(The Weekend Insight) - The End of Easy Product Differentiation

In today’s deep-dive, we will look at a change that is becoming visible across several parts of India’s startup market. It shows up in beauty, payments, broking, electronics, quick commerce and even software. Companies are still building new products, but in many categories the difference between one product and another is becoming smaller, and whatever difference does exist often does not last very long.

A few years ago, a startup could get noticed simply by bringing something visibly new to the market. Today that advantage does not last as long. Competitors can see what is working, use similar manufacturers, copy useful features, use the same technology and reach the same customers much faster. This is happening across payments, quick commerce, broking, consumer electronics and software.

Skincare is one of the easiest places to see it. A customer looking for a face serum today can choose from Minimalist, The Derma Co, Dr Sheth’s, Pilgrim, Plum, Aqualogica and Deconstruct, with many of them selling products around the same ingredients such as niacinamide, salicylic acid, vitamin C and retinol. The products are not identical and quality still matters, but before the first purchase, the customer often sees a shelf full of products that look broadly similar. That is when brand, visibility, reviews, price and availability start playing a much bigger role.

The same thing happens with wireless earbuds. At the ₹1,500 to ₹2,000 price point, boAt, Noise, Boult, Mivi, Realme and other brands offer similar designs, battery claims, Bluetooth versions and noise-cancellation features. In stockbroking, Groww, Zerodha, Angel One and Dhan eventually allow you to buy the same Reliance or HDFC Bank share. In payments, PhonePe, Google Pay and Paytm move money through the same UPI system. In quick commerce, Blinkit, Zepto and Instamart may all deliver the same packet of milk, the same detergent and the same phone charger.

None of this means that the companies themselves are identical. A lot can be different behind the scenes. The problem is that the customer does not always see those differences before deciding where to buy.

That is where things have changed.

A startup can still create something new and useful. But the advantage can disappear quickly. A feature gets copied. A successful formulation inspires several similar products. A pricing model spreads across the category. A delivery promise becomes the minimum expected standard. A software feature that once looked special can become part of five other products within a few months.

This is why product innovation has not disappeared, but product differentiation has become much harder to hold on to.

Why it has become easier to launch similar products

A large part of this change comes from the infrastructure that now exists around startups.

A founder building a skincare brand does not need to own a factory. There are contract manufacturers that can make the product. A consumer startup does not need to build a payments network because UPI and payment gateways already exist. Warehousing and logistics can be outsourced. A company can rent cloud infrastructure instead of buying servers. Websites and apps can be built much faster than before. Marketplaces such as Amazon, Flipkart, Myntra and Nykaa can provide national reach, while Blinkit, Zepto and Instamart can put a new product in front of customers without the brand building a large offline distribution network first.

All of this has made entrepreneurship easier, which is a good thing. The problem is that the same tools are available to everybody else.

If one founder can launch a new sunscreen in six months, so can five other founders. If a particular serum begins selling well, other brands can study the ingredients, packaging and positioning and introduce similar products. If one electronics company finds that customers like a particular earbud design, rivals can move in that direction during the next product cycle. Software is becoming even more exposed to this because APIs, open-source tools and AI models have reduced the amount of time needed to reproduce many visible features.

So while the cost of building and launching a product has fallen, the cost of getting noticed has gone up. Beauty is probably the easiest place to see this.

Honasa Consumer, which owns Mamaearth, The Derma Co, Aqualogica, Dr Sheth’s and other brands, generated about ₹2,067 crore in revenue in FY25 and spent roughly ₹743 crore on advertising. That means around 36% of revenue went into advertising. Gross margin was a healthy 70.3%, but EBITDA margin fell to 3.3%.

Pilgrim shows an even more extreme version of the same problem. It generated around ₹408 crore in FY25 revenue and spent about ₹235 crore on advertising and promotion, which works out to roughly 57% of revenue.

These numbers tell us something about how crowded the category has become. Imagine a customer trying to buy sunscreen. One brand says SPF 50. Another says SPF 50 PA++++. One promises no white cast. Another adds niacinamide. A third has vitamin C. One has a dermatologist explaining the product on Instagram. Another is being promoted by an influencer. One is on sale. Another is appearing at the top of Amazon. A third can be delivered through Blinkit in ten minutes.

