ONDC Frenzy: Exploring India’s Affair with E-Commerce Revolution
Imagine you are a small business owner who sells handmade jewellery in the old Zaveri Bazar and now wishes to digitalise your business operations. You have a website set up for the purpose linked to your social media account but struggle to reach new customers as well as compete with big brands that set aside dedicated marketing budgets. You wish there was a way to expand your reach to a wider audience and boost sales without spending a fortune on advertising and commissions.
Now imagine there is a network that connects you with millions of potential buyers who are looking to purchase unique, high-quality products. A platform that-
- Displays your catalogue across multiple e-commerce platforms and apps, without having to create separate accounts or individual listings.
- Streamlines fintech solutions to expedite order delivery and payments.
- Enables you to set your own prices and policies without any intervention from third-party platforms or intermediaries.
This network is no more a fantasy but a reality that is being created by the Indian government with the Open Network for Digital Commerce (ONDC) initiative. The goal of ONDC is to democratise e-commerce and create a level playing field for small businesses and consumers. ONDC is not just an alternative to the global giants that dominate India’s e-commerce market; it is a revolution that will reshape the future of digital commerce in India and beyond.
The state of e-commerce in India presents an intriguing paradox. While the sector has witnessed remarkable growth in recent years, there remains a vast untapped potential, evident in the modest e-retail penetration rate of 5-7%.
“What ONDC can do for commerce can go beyond what UPI did for payments. The ONDC India scope is much broader, enabling both products and services. There is tremendous room for innovation and value creation for startups, product builders, and on-the-ground operators, as well as for large and conventional players and investors to come together and reimagine one of the most fundamental aspects of our society”, says T. Koshy, Chief Executive Officer, ONDC.
In this article, we will cover:
ONDC India: Understanding the Landscape
ONDC is based on the principle of unbundling e-commerce into distinct micro-services that can be operated by different entities.
So, what is unbundled and what is not?
ONDC works by applying two principles: unbundling and interoperability. Unbundling splits a typical e-commerce transaction into different components, such as product discovery, payment, delivery and feedback.
Unbundling creates value by opening every step of an e-commerce transaction, specialised players can focus on tackling one aspect and offer better solutions to it.
While Interoperability aims to codify protocols that allow different players on a network to communicate and collaborate on the unbundled components.
Building blocks of ONDC
ONDC connects buyers and sellers across multiple e-commerce platforms and apps without interference from intermediaries and evading certain external mandates. Consumers can access ONDC from within any of their preferred shopping apps—such as PayTM, which is a part of the network. They will then be redirected to a product catalogue, which will list products and services from all sellers who are a part of the network i.e., not just those registered with PayTM. This way, buyers can discover and compare products and prices across platforms and apps and choose the best option for themselves.
What makes ONDC cheaper than Zomato & Swiggy?
ONDC recently notified seller-side applications about placing limits on the delivery cost incentives. This development comes after the orders on the platform peaked due to the relatively low prices, as compared to other food delivery apps, and free delivery.
As of May 2023, incentives will be capped at Rs 2,25,000 per seller-side app daily and Rs 3,750 per seller each day.
Prior to this, ONDC offered a discount of up to Rs. 75 for delivery on every eligible order as an incentive. This was the main reason why prices were cheaper on ONDC as compared to Swiggy and Zomato for similar orders. Even with the new delivery mandate in effect, orders on ONDC are still likely to be lower as compared to its competitors.
Economical enough but for how long?
As per a recent Economic Times report, ONDC offered a generous Rs. 50 discount on the first 2,000 orders of the day placed on PayTM. Thus, the 2,001st customer would luck out on the scheme.
However, it is expected that the prices of food items on ONDC will continue to remain on the lower side. This is because seller apps on ONDC charge restaurants a commission of 2-3%, whereas rival apps like Zomato and Swiggy impose hefty commissions, typically in the ballpark of 20-30%.
