How ONDC Will Transform The Indian Ecommerce Landscape

ONDC is an initiative that aims to promote open networks for all aspects of the exchange of goods and services using an open-network methodology that is not limited to a single platform. 

The rationale behind this decision is to empower small merchants and end the duopoly of global ecommerce behemoths like Amazon and Walmart-owned Flipkart, which account for more than half of the industry. 

The government’s move aims to shift electronic commerce away from a platform-centric model and toward an open-source model.

The move has been brought about by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. This model would enable the merchants to save data, build credit history and expand their consumer base. This would enable platforms with significant business-to-business sectors to connect with new consumers while also sourcing products from the seller side of the ONDC network. 

A 9-member advisory council comprised of eminent names such as Infosys’ Nandan Nilekani and National Health Authority’s RS Sharma has strategised ONDC’s design, operation, and future growth.

ONDC, like UPI, would foster interoperability and pave the way for the democratisation of the entire ecommerce ecosystem.

The Launch

In the month of September 2022, ONDC launched its beta launch in Bengaluru. On the first day of the launch, there were 161 orders across two available segments — groceries and restaurants. 

The driving forces in this experience are buyer-facing apps that function as online payment gateways, such as Paytm, IDFC First Bank, SpiceMoney, and MyStore.  Seller apps included in this initiative include Bizom, SellerApp, Ushop, Uengage, Innobits Mystore, nStore, e-Samudaay, eVitalrx, Go Frugal, and Growth Falcons.  

According to reports, ONDC intends to expand beta testing into regions where its network members have significant delivery and logistical footprints and have the capacity to deploy. Furthermore, the initial sectors are expected to focus on fashion, travel, pharmaceuticals, mobility, home decor, and gadgets. Along with Bengaluru, ONDC has expanded to cities such as Delhi NCR, Bhopal, Coimbatore, and Shillong. 

What Problems Does ONDC Aims To Solve?

The ONDC would enable the government to regulate the ecommerce segment in a much more systematic manner, given that all transactions between the buyer and the seller would take place on one independent portal. 

The platform would empower offline retailers and allow them to compete with major online sellers on a single platform. The entire framework of digitisation, which is widely advocated and implemented by the government at all levels possible, is underpinning this move. 

According to a joint report by FICCI-Anarock, India’s skyrocketing ecommerce business is anticipated to grow by more than three times to $170 Bn by 2026 from $38 Bn in 2021. 

Despite a thriving industry, a handful of major firms, such as the domestic online retailer, Flipkart and the global digital behemoth, Amazon, control a huge portion of the Indian ecommerce market. The government’s efforts to support the industry through supportive regulations and the development of tech infrastructure are anticipated to democratise digital trade in the nation and launch the next phase of ecommerce sector growth. 

An ONDC strategy paper identified the incapacity of marketplace vendors to leave the ecosystem of the platform, given the fact that the value these small players create is maintained by the bigger platforms. In light of this, ONDC seeks to change the marketplace ecosystem from a facilitator-driven interoperable decentralised network to an operator-driven platform-centric model. 

How Will This Digital Equaliser Pave The Way For Indian Retail?

In a nation of more than 1.35 Bn people, ONDC sets its eyes on expanding the ecommerce reach to 25% of consumer purchases in India during the next two years from the present 8%. According to Bain & Company, the e-retail sector in India is projected to grow from $150 Bn to $170 Bn by 2026. The government anticipates that the ONDC project would ultimately benefit consumers by driving competition and innovation in the ecommerce sector.

Within the next five years, the initiative hopes to register 900 Mn buyers and onboard 1.2 Mn sellers on the shared network, with a gross merchandise value of 48 Bn dollars. An investment of $33.4 Mn has been garnered from 20 government and private companies, including the State Bank of India, HDFC Bank, Bank of Baroda, ICICI Bank, and more. 

24 companies, including Flipkart-backed Ekart Logistics, Google, Reliance-backed hyperlocal delivery platform Dunzo, and digital payment and financial services company, PhonePe are reportedly in the process of integrating with ONDC. 

The ONDC has recently released a 43-page consultation paper seeking public comments on 24 issues in a bid to strengthen its network. The questions are centred around order placement, order fulfilment, payment and settlement, returns, refunds, and cancellations, grievance management, enforcement and compliance, and local government. 

India will have 500 Mn online users by 2030, securing its spot as the third-largest global market. Consequently, data privacy is the biggest issue raised by this increase. Since India doesn’t have a comprehensive data privacy regulation in place, ecommerce companies may collect, keep, and utilise customer data in ways that might not always be equitable. The administration is allegedly considering answers to these issues before enacting any ecommerce rules.