Most customers are not going to test eight sunscreens for two weeks each before choosing one. They will use shortcuts. They will buy the brand they have heard of, the one a friend mentioned, the one that appeared first in search, the one with better reviews or simply the one that is available right now.

The actual product becomes very important after the purchase. If it is bad, the customer may never come back. But before the first purchase happens, the brand has to somehow get into the customer’s head or onto the screen in front of them. That is where a large part of the money is now being spent.

Minimalist is a useful example because it started with a real product idea

Minimalist did not enter Indian skincare by simply copying the language that already existed. When it launched, much of the market still relied on broad claims around fairness, glow, natural ingredients and beauty. Minimalist took a very different route and put the active ingredient at the centre of the product.

The bottle itself told the customer what they were buying. Niacinamide 10%. Salicylic Acid 2%. Alpha Arbutin. Retinol. The packaging was simple and clinical, and the company spoke in a language that made skincare feel closer to science than traditional beauty marketing.

Co-founder Mohit Yadav described the thinking quite simply when he asked, “Shouldn’t we understand what the consumer wants and then develop products?”

That idea worked. It gave Minimalist a clear place in the market, and it also helped change the way Indian consumers spoke about skincare. Ingredients such as niacinamide and salicylic acid became familiar. Percentage-based formulations became common. Clinical-looking packaging spread across the category.

But that is also where the problem with product differentiation shows up. Once the market understood what worked, other companies could use similar language. They could launch similar ingredients and similar-looking products. The original advantage did not disappear completely, but it became smaller.

Minimalist then moved into another phase. Hindustan Unilever bought a 90.5% stake in the company in 2025. The brand later crossed an annual revenue run-rate of ₹850 crore.

That deal is interesting because of what happened after the product had already proved itself. Minimalist now had access to an organisation that has spent decades putting soaps, shampoos, detergents and creams into Indian shops and homes. HUL understands retailers, modern trade, procurement, supply chains, advertising and distribution at a scale that a startup cannot easily build in a few years.

Minimalist needed a strong product idea to become important. After that, distribution became the thing that could make the brand much larger.

This is probably closer to what is happening across many categories. Product gives a company the first opening. If the idea works, the market learns from it. Once similar products begin appearing, the advantage slowly moves towards distribution, trust, availability and cost.

Good Glamm saw the customer acquisition problem early

The Good Glamm story is useful because founder Darpan Sanghvi had already understood that continuously paying to reach customers could become a serious problem.

Around the end of 2019, MyGlamm was reportedly spending more than ₹1,000 to acquire a customer online. The company was spending about $500,000 a month to bring in roughly 30,000 customers.

Sanghvi’s answer was to stop depending so heavily on outside platforms for attention. He believed that if the company owned content websites, communities and creators, it could reach customers without paying Facebook or Google every time.

He later explained the idea by saying, “I thought that I can leverage content to reach out to consumers organically.”

Good Glamm then went on an acquisition spree. POPxo, BabyChakra, ScoopWhoop and MissMalini became part of the group. So did consumer brands such as The Moms Co, Sirona, Organic Harvest and St Botanica. Sanghvi said the company did ten acquisitions in 2021 alone.

The thinking was not foolish. If Good Glamm owned the content women were reading and also owned the beauty products being sold to them, it could reduce its dependence on paid marketing. For a while, the idea appeared to be working. Sanghvi said around 70% of the top of the company’s marketing funnel was coming from its own content platforms.

The problem was that owning attention did not solve everything else. The group had bought too many companies in a short period. Integration became difficult. Working capital tightened. Some of the acquired businesses struggled. Sanghvi himself acknowledged that the integration was difficult, saying, “The integration is a challenge that we have learnt to power through with time.”

Eventually the structure began to fall apart. Sirona, which Good Glamm had bought for about ₹450 crore, was sold back to its founders for around ₹150 crore. ScoopWhoop, acquired at a valuation of roughly ₹100 crore, was sold for around ₹18 crore to ₹20 crore. By 2025, the broader group was breaking apart.

There was a very human part to the Sirona story. Founder Deep Bajaj had sold the company, moved on and then found himself buying his own business back. After the deal, he wrote that “the goal was never just to sell, make money, and move on.”

