In the past few years the e-commerce businesses is rapidly increasing. And due to this the average consumer consumption pattern is also changed with the business dynamics. Obviously Amazon, Flipkart and Myntra are the big tech based giants. But here the Indian Government is trying to spread the competition. So that the small businesses can also be appear in the marketplace. And due to this research by the Gov they came with a unique concept of ONDC Platform. Which is assuming to be the next kind of UPI for India.
What is ONDC
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The Open Network for Digital Commerce (ONDC) is a non-profit organization incorporated under section 8 in India. With the Department of Promotion of Industry and Internal Trade under the Ministry of Commerce and Industry as its initiator. Its objective is to promote fair competition among all participants in the e-commerce industry by providing a level playing field. ONDC will function as a unified platform for standardizing the supply value chain, operations, and logistics. And will include suppliers from every region of the country. By creating an open network for consumers and suppliers across India, ONDC is set to give a significant boost to the country’s e-commerce sector and help integrate them.
How will Open Network for Digital Commerce work
The absence of a common platform became apparent when small-scale D2C businesses were largely excluded from the e-commerce landscape, despite this sector’s potential for annual growth of 20%. In India, 80% of the retail space is occupied by small kirana stores and shops that lack the necessary resources such as expertise, scale, or finances to take advantage of the e-commerce boom.
ONDC will operate as an open network, different from a single platform such as Amazon or Flipkart. Instead, it will serve as a gateway connecting buyers and sellers across various platforms. The core of this interface will be the ONDC buyer app and the ONDC seller-side app, with a gateway linking the two. This gateway will act as a unifying thread, facilitating price discovery and matching buyers and sellers based on parameters such as availability, accessibility, location, and customer preferences.
The buyer-side application of ONDC will enable buyers from different regions to log in and search for goods and services. On the other hand, the seller-side application will allow sellers to list their products and services and coordinate with the logistics team to ensure accurate deliveries to customers. Additionally, the seller-side application will be responsible for promoting ONDC to Amazon sellers and creating awareness about the platform.
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ONDC will operate under a similar principle as UPI, where consumers can download the ONDC app of their choice to gain access to all the sellers in the ONDC network offering goods and services. Price discovery will be facilitated by matching customers with relevant products and sellers. Unlike traditional e-commerce platforms, ONDC will not be restricted to the retail sector but will also incorporate goods and services from the wholesale sector, food delivery, logistics, urban services, travel, mobility, and other areas.
Similar to UPI, the ONDC open-source network will function as a neutral platform or portal. It will provide open access to the code and process development, ensuring maximum participation and integration.
Is Govt Operating ONDC?
There is already considerable excitement surrounding the ONDC platform, with numerous entities signing up for this initiative. The platform has secured investments of Rs. 2.55 billion from 20 government and private organizations.
The ONDC initiative has attracted several big names from the banking sector, including HDFC, Kotak Mahindra, Axis Bank, State Bank of India (SBI), and Punjab National Bank (PNB), with significant stakes in the platform. These private sector banks, as well as SBI, have reportedly acquired a 7.84% share each in ONDC, comprising 10 lakh equity shares valued at Rs. 100 each, with an individual investment of around Rs. 100 million (US$1.3 million). Additionally, in November 2021, PNB announced its plans to purchase a 9.5% stake in ONDC.
As the demand for the indigenous ONDC platform grows, e-commerce giant Flipkart has joined the initiative with its logistics arm eKart Logistics. Other significant players in the logistics sector include Dunzo.
PhonePe has joined ONDC as the payments gateway or service provider, and the platform has also partnered with several other companies to provide interfaces for both buyers and sellers. PayTM is one such partner from the buyers’ side, while the sellers’ side includes eSamudaay, ERP player Gofrugal, digital business platform Digiit for enterprise business, and digital marketing outfit Growth Falcon.
The ONDC initiative aims to revolutionize the e-commerce industry and break the duopoly of Amazon and Flipkart. However, this move was not favored by these giants as well as other players in the retail e-commerce sector such as Reliance and Tata Group due to their significant capital and R&D investments in this space. Nonetheless, the government believes that the e-commerce industry needs to be transparent, accessible, and compliant with the regulations set by the Competition Commission of India. With the industry estimated to reach a value of US $200 billion by 2027, India is poised to become one of the largest markets globally. Thus, this initiative is expected to support the growth of the industry while maintaining fair market practices.
When will ONDC start in India?
ONDC was launched as a pilot in India on April 29th, 2022, in five cities that represent different geographies of the country: Delhi National Capital Region, Bhopal, Bengaluru, Shillong, and Coimbatore.
Summarise ONDC in Simple
ONDC’s open-source network will function as a neutral platform similar to UPI, providing free access to the code for the development of the process. This approach will ensure broad participation and seamless integration across various entities.
How will ONDC take stand in Sellers Favour
One of the benefits of ONDC for sellers is that it will enable them to reach a broader customer base beyond their traditional markets. Additionally, they can take advantage of lower operating costs, increased visibility for their products and services, and access to cost-effective logistics options.
Who will be responsible for grievance redressal on the ONDC network?
The ONDC team is currently working on developing a comprehensive grievance redressal platform and associated regulations. In the meantime, the initial process for handling grievances related to returns and refunds will be the responsibility of the buyer apps.
How will the Buyer App help Sellers on the Open Network for Digital Commerce?
Responsibility for customer registration, product searches, price discovery, order confirmation, cart management, payments, and special offers on the ONDC network will lie with the buyer apps.