ONDC: Why is govt betting big and how it will democratise India's e-commerce landscape
With an aim to digitise the value chain, standardise operations, promote inclusion of suppliers and enhance value for consumers, the government recently launched an initiative -- Open Network for Digital Commerce (ONDC). The government projects ONDC as an initiative to promote open networks for all aspects of the exchange of goods and services over digital networks.
Touted to be an alternative to the e-commerce landscape, ONDC which is a non-profit company seeks to provide equal opportunities to small retailers to enjoy the benefits of the digital world and permit them to trade on a common platform. The initiative was launched in April by the Ministry of Commerce and Industry in five cities of Delhi-NCR, Bengaluru, Bhopal, Shillong and Coimbatore in the pilot phase. The government is aiming to reach around 100 cities by the end of August.
What is ONDC
ONDC is a freely accessible online system for traders and consumers and it is critical because the government intends to dismantle the digital monopolies and duopolies of giant tech companies such as Amazon, Flipkart, Zomato and others. By using any ONDC-compatible application or platform, consumers can discover any seller, product or service, thus giving them freedom of choice.
ONDC is a network based on open protocols that will allow any network enabled application to discover and engage in local commerce across segments. It is an advancement over the current platform-centric e-commerce system, in which both the buyer and seller must use the same platform or application to conduct a business transaction.
This platform intends to create opportunities, reduce digital monopolies and help MSME and small traders get on digital platforms where businesses and consumers will be capable of carrying out transactions over ONDC using any compatible apps of one‘s preference, giving consumers the option to choose any seller, product, or service by using any suitable apps or platform.
Lokendra Singh Ranawat, CEO, WoodenStreet, said that ONDC targets to provide a two-way interaction between seller and buyer. This way the seller is able to connect with multiple buyers and the buyer also gets the freedom to be connected to various sellers. This leads to diversification for both buyer and seller and potentially caters to 130 crore Indian consumers with various opportunities.
ONDC also helps sellers and businesses to establish a direct-to-consumer (D2C) channel and reach their customers directly enabling the elimination of middlemen which eventually leads to fair prices for customers and a profitable margin for the business.
"ONDC focuses on creating new opportunities for micro, small and medium enterprises (MSME) who fail to get the benefits of e-commerce platforms due to predatory pricing on big platforms," Lokendra said, adding that the platform will give a big boost to small businesses as well as the new players in the market. "It will empower sellers and buyers by breaking the monopoly of big market parties to drive innovation."
More transparency, minimise exploitation
With ONDC, sellers will be able to reach new customers and build high potential growth areas of digital commerce where they can also create their own terms and conditions. On the other hand, buyers will also have multiple options on a single platform and can access sellers on ONDC through any app that is integrated with the network.
"In all, there will be more transparency, better regulation to minimise exploitation, fair-trade rule and upgradation of the local economy,” he said.
Ridhima Kansal, director, Rosemoore, said that ONDC will usher the Indian digital commerce industry into a new era by multiplying the overall discoverability of merchants and vendors.
"The Indian e-commerce industry is still in its nascent stage. However, Indian digital consumerism is growing at a scorching pace and is expected to reach 0 billion in the next 5-7 years. The growth will be due to young demographics, large aggregate demand and an overall rise in per capita disposable income,” she said.
Raghunandan Saraf of Saraf Furniture said that ONDC will help offline retailers compete with online sellers, thereby increasing hyperlocal deliveries.
"This will enable small businesses to display their products on multiple e-commerce websites without them having to register on each platform separately. With this model, the government is able to create a platform that works seamlessly and provides alternatives to consumers and sellers," he said.
Rimjhim Hada, co founder and creative head, Aachho, said that ONDC is the future of digital commerce in India as it aims to curb digital monopolies and standardize online commercial interactions.
"The growth of the internet and e-commerce sector in India is escalating after the pandemic and with ONDC in play, it is only expected to boom further," she said.
Limit digital monopolies
Hritesh Lohiya, founder, Priti International, said that ONDC has the potential to become the next UPI which is India's one of most successful digital product.
"It is a brilliant way to limit digital monopolies. ONDC has the potential to change the game. This would benefit smaller online retailers and new entrants by increasing discoverability, interoperability, and inclusivity," Hritesh said.
Most of the global tech giants including Amazon, Walmart, Google, Meta, etc. are betting big on the Indian e-commerce story. Likewise, international PE players such as GIC, ADIA, CCPIB, Sequoia, and Warburg Pincus, are confident about the prospect of Indian digital consumerism.
Amidst such a positive turn of events, the recent announcement to develop an exhaustive and democratic system such as ONDC can give a further positive thrust to India’s e-commerce ambition. It can reshape the entire industry by giving a level playing field to all kinds of merchants and vendors.
As per the government estimates, ONDC will directly positively impact nearly 3 crore sellers and 1 crore vendors. It will also help the buyers by giving them a more democratized digital platform and finding better bargains and options.
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