Good Glamm had correctly identified that CAC was becoming expensive. What it learnt the hard way was that owning an audience is not enough on its own. The products still need to sell. Customers need to return. Brands need to remain healthy. Acquisitions need to work together. At some point the business has to generate cash.

Distribution can solve many problems, but it cannot solve every problem.

The platforms are also making money from this fight

There is another part of the story that is easy to miss. When many brands start looking similar, the company that owns the shelf becomes more powerful.

Take the same example of sunscreen. Ten brands may be selling decent products. All of them would like to appear first when a customer searches for sunscreen on Amazon. They cannot all have the first position, so the marketplace can charge for that position.

That is now a very large business.

In FY25, Amazon, Flipkart and Myntra together generated about ₹15,573 crore from advertising, up 26% from the previous year. Amazon alone generated ₹8,342 crore. Flipkart made ₹6,317 crore and Myntra made ₹914 crore.

This is different from traditional advertising because the customer has already entered the shop. The brand is paying for a better place inside that shop.

If only one product is clearly better than everything else, customers may search for it by name. If twenty products look good enough, all twenty companies have a reason to pay for visibility. Product similarity therefore creates another source of income for the platform.

The same thing happens before the customer even reaches Amazon or Flipkart. Brands pay Google for search. They pay Meta for attention. They pay creators for reach. Then they may pay again for sponsored placement on the marketplace where the purchase finally happens.

In some consumer businesses, the fight to get the product in front of the customer is becoming almost as important as the product itself.

Quick commerce looks similar from the outside, but the real fight is happening inside the business

Blinkit, Zepto and Instamart are a good example of why product innovation should not be judged only by what appears on the screen.

The customer experience is simple and increasingly similar. You search for something, add it to the cart, pay and wait for the delivery. Most customers are not thinking about the hundreds of decisions needed to make that order possible.

The companies, however, are constantly trying to work out what should sit inside each dark store, how much milk a neighbourhood will need tonight, how many riders should be available at 8 pm, which products are likely to expire, how many items should be stocked, what rent makes sense in a particular location and how many orders a dark store needs before the economics begin to work.

This is where the real difference can build over time.

Swiggy ended FY26 with 1,143 Instamart dark stores across 129 cities. Instamart’s gross order value reached ₹7,881 crore in Q4 FY26, up nearly 69% from a year earlier. At the same time, the business still reported an adjusted EBITDA loss of ₹858 crore for the quarter.

Zepto processed 64 crore orders in FY26. Revenue more than doubled to ₹22,624 crore, but the company lost about ₹5,905 crore.

Blinkit has moved further on profitability. By Q4 FY26, it had 2,243 dark stores and was making a small adjusted EBITDA profit from quick commerce.

To the customer, the three apps may look close to each other. Inside the companies, they are fighting over cost per order, orders per dark store, basket size, inventory turns, rider utilisation, rent, wastage, advertising income and repeat frequency.

That work may not look like traditional product innovation, but it matters much more than adding another feature to the app. If one company can fulfil the same order ₹10 cheaper than another, that difference can eventually decide the business.

UPI shows what happens when the basic product becomes common

Payments take this argument even further because UPI has standardised the basic transaction.

A customer sending ₹500 through PhonePe is not sending a better ₹500 than somebody using Google Pay. The money moves through the same underlying system, which means the apps have limited room to differentiate on the core act of sending money.

PhonePe therefore spent years building something around the payment.

By July 2026, it had 718 million lifetime registered users and more than 50 million registered merchants. Its merchant network covered more than 98% of Indian postal codes.

That merchant network matters more than another small design change in the app. A startup can launch a clean UPI interface. It cannot suddenly appear in 50 million shops.

Once PhonePe had that reach, it could use the same customer and merchant base to sell other services such as insurance, merchant products, lending distribution and wealth products.

The payment helped create the relationship. The network around that relationship became the real asset.

Customer acquisition and distribution are not the same thing

There is a temptation at this point to say that startups should simply spend more money acquiring customers. That would be the wrong conclusion.

Zerodha shows why.

Nithin Kamath has written openly about why Zerodha does not advertise in the way most consumer internet companies do. One line from him explains the thinking well: “It is a good place to be when you don’t have to look at customers in terms of acquisition costs and lifetime value.”

