The ONDC, or Open Network for Digital Commerce, is a revolutionary new platform that aims to transform the Indian eCommerce landscape. As we know, with growing internet users, the Indian eCommerce industry is expected to hit a $99 billion market value by 2024. Post-pandemic, online shopping has seen exponential growth. Local sellers who were happy selling offline are now pushed to sell online.
With so many eCommerce sellers in the market, the competition should rise, but that’s not the case. If you look closely, more than half of the online sales are driven through platforms like Amazon and Flipkart, curbing the local sellers.
To break the monopoly and duopoly of these big players, the government of India came up with ONDC- an everything store for all your shopping needs. Like UPI in the Fintech industry, the ONDC will democratize the entire digital commerce in India. In this blog, we’ll discuss everything about ONDC and how it will level up Indian eCommerce.
What is the Open Network for Digital Commerce?
The Open Network for Digital Commerce (ONDC) is a cutting-edge platform that aims to revolutionize the Indian eCommerce industry. Designed using an open-source methodology, ONDC is a neutral platform that sets protocols for price discovery, cataloging, and vendor match. With ONDC, buyers can easily discover local stores and shop for a wide array of products at competitive prices.
At the core of ONDC is its commitment to fostering open networks and creating a more competitive landscape. With ONDC, online retailers of all sizes can compete on a level playing field, giving small and medium businesses a chance to thrive in this rapidly growing market.
Whether you’re a tech-savvy consumer looking for new shopping options or an entrepreneur looking to capitalize on emerging business opportunities, ONDC has something for everyone. It will be one of the driving forces behind India’s rapidly expanding eCommerce market, and we can expect great things from this platform in the years to come.
What does open source mean?
The term “open source” refers to a methodology for creating software or other products that are freely accessible and can be modified by anyone. At the core of open source is the idea that collaboration between developers, users, and other stakeholders can result in higher-quality products at a lower cost than traditional processes.
How Does It Work?
Imagine all the eCommerce stores are listed on one platform. With the help of ONDC, you can check different prices of a product in real-time and can get it delivered from the most efficient delivery service provider. Suppose you ordered a product from Flipkart, but you want your product to be delivered through Nimbuspost. Through the ONDC app, you can order from Flipkart and choose to get delivery from Nimbuspost, listed on the same platform.
The ONDC platform consists of 3 things: Discoverability, an Open platform for eCommerce platform & interoperability, and price comparison.
Discoverability means the ONDC platform will help consumers to discover the best quality product without any hassle. Today if you buy a refrigerator, chances are you’ll look at Amazon or Flipkart because they are in your phones and they are the most trusted ones. Therefore you’ll rarely consider other options which may be best and most efficient for you. But with ONDC, when you look for a refrigerator, you’ll be shown the best options from Flipkart, Amazon, Croma, Reliance, and other local sellers. So ONDC will help you discover the best and most cost-effective option without any difficulties.
Open platform and interoperability
The second awesome feature of ONDC you can leverage is an open platform and interoperability. Let’s continue with the refrigerator example. After ordering the refrigerator from, let’s say, Chroma, they might charge you a higher delivery price because of the lack of delivery boys in your area. Now, through ONDC, you can buy a refrigerator from Chroma but get it delivered from Nimbuspost or another delivery partner listed on ONDC.
With so many eCommerce stores listed on the same platform, the customer can compare the price of a product and choose the best option through ONDC.
What does it mean for Online Buyers?
In India, even though there is a rise in digital shopping, it still lacks authenticity, security, and trust. Many people are skeptical about buying online from Amazon and Flipkart because most of the products are cheap and of low quality. ONDC will enable a variety of options for online buyers to choose and promote eCommerce in India. People can buy Apple- the phone and Apple- fruit through ONDC.
What are ONDC’s Transaction Targets?
ONDC targets to raise eCommerce reach in the next two years to 25% of India’s consumer purchases, from 8% currently in a country of over 1.35 billion people.
As for buyers, its target is signing 900 million buyers onboard and targeting 1.2 million sellers on the shared network within the next five years while achieving a gross merchandise value of 48 billion dollars.
Currently, more than 60% of India’s eCommerce market is controlled by Amazon and Flipkart, which will change if ONDC becomes successful in achieving its target.
The GOI says existing platforms work in silos and are tightly controlled and keep out small players, but with ONDC, start-ups will increase. The focus will be on small merchants and rural consumers with apps in Indian languages. All this will boost healthy competition.
The government estimates that India’s e-commerce market was worth more than $55 billion in gross merchandise value in 2021 and will grow to $350 billion by the end of this decade. Currently, Amazon and Walmart’s Flipkart control more than 60% of the market.
What Challenges does ONDC Face?
