ONDC Explained: India’s Bid To Disrupt Ecommerce Monopolies

Unified Payments Interface, commonly known as UPI, has been one of the most fascinating use cases of nationwide digital transformation. It simplified and most importantly unified mobile banking and digital payments, building a bridge between wallets and banks, which before UPI were proliferating the market and hindering the smooth flow of payments phygitally. 

What the government did with mobile payments, it is planning to do the same, only more remarkably, with ecommerce or digital commerce. In simple words, it is advancing towards breaking the silos of multiple ecommerce platforms and unifying them with a single, open network. That’s what ONDC is short for, Open Network for Digital Commerce. 

As a standalone use case, ONDC is a peculiar, incredible and immersive idea for a country with over ten million e-retail shoppers. Until the pandemic, a good number of hyperlocal retailers were happier building a loyal customer base in their neighbouring areas. The pandemic made the shortcomings of being a digitally absent hyperlocal outlet more evident, led by a broken supply chain. This is especially the case when hyperlocal retail stores account for 80% of the retail sector. 

And yet, most of them are digitally excluded. But making the move from physical to phygital is not easy. Even more with the multiplicity of platforms offering integrated services including warehousing, logistics, payment and buyers under a single roof. Despite the similarity in services, they are all separate in the sense that a seller who has spent months or years building loyalty and authenticity among buyers on one platform suddenly has zero loyalty if it establishes a presence on another platform. This is just one of the many challenges ONDC aims at solving. 

Riding the Wave

To start with, ONDC standardises the protocols so sellers would not have to follow separate lists of mandates from every platform they join. Secondly, powered by ONDC, sellers’ products will be visible to all the buyers using any ONDC-enabled platform. 

Similarly, buyers using any such ONDC-enabled platform or application will be able to see a variety of products of their choice from several sellers on the network-powered platform. All drilled down to their specified location, availability, and other criteria. 

Thirdly, ONDC will be connecting logistics on the same network so both sellers and buyers can keep track of the order and delivery irrespective of the particular platform they are using. Furthermore, ONDC is not merely restricted to the retail sector and the respective buyers therein. It expands to include any digital transaction for products and services between sellers and buyers, spanning industries such as wholesale, distribution, and food delivery, among others.

At this point, ONDC could potentially turn up all aces for consumer brands. Currently, a whole set of transactions between retailers and consumer brands either via salesmen, distributors or wholesalers are recorded on a digital platform. Data recorded from these sales transactions give brands insights into the market. There have been cases where double-digit growth in brands’ sales was recorded simply owing to these readily available, timely insights. Until ONDC, these insights lacked data on direct-consumer sales.

With the onset of ONDC, the same platforms for recording primary and secondary sales can be powered with APIs (Application Process Interfaces) to record transactions from tertiary sales for drawing unified market insights and building go-to-market strategies. One of the major ways brands can eventually leverage this insight is in bundling marketing and promotional activities for both retailers and end-consumers, bringing better price offerings to both. With predictive analytics, consumer brands can plan stock deliveries, production capacities, logistics and connected functions much more effectively and in advance. 

Fighting The Tide

However, the entire picture is still largely painted in bright colours. There are questions in the minds of brand leaders, retailers, distributors, and consumers alike that are making the picture rather hazy. To begin with, India lacks an established set of uniform regulations for ecommerce customer liability. In this case, if all key stakeholders, that includes retailers, logistic partners, platform providers, and consumers, among others are on the same lane then who will eventually be responsible for diversions in the course? And how will it be identified and directed appropriately? 

For instance, if a customer receives faulty goods, who will they contact: the logistics partner, the platform provider, or the retailer? Currently, the ecommerce platform handles ecommerce transactions, providing quick resolutions. Then there’s the question of who will ultimately pay for logistics and delivery: the platform provider, the retailer, or the consumer. Who will decide the price cut threshold between large, medium, and small or hyperlocal vendors, or between those who can afford economies of scale and those who cannot? 

This new wave of digital transformation, like the UPI, is fraught with questions, challenges, and concerns. Whether it is about security, in which case there are tens of thousands of UPI frauds recorded every month; or service failures, where the double clocking of transactions in UPI leads to a pile of credit reversal failures.

That is not to say that ONDC is a bad thing. In fact, it is the kind of futuristic vision most brand leaders, be it in technology, consumer goods, or any other industry, hold today. Unifying platforms and connecting the entire value chain digitally is a big leap toward empowering India and establishing it as a leader. Yet, to be able to participate in the vision, many leaders would need broader clarity on the concept to innovate technical possibilities and ensure seamless connectivity. 

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.