Zerodha built low-cost broking, then added tools, education through Varsity, communities and trust. Existing customers brought other customers. The company was still acquiring users, but it was not buying each one through an advertisement or discount.

Groww gives us another example. It became India’s largest broker by active NSE clients, but according to its IPO filings, 83.6% of new customers in FY25 came organically.

This is an important difference.

If a startup pays Meta ₹500 for a new customer and has to keep paying similar amounts for future customers, that is paid acquisition. If customers keep coming back, tell friends, search for the brand directly and bring other people with them, the company is slowly building its own distribution.

A merchant network is distribution. A large installed user base is distribution. A dealer network is distribution. Being available in thousands of shops is distribution. Strong search traffic can become distribution. A community can become distribution. Referrals can become distribution.

Paid marketing can help build all of these things, but the company becomes much stronger when it no longer needs to pay for every single customer.

Meesho shows why a network is harder to copy than an app

Meesho is another useful example because its visible product is only one small part of what the company has built.

At the end of FY26, Meesho had 264 million annual transacting users, 961,000 active sellers and more than 18,000 active logistics providers. Marketplace net merchandise value reached ₹41,560 crore.

A competitor can build another shopping app. It is much harder to copy the network behind Meesho.

More consumers give sellers a reason to join. More sellers improve choice and price. More orders make the logistics network denser. A denser network can reduce delivery costs. Lower costs make low prices easier to sustain, which brings in more consumers.

The app may be copied. Building all of those relationships takes years.

This is a form of product differentiation that survives much longer because the product is not simply what appears on the phone.

boAt found another way to make a common product feel different

Consumer electronics has the same problem as beauty. Many products begin to look similar after a while, especially in lower price bands.

When Aman Gupta and Sameer Mehta started boAt, India already had hundreds of audio brands. International companies were present, Chinese brands were expanding and cheap unbranded products were everywhere. boAt did not invent headphones or Bluetooth speakers.

The founders noticed something else. Young customers were wearing earphones in public, carrying them to college and using them as part of how they looked. That meant the product was not only electronics. It was also fashion.

Gupta put it clearly when he said, “We don’t sell our products as electronics only. We sell them as lifestyle accessories.”

The company surrounded itself with cricket, Bollywood, music and youth culture. It worked with celebrities such as Hardik Pandya and Kartik Aaryan. At one stage, models even walked at Lakmé Fashion Week wearing boAt products. Gupta later described boAt as the “Zara of electronic fashion”.

The electronics could be copied. The brand gave the customer another reason to choose one pair of earbuds over another.

There is still an important difference between brand and advertising. Advertising is the money a company spends to get attention. Brand is what remains in the customer’s mind after that spending stops. A strong brand should eventually make future customers cheaper to acquire.

AI could make software differentiation even shorter

Software may be the next big place where this problem becomes visible.

For years, software features had some protection because building them took time. A company needed engineers, infrastructure and months of development.

AI has shortened that process.

Suppose a startup launches a tool that records meetings, turns them into notes and sends follow-up emails. A few years ago, that could have looked like a company on its own. Today, competitors can use similar language models, transcription tools and APIs to reproduce much of the visible product quickly.

Then there is an even bigger threat. Microsoft can add the feature to Teams. Google can put it inside Meet. Zoom can add it to Zoom. The startup may have built the feature first, but the larger company already has millions of customers sitting inside the product every day.

Freshworks gives us a useful Indian example. Its Freddy AI products crossed $25 million in annual recurring revenue by the end of 2025 and had more than 8,000 customers. Freshworks, however, already had roughly 75,000 companies using its broader software products.

That customer base gives it a head start. An AI startup may have an impressive demo, but Freshworks can offer AI to a company that is already using Freshdesk every day.

This is why many software features will probably become easier to copy. The harder things to copy will be customer relationships, workflow, integrations, data, trust and the amount of time a company has already spent inside the customer’s business.

There are still businesses where the product itself is the main advantage

It would be wrong to carry this argument too far.

There are many businesses where the product remains at the centre of everything.

Ather is one example. An electric scooter is not only a touchscreen, body shell and logo. Battery management matters. Thermal performance matters. Motor design matters. Manufacturing quality matters. Vehicle software matters. Reliability matters.

