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Demystifying the Indian Open Network for Digital Commerce

Snigdha Kotnala
Aug 17, 2023

Open Network for Digital Commerce (ONDC), by the Department for Promotion of Industry and Internal Trade of the Government of India), has been the topic of much discussion in the first half of 2023.

Will ONDC make a dent in the Indian food-delivery market worth $5 Billion, where Zomato and Swiggy have a stranglehold (90%)? Will ONDC break the silos created by Amazon and Flipkart (controlling 60% of the Indian e-commerce market)? It seems too soon to answer these questions.

The ONDC platform showed a phenomenal growth with a peak of 25 thousand orders per day in mid-May, but thereafter it slid down to nine thousand orders/day in the first week June – a 64% fall3,4. A similar pattern was witnessed in food delivery owing to decrease in discounts and delivery subsidies. The platform is still at a nascent stage in terms of reach and categories however frequent iterations are planned approximately every three months.

ONDC is expected to tackle issues as they arise and yield results. It is part of the ambitious Digital India initiative by the Government of India (GoI), after the successful implementation of ‘Unified Payments Interface’ (UPI) and ‘Rupee and Payment’ (RuPay). It comes with a long-term perspective and a social mission – the aim to reach the remotest corners of the country and the smaller sellers thanks to the extensive internet and mobile phone penetration across India.

The concept behind ONDC is as illustrated below:       

An initiative of the department for promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, it is a scalable, open network for digital commerce. ONDC assembles all stakeholders: Seller apps (such as e-Samudaay, Snapdeal, GoFrugal,); Logistic players with capability to cover 90% of the pin-codes in India (such as Ekart, Shiprocket, Delhivery, Dunzo,); and Buyer apps (such as Paytm, Magic pin). Buyer apps to follow suit are PhonePe, CSC Grameen e-store. There are 400 thousand rural Grameen e-stores, that also have the potential to provide employment for rural youth for last-mile logistics6.

Starting with food ordering, grocery, and mobility, ONDC has now forayed into business-to-business (B2B) commerce (wholesale trade). It recorded 160 transactions on June 5, 2023 in the alpha-testing phase7. Conglomerates such as ITC, Hindustan Unilever Limited (HUL), and Proctor & Gamble (P&G) are on the network, as are Kancheepuram saree sellers. With the intention of touching every aspect of daily life, ONDC is standardizing protocols for loans and insurance, and entering hotel and travel bookings.

Large e-commerce players with B2B verticals are interested in the seller-side of ONDC but the network has clarified that it wants to cultivate give and take relationships – it is not keen to host special, restricted versions of e-commerce platforms specially designed for ONDC. Banks (private and public sector) are in talks with ONDC to launch cards/loans/other services as are telecom companies (such as Airtel and Vodafone), with their large customer bases. Even social media firms are showing interest.

There are a few hurdles but those are surmountable.

Key challenges

The network does not want to rely on discounts for sales, this will make it viable in the long run and provide small sellers with sustainable livelihoods. However, certain sectors are price-sensitive, so achieving scale may take time.

In-order to truly democratize digital commerce in a country such as India, ONDC needs to focus on communicating the concept of scale to the owners of the presently un-digitized kirana (grocery) stores.

The network targets small sellers however blog posts quote some of the difficulties small urban and rural sellers are facing in onboarding: such as broken new user experience (NUX), requirement of Goods and Services Tax Identification Number (GSTIN) (not required by small vendors,) medium of communication (English), and so on. There is a need to manually upload content and images of each stock keeping unit (SKU) which is both time-consuming and difficult for the non-tech savvy seller. The ONDC network is working swiftly to fix these problems. It is planning a master in subsequent iterations with product categories, stock images for daily kirana products, ledgers, and payment processes for sellers.

There is limited credit access at present for the small sellers.

On the buyer side, lack of standardization and quality assurance may be problematic. Customer-experience, returns, grievance-redressal are pain-points which soon gain importance once the network diversifies to less price-sensitive segments. The solution would be iterations of ONDC network and new agreements which are due in a few weeks which are expected to provide improved customer experience and more fulfilment options.

ONDC has a long way to go, and many shortcomings to overcome, before it meets expectations. It is expected to survive successfully. Its differentiators are:

  • Transparency in pricing: This is an ability to compare prices across sellers and an absence of mark-up and deep discounting.
  • Visibility: Discoverability of small sellers, some dealing in, India’s rich and diverse tapestry of handicrafts. These players are unable to invest in advertisements and hence lack visibility on larger platforms.
  • Sustainable livelihoods: Rural employment including last-mile logistics and a sustainable livelihood for sellers.
  • Planning for the future: Future iterations of the platform will focus on customer-experience, improved tracking, more fulfilment-modes, and automated grievance redressal.
  • The vision and mission: ONDC is on a long-term mission and its small sellers are ably supported by major bodies like NABARD, SIDBI and TERI – an indication that it is likely to make inroads into digital commerce.
  • Range of offerings: Its range of offerings is much wider than e-commerce players, it provisions for finance and insurance.

ONDC’s aims and conceptualization are significantly different from food-delivery apps and e-commerce platforms; it targets social impact and democratization of digital commerce in India. The doubts and comparisons which are topics of heated discussion presently, are likely to become redundant a few years down the line.









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