The biggest hurdle in front of the success of ONDC is the lack of technology awareness among local sellers. More than half of the Indian market is unorganized and full of local sellers. Therefore it is a big challenge for the government to bring these local players on a single platform. Thus, massive awareness campaigns must be organized to get involved with local and small businesses.
The success of an eCommerce business is based on technology more than a product. Customers love Amazon because the platform can offer the best product listing with the help of Artificial Intelligence and Machine Learning. The technology will play a big role in revolutionizing the ONDC and competing with big players like Amazon and Flipkart.
The price war is very common in the Indian business ecosystem. Local and small businesses often differentiate through price as they do not vary much in the product. However, giant businesses can use predatory pricing strategies to destroy small and local businesses by selling products at dirt-cheap prices on ONDC. They can do this because they are well-funded businesses. Therefore this is a challenge for ONDC which needs to be solved before it attracts customers.
Why is the Government Pushing for it?
Through ONDC, the government of India plans to address these major problems penetrating the Indian eCommerce market.
Limited competitiveness of new sellers
Although digital commerce connected sellers to buyers from far ends of the country, the dominance of large players somewhat limits the competitiveness of new sellers as end-to-end service providers. The government hasn’t named these monopolies, but their main motive is to curb the dominance of large foreign-owned companies and give new and local sellers equal opportunities.
The difficulty of sellers being available on multiple platforms
This is one of the major problems eCommerce brands of all sizes face while selling on digital platforms. Brands that sell on multiple platforms have to adopt multiple policies because digital eCommerce platforms have different policies. This adds an extra cost to sellers and limits participation.
What do the Critics Say?
Since the government of India announced the initiative of ONDC- an open network for digital commerce, there have been mixed comments and opinions from business experts, scholars, and critics from different corners of the country.
Some brightest minds, like Nandan Nilekani, Co-founder of Infosys, are behind this initiative, and tycoons like Anand Mahindra, who’re all praises for ONDC, have already made it revolutionary.
What lies ahead?
So far ONDC has been successfully rolled out in 5 cities: Delhi NCR, Bengaluru, Bhopal, Shillong, and Coimbatore. Going ahead ONDC will be expanded to over 100 cities in India to accommodate 30 million buyers and 10 million sellers after its pilot exercise and network stabilization.
For joining the initiative, top banks and financial institutions collectively promise to invest around 2.55 billion rupees in the ONDC project.
How does ONDC Aim to Boost Competition?
- According to the government, the existing eCommerce marketplace has tight policies and processes which rub out small players. Through ONDC, the focus will be on small and local businesses and increasing healthy competition.
- Through ONDC, logistics partners and other collaborators will be under a single umbrella providing buyers with multiple options.
- The apps will be in local languages to boost the participation of local sellers and rural consumers.
Who are the Key Stakeholders of the ONDC?
Different eCommerce players, logistics partners, payment gateways, and financial institutions have shown interest in ONDC. Top banking institutions like the State bank of India, HDFC, and Kotak Mahindra banks have invested in the platforms. This allows them to drive the payment through their cards and net banking.
According to the report, Flipkart logistics providers Ekart and Dunzo have integrated with the ONDC platform to provide logistics services.
ONDC, if implemented as it is planned, can do what UPI has to the Fintech industry. It is one of the boldest moves the government has taken and has the potential to revolutionize the shopping experience in India from both buyer and seller perspectives.
Is ONDC government or private?
The ONDC is a government-owned open network for digital commerce. In this platform, eCommerce sellers of all scales can integrate other collaborators, like logistics partners, to give consumers a large option to choose from.
How do I sell on ONDC?
To sell on ONDC, you need these prerequisites:
- Log in to the platform
- Enter the GSTIN of your business
- Contact details of authorized personnel of the business
- Details of bank accounts (To complete payouts from the buyer app)
- Onboarding agreement
Why is ONDC important?
ONDC is an open-source platform by the government, and here you’ll not face any restrictions like other marketplaces. It is one of the best solutions for small and local sellers who are unable to sell online through a marketplace like Amazon.
Who can join ONDC?
ONDC is for everyone, from small sellers to large eCommerce brands you can sell on ONDC. Not just for online sellers, but ONDC is also available for logistics providers and other aggregators.
Who is developing ONDC in India?
The ONDC platform is by the government of India to boost digital commerce in the country. This initiative is chaired by Sri Piyush Goyal and has Nandan Nilekani Sir as a key contributor. He is an Indian entrepreneur and is considered one of the brightest minds in the Indian business ecosystem.
Will Amazon join ONDC?
According to Amazon India’s country manager, Amazon is closely working with the government of India on how successfully they can integrate Amazon on the ONDC platform.
How do I use the ONDC API?
ONDC is a network, not an application. To use the network, you need to register for it.