Categories: Market Updates

What is ONDC? How is set to change the face of e-commerce in India?

The e-commerce space in the country is rapidly increasing over the past few years. It has radically changed the business dynamics as well as The consumption pattern of the average consumer. The giants in this space are obviously Amazon and Flipkart. However, the government has been trying to crack its duopoly for some time now. This has given birth to the unique concept of ONDC which is touted to be the next UPI moment for India.

Table of Contents hide

1 What is ONDC?

2 How will ONDC work?

3 Is ONDC a govt company? Who are the stakeholders of ONDC?

4 Latest news on ONDC implementation

5 Conclusion

6 FAQs

7 Other interesting reads

What is ONDC?

ONDC stands for Open Network for Digital Commerce which is a non-profit making organization incorporated under section 8 in India. It is the initiative from the Department of Promotion of Industry and Internal Trade under the Ministry of Commerce and Industry. It aims to provide a level playing field to all the participants in the e-commerce business. It will serve as a common platform for standardizing the supply value chain, operations, and logistics, including suppliers from every corner of the country. This will give a huge boost to the country’s e-commerce sector and will help integrate consumers and suppliers across the country by creating an open network for them.

How will ONDC work?

The need for a common platform was seen when the small-scale D2C businesses were majorly left out of the e-commerce space although this sector is set to grow at a pace of 20% annually. 80% of the retail space in the country is filled with small kirana stores and small shops that are not able to participate in the e-commerce boom on account of a lack of expertise, scale, or finances.

ONDC will function on the basis of an open network where it will not be a single platform similar to Amazon or Flipkart but rather in the form of a gateway where buyers and sellers across different platforms will be able to connect. The crux of this interface will be seen in the form of a ONDC buyer app and a ONDC seller-side app with a gateway between the two that will connect them. The gateway will act as a common thread that will enable price discovery as well as matching the buyers and sellers on the basis of parameters like availability, accessibility, location, customer choices, etc.

Working of ONDC -Image Source: Smartprix.com

The buyer-side application will be responsible for buyers from various zones who can login to the app and search for the goods and services that they need. The seller-side application will be responsible for the listing of various sellers and the products and services offered by them. They will also be responsible for coordinating with the logistics side of the business to ensure correct deliveries to the end consumer. The seller side applications will also be responsible for creating awareness for the ONDC amazon sellers and pitching it to them.

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The core principle of functioning for ONDC will be similar to that of UPI. Consumers will be able to download the ONDC app of their choice and get access to all sellers that are part of the ONDC network offering their goods and services. The price discovery will be done by matching the customers with the products and the sellers offering them. This platform will not be limited to the retail sector but will be extended to incorporate goods and services from the wholesale sector, food delivery, logistics, urban services, travel, mobility, etc.

The open-source network for ONDC will be a neutral platform or a portal like UPI. It will ensure that the process or the code for the development of the process will be freely available to ensure maximum participation and integration.

Is ONDC a govt company? Who are the stakeholders of ONDC?

The buzz around the ONDC platform is already quite high with many names already joining this initiative. The platform has confirmed investments to the tune of Rs. 2.55 billion from 20 government and private organizations.

Many big names from the banking sector are part of the ONDC initiative. These names include HDFC, Kotak Mahindra, Axis Bank, State Bank of India (SBI), and Punjab National Bank (PNB) with significant stakes in ONDC. These private sector banks as well as SBI are reported to have acquired a share of 7.84 percent each, This stake is in the form of 10 lakh equity shares with a face value of Rs. 100 each and an individual investment of approximately Rs. 100 million (US$1.3 million). In November 2021, PNB also announced its plans to buy a 9.5% stake in ONDC.

With the increase in the push to the indigenous ONDC platform, existing e-commerce giant Flipkart has also come on board with its logistics arm eKart Logistics. The other big name in logistics parts includes Dunzo.

PhonePe is part of ONDC as the payments gateway or payments service provider. The platform also has many partners providing the interface from the sellers’ and the buyers’ sides. While PayTM is from the buyers’ side interface., the sellers’ side includes names like eSamudaay, ERP player Gofrugal, a digital business platform for enterprise business Digiit, and digital marketing outfit Growth Falcon.

Latest news on ONDC implementation

D2C and personal care brand WOW Skin Science has joined the ONDC network and will be available for all seller apps registered on ONDC. This is expected to help WOW Skin Science to expand its reach and sell to more customers.

According to a recently published report by Publicis Groupe India and Digital India Foundation, more than 250 million customers will be able to buy goods and services through ONDC in the next five years

Conclusion

The ONDC move is an attempt to revolutionalize the e-commerce space and remove the duopoly of Amazon and Flipkart. This initiative was understandably not favored by them as well as other giants in the retail e-commerce space like Reliance, and Tata Group due to the heavy capital investment as well as R&D investments made by them in this sector. But the government is of the view that the e-commerce space needs to be transparent, accessible, and adhere to the rules set by the Competition Commission of India in the truest form. The sector is set to reach an estimated value of US $200 billion by the end of 2027 making India one of the biggest markets in the world. This initiative is therefore set to aid the growing industry and maintain far market rules along the way.

FAQs

What is the open source network in ONDC?

When will ONDC start in India?

The pilot of ONDC was launched in India on 29th April 2022 in five select cities highlighting different geographies of the country. These cities are Delhi National Capital Region, Bhopal, Bengaluru, Shillong, and Coimbatore.

How will ONDC favour sellers?

ONDC will help the sellers access wider markets than their traditional ones along with the benefits of lower cost of operations, better visibility of their products and services, access to cost-effective logistics options, etc.

Who will be responsible for grievance redressal on the ONDC network?

The work on grievance redressal platforms and related rules and regulations is still under work. However, the initial process lays the onus of grievance redressal relating to returns and refunds on the buyer apps.

What would be the brief role of buyer apps on the ONDC network?

The buyer apps will be responsible for customer registration on the ONDC network, product searches, price discovery, order confirmation, cart management, payments, and special offers.