Myntra’s Ad Boom: What Happens When the Clothes Come Back?

Zalando has built an unusual option into its advertising system: exclude the products most likely to come back.

The European fashion platform’s “Return Rate Optimisation” control removes the 20% of items with the highest predicted return rates from campaign selection. The company describes it as a profitability control.

That feature captures a problem facing fashion e-commerce as shopping platforms become advertising businesses. An advertisement can generate an order. Whether that order becomes a worthwhile sale depends on what happens after delivery.

Back home, for Myntra, the question has become more consequential. Its FY26 advertising expenditure reached ₹2,326.5 crore, while income from selling advertising rose to ₹1,236.4 crore, according to Entrackr’s analysis of regulatory filings.

Those are separate commercial activities: Myntra pays to market its business while brands and sellers pay it for visibility. Their durability ultimately depends on the value created by the shopping that follows.

THE GROWTH BEHIND THE HEADLINE

Myntra’s reported operating revenue fell to ₹5,242.5 crore from ₹6,063.8 crore. However, logistics and shipping revenue dropped sharply, obscuring growth elsewhere.

While revenue excluding logistics reportedly stood at ₹4,123.3 crore, up from ₹3,673.3 crore, advertising income increased by ₹321.9 crore to ₹1,236.4 crore. Marketplace and collection-service revenue increased by ₹77.1 crore to ₹2,657.3 crore.

The calculation is revealing: advertising accounted for approximately 72% of the ₹450-crore increase in revenue excluding logistics.

This identifies the source of much of that growth. It does not establish whether advertising became more expensive, more sellers bought it, or campaigns delivered better results.

Similarly, marketplace-fee growth of 3% cannot be treated as a measure of growth in the value of clothes sold. Fee revenue depends on commercial terms and business mix as well as transaction activity.

The business question is whether sellers can keep increasing advertising budgets because doing so produces enough additional profit. A platform can grow advertising income while individual advertisers experience very different results. The quality of that growth depends on whether enough brands find the spending worthwhile over repeated campaigns.

THE ORDER IS ONLY AN INTERMEDIATE RESULT

Consider a hypothetical campaign costing ₹100 that generates ₹500 of orders. If customers return ₹200 of merchandise, the five-to-one ratio measured against ordered goods becomes three-to-one against retained sales.

Product costs, marketplace charges and applicable delivery or return costs still have to be covered.

The arithmetic does not describe a specific Myntra campaign. It explains why a fashion brand needs to connect advertising reports with completed transactions and settlements.

Advertising formats also matter. Payment for an impression or click buys exposure or engagement; it does not guarantee a completed purchase. Other arrangements may link charges to sales or agreed campaign outcomes.

Myntra’s aggregate financial numbers cannot establish how a particular advertiser’s bill or reported campaign sales are adjusted after a return. Those questions depend on the relevant product, measurement method and contract.

The distinction is commercially important. An advertiser could have a successful campaign by one measure and disappointing margins by another, even when every charge follows the agreed terms.

ZALANDO CONNECTS ADVERTISING WITH RETURNS

Zalando’s system provides one practical response: use predicted returns when deciding which products to promote.

Its campaign documentation lets advertisers filter products by estimated return rates. The automatic optimisation option excludes the highest-risk fifth of the assortment, concentrating spending on the remainder.

The logic extends beyond generating clicks. Advertising can direct shoppers towards products they are more likely to keep, potentially improving the economics of the resulting orders.

That approach sits alongside a growing advertising business. In its second-quarter 2026 results, Zalando reported retail-media revenue growth of 39.5%. Group adjusted operating profit rose 10% to about €205 million. Reported group growth also reflected the acquisition of ABOUT YOU, so these figures are not a clean measure of organic expansion.

The company identifies retail media among its higher-margin activities. Its returns-aware tools show how an advertising business can also address the operational costs borne by the brands buying access.

They do not prove that every campaign is profitable. They illustrate a more demanding objective than maximising the number of orders attributed to advertising.

ASOS IMPROVED EARNINGS WHILE MERCHANDISE VALUE FELL

ASOS offers a different lesson about performance.

In its September 24 trading update, the British fashion retailer reported a 5% decline in full-year gross merchandise value on a like-for-like basis. Yet it said adjusted earnings before interest, tax, depreciation and amortisation increased by more than 25%.

Management identified improved gross margin, a lower returns rate and cost discipline among the reasons. The marketing-to-sales ratio increased by more than one percentage point as some efficiency gains were reinvested in growth.

That combination challenges a simple reading of either advertising expenditure or sales growth. More marketing can accompany better earnings when other parts of the business improve. Lower merchandise value can coexist with a healthier operating result.

ASOS’s recovery also remained incomplete: its update described slightly negative free cash flow, while asset disposals helped reduce debt. These were pre-close disclosures ahead of full results.

The useful comparison for Myntra concerns the relationship between spending, returns and contribution. The size of an advertising budget alone cannot explain whether the wider business is becoming stronger.

REVOLVE SHOWS WHY HIGHER SPENDING NEEDS CONTEXT

US fashion retailer Revolve demonstrates another combination.

Its second-quarter 2026 net sales rose 12% to $347.4 million. Marketing costs increased to $57.5 million, equivalent to 16.5% of net sales, from 15.2% a year earlier. Management linked the increase principally to growth initiatives, including its namesake label.

Revolve also said a lower product-return rate partly offset higher shipping rates within selling and distribution costs. Net income increased to $18.6 million, although tariff refunds provided a material benefit.

The figures show several forces moving at once: customer growth, additional marketing, shipping pressure, fewer returns and a favourable refund.

Its marketing ratio should not be ranked directly against Myntra’s. A retailer’s net merchandise sales and a marketplace’s service income represent different revenue bases.

The more useful question is whether additional marketing produces enough retained sales and contribution to support the investment. Revolve’s disclosures help connect those components without reducing performance to a single spending ratio.

ATTRIBUTED SALES ARE A STARTING POINT

Even measuring sales after returns leaves another question: how much business did the advertisement actually create?

A customer might have bought the same brand without seeing the campaign. An advertisement could also move a purchase from one seller to another without increasing total category spending.

This is the distinction between attributing a sale to advertising and establishing an incremental sale caused by it.

IAB Europe’s January 2026 commerce-media measurement standards explicitly address definitions of gross and net sales, alongside incrementality and approved measurement methods.

These distinctions matter when brands compare platforms or decide whether to increase spending. A dashboard needs to explain what its sales number includes, when returns are reflected and how much of the result represents additional business.

Advertising can create discovery and help smaller brands reach customers. The commercial case becomes stronger when those benefits can be connected to purchases customers keep and margins sellers can sustain.

THE NEXT TEST IS THE SELLER’S RETURN

Myntra’s advertising growth establishes that brands and sellers are paying it more for advertising in aggregate. It does not, by itself, establish their profitability or the reasons behind their spending.

Global fashion provides several ways to examine the outcome. Zalando incorporates predicted returns into advertising selection. ASOS links lower returns with improved earnings. Revolve reports marketing investment alongside shipping costs, return trends and net sales.

These are different business models, with different accounting bases and commercial arrangements. Their common lesson concerns the transaction after checkout.

For Myntra, sustainable advertising growth will depend partly on whether sellers can repeatedly convert paid visibility into worthwhile business. The relevant evidence sits across campaign reports, return records and seller settlements.

The advertisement may bring the shopper to the product. The stronger economic result arrives when the customer keeps it—and enough money remains for both the brand and the platform.