Ather had filed 643 patents by FY26 and had also built a large charging and service network around its vehicles.

Good marketing can bring somebody into an Ather showroom, but it cannot turn a poorly engineered battery into a good one.

Skyroot makes the point even more clearly. When a rocket launches, it either works or it does not. There is no advertising campaign that can make up for a vehicle that cannot reach orbit.

The same applies to medical devices, semiconductors, industrial machines, robotics, advanced materials and many climate-tech businesses. In these categories, technical work still creates a real barrier because the product is difficult, expensive and slow to reproduce.

Even here, distribution eventually matters. Ather still needs showrooms and service centres. A medical-device company still needs hospitals and doctors. An industrial startup still needs sales teams and customer support.

The difference is that marketing cannot replace the product when technical performance is central to the buying decision.

A better way for investors to look at product differentiation

One useful question for investors is not simply whether the product is different today. It is how long that difference can survive.

If a startup launches something customers love, how long will it take for other companies to offer something close enough?

For some consumer products, the answer may be a few months. A new interface can sometimes be copied in weeks. A pricing plan can be copied almost immediately. A new software feature can now spread very quickly.

Other advantages take much longer to reproduce. A dealer network built over ten years is harder to copy. Millions of returning customers are harder. A manufacturing process that lowers cost by 25% is harder. A strong seller network is harder. Years of customer data are harder. A trusted brand can also take a long time to build.

This tells us more about a startup than simply asking whether the app looks different from the competition.

The next question is what happens when the marketing budget comes down.

Imagine a consumer company growing at 50% while spending heavily on advertising. Now cut that spending by half. If sales immediately collapse, the company may still be buying a large part of its demand. If old customers keep returning, people search for the brand directly, retailers still want the product and referrals continue, then some of that marketing spend has created something that lasts.

Honasa is worth watching from this point of view. In FY25, it spent about 36% of revenue on advertising while EBITDA margin fell sharply. In FY26, revenue increased to around ₹2,392 crore, EBITDA rose to ₹231 crore and profit after tax reached about ₹200 crore. Part of that improvement came from tighter spending, including lower advertising costs as a share of the business.

That is the path consumer companies eventually need to show. Marketing helps build the brand, but over time the brand should make marketing more efficient. If every rupee of growth always requires another large rupee of advertising, the company may be buying revenue rather than building a strong consumer business.

Product innovation is also moving to places customers do not always see

There is another reason why it would be wrong to say that innovation is disappearing. We often define product innovation too narrowly.

Innovation does not always mean launching a completely new product or adding a new feature.

If Blinkit can reduce fulfilment cost by ₹10 per order, that matters. If Ather gets more range from the same battery size, that matters. If Meesho can make deliveries to smaller cities cheaper, that matters. If a skincare company gets far more repeat purchases because the formulation works better, that matters. If a SaaS company can bring a new customer live in two hours instead of three weeks, that matters.

These improvements may not make good advertisements, but they can change the economics of the company.

In several mature digital businesses, the most valuable innovation is moving away from the front of the product and into operations, cost, supply chains, data and repeat behaviour.

This brings us back to the original question about whether customer acquisition is becoming more important than product innovation.

In many Indian startup categories, the answer is yes, but only after the product has reached a certain level.

A startup can no longer assume that a visibly better product will protect it for years. The first company may make ingredient-led skincare popular, but others will follow. One company may make ten-minute delivery normal, but competitors can make the same promise. One brokerage can simplify investing, but other apps will improve. One software startup can launch a useful AI feature, but larger companies may soon add the same thing.

The gap closes faster than it used to.

What matters after that is what the company has built around the product. It may be lower costs, repeat customers, a dealer network, retail presence, a merchant base, a large seller network, strong trust, deep integration into a customer’s work or a brand that people remember without being reminded every day.

Products still matter because bad products eventually lose customers. In deep tech and several technical industries, the product can still be the biggest reason the company exists.

What has become weaker is the old belief that a new feature, a different formulation or a better-looking app can protect a startup for very long on its own.

For a large number of consumer and software companies today, making a good product gets them into the market. The real test begins when everyone else learns how to make something good enough as well.