ONDC and impact of it on digital commerce in India

 ONDC and impact of it on digital commerce in India

India is one of the fastest-growing e-commerce markets in the world, with an estimated value of US$200 billion by 2027. However, the online retail sector is dominated by a few large platforms, such as Amazon and Flipkart, that have a significant market share and influence over the ecosystem. This poses challenges for millions of small and medium-sized enterprises (SMEs) and local retailers, who often struggle to access the digital market and compete with the big players.

To address this issue, the Indian government has launched an ambitious initiative called the Open Network for Digital Commerce (ONDC), which aims to democratize and decentralize e-commerce in India. ONDC is a non-profit entity that will create a public digital infrastructure to connect buyers, sellers, logistics providers, payment gateways, aggregators, and other stakeholders on a common platform. ONDC will not follow a platform-centric model, but rather an open network approach, where any seller can offer their products or services through any compatible application or platform, and any buyer can discover and purchase them without being restricted by the platform they are using.

ONDC is based on the principles of interoperability, standardization, inclusivity, transparency, and innovation. It will leverage existing technologies such as Unified Payments Interface (UPI), Aadhaar, and Goods and Services Tax Network (GSTN) to enable seamless transactions across the network. ONDC will also adopt common data formats and protocols to ensure data portability and security. ONDC will not store any data or charge any fees from the participants, but rather act as a facilitator and enabler of digital commerce.

ONDC is expected to have a positive impact on the Indian e-commerce industry in several ways. Some of the benefits of ONDC are:

• Formalization and democratization of e-commerce:

ONDC will help bring more SMEs and local retailers online by reducing the entry barriers and costs associated with joining a platform. ONDC will also empower them to have more control over their pricing, inventory, branding, and customer relationships.

• Benchmarking of prices 

ONDC will enable buyers to access a wider range of products and services from different sellers across the country. ONDC will also allow them to compare prices and quality across platforms and make informed choices based on their preferences and needs.

• Growth of local retail businesses especially MSMEs

ONDC will boost the growth of local retail businesses by increasing their visibility and reach to new customers. ONDC will also help them leverage their existing physical infrastructure and networks to offer faster delivery and better service.

• Increased number of choices for buyers

ONDC will enhance the customer experience by offering more variety, convenience, and affordability. ONDC will also enable buyers to support local businesses and contribute to social and economic development.

• Auxiliary support and services for both buyers and sellers

ONDC will provide additional support and services for both buyers and sellers, such as ratings, reviews, recommendations, loyalty programs, coupons, discounts, etc. ONDC will also facilitate dispute resolution and grievance redressal mechanisms.

• Shortening the monopoly of big-sized eCommerce players and increase the reach of small-sized merchants

ONDC will create a level playing field for all e-commerce players by reducing the dependence on intermediaries and aggregators. ONDC will also foster healthy competition and innovation in the sector by encouraging new entrants and niche players.

• Assisting in ending greedy pricing in higher levels of profit margin and higher value products

ONDC will promote fair pricing practices by increasing transparency and accountability in the e-commerce sector. ONDC will also help prevent predatory pricing, deep discounting, preferential treatment, exclusive deals, etc., that distort the market dynamics.

ONDC is currently in its pilot phase, which started on April 29, 2022, in five cities – Delhi NCR, Bengaluru, Bhopal, Shillong, and Coimbatore. The pilot phase will cover retail and restaurant categories initially, but will gradually expand to other domains such as travel and mobility. Based on the feedback and learnings from the pilot phase, ONDC plans to scale up to 100 cities and towns across India by October 2022. The goal is to accommodate 30 million sellers and 10 million merchants online.

ONDC is a game-changing initiative that has the potential to transform the way e-commerce is conducted in India. By creating a shared digital infrastructure and standardizing data formats, ONDC will help reduce the friction in digital commerce and drive financial inclusion across the country. ONDC will also foster a more inclusive, diverse, and vibrant e-commerce ecosystem that benefits all stakeholders – buyers, sellers, logistics providers, payment gateways, aggregators, and the government.