What is ONDC, India's project for an open e-commerce network?

 

ONDC is a non-profit company whose network will enable the display of products and services from all participating e-commerce platforms in search results across all apps on the network.

India's government in April launched its Open Network For Digital Commerce (ONDC) as a prospective alternative to dominant global giants Amazon.com and Walmart in its fast-growing e-commerce market.

The software giant intends to introduce social e-commerce — group buying experience — in the Indian market, which would include a shopping app for Indian consumers along with their social circle, harnessing the ONDC network to discover the best pricing among retailers and sellers.

Anil Agrawal, Additional Secretary-DPIIT, Ministry of Commerce & Industry, is bullish about what lies ahead. “We have identified five cities — Delhi, Bangalore, Coimbatore, Shillong and Bhopal — as we wanted to keep a geographical spread across the board. We have a trader base in these five cities which is getting prepared on the intricacies of transacting on ONDC,” he said, while speaking at the TiEcon Delhi-NCR Unstoppable India virtual event held last month.

First, what is Open Network for Digital Commerce (ONDC)?

It is an initiative aimed at promoting open networks for all aspects of exchange of goods and services over digital or electronic networks. ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform. It is being developed as a counter to the current duopoly in the Indian e-commerce market which is largely dictated by Amazon and Walmart-owned Flipkart.

In May this year, the Department for Promotion of Industry and Internal Trade (DPIIT) went live with a test run of ONDC in cities like Delhi-NCR, Bengaluru, Coimbatore, Bhopal, and Shillong where it plans to onboard 150 sellers.

How does ONDC work?

The ONDC platform lies in the middle of the interfaces hosting the buyers and the sellers. So far, the buyer side interface is being hosted by Paytm, whereas the seller side interface is being hosted by other players like GoFrugal, etc.

When a buyer searches for an item on the Paytm app, from where ONDC has gone live, the app will connect to the ONDC platform, which will connect it to seller side interfaces that will list all the companies from where you can buy the particular item.

On ONDC, there will be several other backend partners such as logistics service providers, enterprise resource planners, e-commerce store hosting service providers, etc.

What does Microsoft joining ONDC mean, and who else is on board?

Microsoft getting on board the the ONDC wagon means the project gets its first international marquee name ahead of its Bengaluru launch.

A number of participants are currently live on the ONDC network, offering a number of services in the e-commerce supply chain such as buying, selling and offering logistics services. Among those that are live are Paytm, which has joined the platform as a buyer, and Reliance-backed Dunzo, which is offering logistics services for hyperlocal deliveries.

Companies like Kotak, PhonePe, Zoho and Snapdeal are in the “advanced stage of development”, according to the ONDC website.

WHAT ARE ONDC'S TRANSACTION TARGETS?

ONDC aims to raise e-commerce penetration in the next two years to 25% of India's consumer purchases, from nearly 8% now, in a country of 1.35 billion people.

It also hopes to sign up 900 million buyers and 1.2 million sellers on the shared network within the next five years, while achieving gross merchandise value of $48 billion.

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.

HOW DOES ONDC AIM TO BOOST COMPETITION?

The government says existing platforms work in silos and are tightly controlled, keeping out many small players. It expects ONDC to increase competition and foster innovation by start-ups.

The focus would be on small merchants and rural consumers, with apps in Indian languages.

ONDC officials liken the network to a mall with 1,000 gates instead of just two, thereby limiting opportunities for selected sellers to receive preferential treatment - a common accusation against major e-commerce companies.

Users will be able to rate service providers on ONDC, which will be applicable and visible across the network.

The government says ONDC will help to end "predatory pricing, especially in high-margin, high-value products". Amazon and Flipkart deny that they have engaged in predatory pricing.

WHAT CHALLENGES DOES ONDC FACE?

ONDC aims mainly to tap millions of small businesses that often lack technological expertise, so the government will have to run a massive awareness campaign to get them on board, said the Confederation of All India Traders, a group that represents 80 million such businesses.The focus would be on small merchants and rural consumers, with apps in Indian languages.

ONDC officials liken the network to a mall with 1,000 gates instead of just two, thereby limiting opportunities for selected sellers to receive preferential treatment - a common accusation against major e-commerce companies.

Users will be able to rate service providers on ONDC, which will be applicable and visible across the network.

The government says ONDC will help to end "predatory pricing, especially in high-margin, high-value products". Amazon and Flipkart deny that they have engaged in predatory pricing.

WHAT CHALLENGES DOES ONDC FACE?

ONDC aims mainly to tap millions of small businesses that often lack technological expertise, so the government will have to run a massive awareness campaign to get them on board, said the Confederation of All India Traders, a group that represents 80 million such businesses.

The focus would be on small merchants and rural consumers, with apps in Indian languages.

ONDC officials liken the network to a mall with 1,000 gates instead of just two, thereby limiting opportunities for selected sellers to receive preferential treatment - a common accusation against major e-commerce companies.

Users will be able to rate service providers on ONDC, which will be applicable and visible across the network.

The government says ONDC will help to end "predatory pricing, especially in high-margin, high-value products". Amazon and Flipkart deny that they have engaged in predatory pricing.

WHAT CHALLENGES DOES ONDC FACE?

ONDC aims mainly to tap millions of small businesses that often lack technological expertise, so the government will have to run a massive awareness campaign to get them on board, said the Confederation of All India Traders, a group that represents 80 million such businesses.

Smaller businesses with low volumes may also lack the resources to match the discounts offered by heavyweights like Amazon and Flipkart.