog exceeding 168 million items on Amazon.in, the “gold rush” era of easy visibility is over. To survive and thrive, brands must move beyond basic PPC and understand the structural forces causing ROAS to dip.
1. The Cost of Entry: Rising CPCs in a Saturated Market
The primary reason for dropping ROAS is simple economics: more sellers are bidding on the same keywords. As of late 2025, Average Cost-Per-Click (CPC) across major Indian categories—such as Electronics, Beauty, and Home & Kitchen—has seen an increase of 15% to 30%.
When you invest in Amazon Advertising in India, you are no longer just competing with local brands. You are competing with global conglomerates and sophisticated “aggregators” who have massive budgets and professional data science teams. This saturation drives up bid floors, meaning you pay more for the same click you got for half the price two years ago.
The “Big Billion” & Festive Volatility
India’s unique festive calendar (Diwali, Holi, Great Indian Festival) creates massive demand spikes. However, many sellers fail to adjust their “Lead-up” and “Peak” strategies. If you aren’t optimizing your bids 2-3 weeks before a major sale, you end up overpaying for low-intent clicks when the actual sale starts, leading to a ROAS disaster.
2. The AI Revolution: Amazon’s A10 Algorithm & Rufus
Amazon has fundamentally changed how it evaluates ads. The shift from the A9 to the A10 Algorithm means that “Relevance” and “External Traffic” now carry more weight than ever before.
Furthermore, the introduction of Rufus, Amazon’s AI-powered shopping assistant, has changed how Indian consumers discover products. Instead of typing “waterproof backpack,” users are asking Rufus, “What’s the best waterproof backpack for a monsoon trek in the Western Ghats?” If your Amazon Advertising in India strategy is still focused purely on “Exact Match” short-tail keywords, you are missing out on the conversational search traffic that Rufus prioritizes. Brands that aren’t optimizing for long-tail, natural-language queries are seeing their organic and paid efficiency plummet.
3. Creative Fatigue: Static Images vs. Dynamic Content
Indian shoppers are mobile-first and visually driven. A major cause of dropping ROAS is Creative Fatigue. Using the same static product shots for a year will lead to a decline in Click-Through Rate (CTR).
In 2025, Sponsored Brands Video (SBV) and Amazon Live are no longer “optional.” Research shows that AI-generated lifestyle images and video ads can improve engagement by up to 40%. If your competitors are using Amazon’s new AI Image Generator to create seasonally relevant content (e.g., adding a festive background during Diwali) and you are not, your ads will look dated and your conversion rate will suffer.
4. The Fragmented Buyer Journey & Last-Touch Attribution
One of the biggest mistakes sellers make is looking only at “Last-Touch Attribution” in the Ad Console. The modern Indian buyer journey is fragmented:
- A shopper sees your ad on Instagram (External Traffic).
- They search for your brand on Amazon.in via their phone.
- They compare prices on a desktop.
- They finally buy 3 days later after seeing a Sponsored Display retargeting ad.
If you only measure the final ad, you might think your Top-of-Funnel awareness ads are “failing” and cut their budget. This actually causes your overall ROAS to drop because you’ve stopped feeding the funnel. To fix this, smart sellers are moving toward Amazon Marketing Cloud (AMC) to see the full 360-degree view of how their advertising spend in India actually works.
5. Logistics and “Retail Readiness”
In India, the “hidden” killer of ROAS is Out-of-Stock (OOS) issues and high return rates.
- The Prime Factor: If your product loses its “Prime” badge because of shipping delays, your conversion rate can drop by 50% overnight. Even if your ads are perfect, your ROAS will tank because people won’t click “Buy” on a product that takes 7 days to arrive.
- The Return Rate: Categories like Fashion and Apparel in India see return rates as high as 25-30%. If your ad copy is misleading or your A+ content doesn’t accurately represent the product, you are paying for “sales” that will eventually be refunded, effectively making your ROAS zero.
How to Reclaim Your ROAS: A 2025 Action Plan
If you want to stop the bleed and improve your Amazon Advertising in India, follow this checklist:
Step 1: Audit Your Keyword Match Types
Move away from “Broad Match” dominance. Use Exact Match for your high-performing “Hero” products to protect margins, and use Phrase Match for discovery. Use Negative Keywords aggressively to block irrelevant searches that eat your budget.
Step 2: Embrace AI-Driven Bidding
Don’t guess your bids. Use Amazon’s “Dynamic Bids – Up and Down” only when you have at least 50 conversions per month. For newer products, stick to “Down Only” to prevent the algorithm from overspending on unproven listings.
Step 3: Localize Your Creative
India is a land of many languages and cultures. Test Hinglish (Hindi + English) keywords and ad copy for Tier 2 and Tier 3 cities. 80% of Amazon India’s new customers now come from non-metro areas—speak their language to win their trust.
Step 4: Focus on TACoS, Not Just ROAS
Stop obsessing over ROAS in isolation. Start tracking TACoS (Total Advertising Cost of Sales). This measures your ad spend against your total revenue (including organic). A healthy business might have a lower ROAS but a stable TACoS, indicating that ads are successfully driving organic rank.
Conclusion: Don’t Go It Alone
Navigating Amazon Advertising in India in 2025 requires a mix of data science, creative excellence, and deep local market knowledge. As competition intensifies, the gap between “amateur” and “expert” management will only grow wider.
Is your ROAS still heading in the wrong direction? It might be time to stop treating Amazon Ads as a side task and start treating it as the core growth engine of your brand.