Major Challenges for ONDC Ahead
Every bold and ambitious initiative has faced several challenges in its implementation and adoption, and ONDC is no different. The app currently poses a threat to the existing platforms that dominate the e-commerce market in India, such as Amazon and Flipkart. These platforms have invested heavily in building their customer base, seller network and logistics & infrastructure from the ground up. They may, admittedly, not be willing to integrate with ONDC (or any cross-functional competitor platform, for that matter) to share business or consumer data.
So, what exactly needs to happen for ONDC to expedite domestic e-retail penetration and become a success? The first crucial factor is to get everyone involved. And by everyone, we mean the buyers and their applications, sellers and their applications, logistics players and payment partners.
“While we’ve heard that Amazon, Flipkart, and Meesho are in talks with ONDC, they haven’t officially joined the network yet. They are still contemplating their involvement,” says Shireesh Joshi, Chief Business Officer, ONDC
ONDC is still a burgeoning concept and a vast majority of buyers as well as sellers are not familiar with it. Few may even find it unappealing, especially those who are habituated to other platforms and apps. For ONDC to thrive and truly make a difference, it’s essential for all major players in the e-commerce industry to come together.
Latest updates on ONDC
ONDC has made significant progress since its launch in December 2021. The latest update on ONDC concerns network expansion. It has expanded its network to over 85 cities across India. It has also onboarded more than 30 network participants, including BNPs, SNPs, GTSPs, LSPs and PSPs. Some of the prominent participants are PayTM, Meesho, Jio Mart, Shopify, WooCommerce, Zoho Commerce, NPCI (National Payments Corporation of India), NSDL (National Securities Depository Limited), Delhivery, Ecom Express and Shadowfax.
The Way Forward
With a bold vision in mind, ONDC aims to revolutionise the e-commerce landscape by establishing a robust yet sophisticated network comprising 30 million sellers and attracting a staggering 300 million shoppers by the close of 2024.
At present, the network boasts of sponsoring 36,000 sellers who collectively process approximately 15,000 transactions per day. Notably, the food and grocery sector accounts for around 11,000 of these transactions, with the remaining encompassing diverse categories such as mobility, fashion, apparel, electronics, and agricultural products like seeds and saplings.
However, ONDC’s current scale pales in comparison to industry giants like Swiggy, which delivers an impressive 1.5 million orders each day, and Amazon India, which fulfills a remarkable 1.6 million orders daily. ONDC does not intend on drawing its perimeters around food and groceries, it aims to eventually cover all the verticals of e-commerce to emerge as the market leader in India and beyond.
T. Koshy also said, “The company was in talks with cab operators to launch operations in at least four cities, after successfully launching mobility operations in two cities in South India. More than 55,000 taxi owners have already joined the network, and consumers were using it for about 35,000 rides a day.”
Closing Note
While ONDC has been likened to India’s UPI moment for the e-commerce space, there are notable differences between the two. One distinction lies in the concept of “population-scale inclusion”, where ONDC aims to herald a nationwide people participation movement, and “interoperability”, where transactions across multiple apps and platforms are made easy.
Moreover, UPI deals solely in mobilising instant peer-to-peer/person-to-merchant financial transactions, while ONDC orchestrates an intricate supply chain operation involving the movement of physical goods, accounting for the warehousing and logistical infrastructure and managing returns and refund requests.
Despite these challenges, Shireesh Joshi anticipates ONDC revolutionising e-commerce by the end of this year and expects transacting through the platform to become commonplace. India’s impressive track record in championing digital infrastructure, exemplified by Aadhaar and UPI, suggests that ONDC has the potential in revolutionising e-commerce & retail, not only in India but also globally.
There are still a few questions that linger
- How will ONDC revolutionising e-commerce grow?
- What changes will the e-commerce landscape witness with respect to buyers, sellers, and everyone else?
As the world eagerly awaits to see how ONDC will revolutionise e-commerce, this seems like a win-win situation in an ONDC-powered digital retail ecosystem. How do you think ONDC will affect your online shopping experience?
