SUMMARY
Digital commerce is one of the biggest contributors to India’s fast-paced economic growth
ONDC distinguishes itself by making platforms interoperable, allowing buyers and sellers to transact regardless of platform
ONDC has the potential to turn the Indian ecommerce industry on its head by providing a strong and unbiased platform to India's small, medium-scale retailers and IT/ITES startups
Digital commerce is one of the biggest contributors to India’s fast-paced economic growth. The industry received a huge boost during the pandemic as homebound consumers dramatically increased their online spending.
However, the pandemic has also exposed certain shortcomings in the Indian ecommerce ecosystem. Parts of the retail chain were discovered to be digitally missing, and the supply chain was completely disrupted as a result of various lockdowns and notified containment zones.
ONDC Explained
The Open Network Digital Commerce (ONDC) initiative aims to address these gaps and create an inclusive digital commerce ecosystem. A first-of-its-kind initiative not only in India but globally, it is very important to note that ONDC is neither a super aggregator app nor a hosting platform. There will be no centralised intermediary. All existing digital commerce applications and platforms can voluntarily choose to adopt and become a part of this interoperable network.
In other words, ONDC is an open network that will unbundle the existing closed network of digital commerce. Currently, for any digital commerce transaction to occur, buyers and sellers must be part of the same platform.
ONDC distinguishes itself by making platforms interoperable, allowing buyers and sellers to transact regardless of platform. ONDC is not platform-centric; its goal is to match online consumer demand with the closest available source of supply, such as hyperlocal Kirana shops.
ONDC has the potential to bridge the wide gap that exists between the country’s rural and urban populations due to factors such as lack of digital skillset, unserviceable or remote locations, supply chain constraints, lack of digital infrastructure, and a greater focus on the urban customers by the giant ecommerce platforms.
By onboarding the local retailers, the network will help in localising the ecommerce market’s focus and reach to remote locations. This will help value creation in India’s ecommerce ecosystem which will translate into a wider market for the sellers with greater opportunity for growth.
It will also allow sellers greater autonomy by providing them with multiple choices for being digitally visible while keeping the costs low. Currently, if a seller wishes to be on multiple platforms, they have to maintain separate infrastructure processes and terms and conditions for the different apps, which adds to the cost of doing business.
The ONDC Framework
ONDC’s construct includes a few key elements. First is the buyer app. It is an application that will interact with the buyers and deal with the demand side of any transaction, where the transaction originates.
There is also the seller app which will interact with the sellers and deal with the supply side of any transaction. It will receive buyer requests and, in response, publish its catalogue of goods and services to fulfil buyer orders.
This setup gives India’s small and medium-sized IT/ITES startups a great opportunity to make their products and services available either as an aggregator acting as the seller on record or as a white-labelled seller application. This can address the existing lack of digital infrastructure in the Indian ecommerce ecosystem.
On the other hand, it will provide buyers with more purchasing options through price comparison. Currently, if a buyer wants to buy products online, they must first create a profile with a specific platform, which limits the buyer to the products listed on that platform. ONDC, on the other hand, will allow the display of products and services from all participating ecommerce platforms (including local retailers) in search results across all network apps.
Given India’s projected ecommerce growth and the vision behind ONDC, it has the potential to turn the Indian ecommerce industry on its head by providing a strong and unbiased platform to India’s small, medium-scale retailers and IT/ITES startups. At the same time, it will provide consumers with true freedom of choice by not limiting them to a single platform. Thus, truly democratising India’s ecommerce ecosystem.
