Since inception in 2020, Open Network for Digital Commerce (ONDC) has been working to digitalise and democratise commerce by supporting local entrepreneurs and retailers. The aim is to create a more innovative, competitive and inclusive marketplace.
The rise of affordable smartphones and the availability of low-cost data plans have contributed to the growth of mobile e-commerce in India. Many consumers prefer to shop through mobile apps and this presents an underlying opportunity in tier 2 and 3 cities. Thanks to this, players like Meesho co-exist along with giants like Amazon and Flipkart. Indian e-commerce is expected to grow at a CAGR of 27 per cent to reach USD 163 billion by 2026, almost three times the growth of the overall retail market, according to Redseer. India has the third largest online shopper base globally, only behind China and the US but the penetration is only 4.3 per cent. As per a joint report released by McKinsey & ONDC in May 2023, digital commerce is just 7 per cent of the overall market.
Innovative and inclusive…
An initiative by the Department for Promotion of Industry and Internal Trade, ONDC aims to create a network based on open protocol rather than a platform centric model. This will enable various local commerce segments, such as mobility, grocery, food delivery, hotel booking and travel, to be discovered and engaged by any network-enabled application. Merchants will be able to save their data, build credit history, and reach consumers using this. It is being run as a section 8 non-profit company in which multiple entities have stakes, especially banks. The project was announced in 2020 but picked pace only in 2022.
Small players are often left behind in digital transformation. It is mainly due to hindered digital access, the need for higher margins and difficulty to maintain presence on multiple platforms. In the existing digital marketplaces, buyers and sellers can transact only when they are part of the same platform. This, as per the government, can create monopolies and hinder population-scale adoption of e-commerce. In a bid to alter the approach of “scaling what works”, the government has introduced this new approach of “what works at scale.” With this in mind, ONDC was born. Buyers using any participating app can search for an item and the network will connect them with thousands of sellers across the country.
While ONDC pilots have focused on online grocery and food delivery, it is not limited to it. Namma Yatri enables passengers in Bengaluru to conveniently book auto-rickshaws and pay the fare directly to the drivers. Over six lakh trips have been completed by more than 47,000 registered drivers. Another participant, Unified Energy Interface, empowers owners of electric vehicles to discover, access, and make payments for charging networks available at 14,000 charging stations. The canvas is so large and the aim is to present an example globally and the world’s largest democracy is the best place to do so.
Increased Usage
The number of retail orders hit a fresh high of 30,000 recently, even though the network has substantially reduced its spending on incentives for consumers and network players. At present, retail orders mostly consist of the food & beverages category and a small volume of grocery. More and more sellers are joining every day. While many food delivery startups perished under the weight of Zomato and Swiggy, startups like Waayu and Thrive are trying to hitch a ride on ONDC.
Starting June, ONDC has launched B2B transactions as well to enable merchants to engage directly in wholesale trade. As ONDC does not involve any third-party service fees, both vendors and consumers can realise considerable cost savings on their transactions. “ONDC can trigger a price war in the Indian e-commerce market, which is set to cross the USD 100 billion milestone by 2024,” the report by GlobalData, says. The report also mentioned that while ONDC has received a large number of users since its launch, it has a long way to go before it can match the technological and service capabilities of companies like Amazon, Flipkart, Swiggy, Zomato and their likes.
There are challenges with respect to integrity of data, bringing about a substantial change in consumer behaviour and clarity in grievance redressal. The journey of ONDC has been promising so far but time will tell if it can bring the promised revolution in the e-commerce space.
