Will ONDC Succeed In Providing A Level Playing Field To Small Businesses?

The Open Network for Digital Commerce (ONDC) on March 23 onboarded Namma Yatri onto its platform as part of its open mobility initiative. This marks ONDC's entry into the mobility sector, where it will compete with players such as Ola and Uber. This move comes after ONDC's expansion into food, grocery, e-commerce, and other segments.

If you feel that you were late to understand UPI, read on to know about ONDC before it becomes a household buzzword in India. Last year the Government of India announced its intent in opening up the digital commerce space in India in the form of Open Network for Digital Commerce (ONDC). Still, in its  ideation phase, ONDC is already creating ripples. ONDC is aimed to completely rewrite and re-architect the digital commerce landscape in India. ONDC is an open network aimed at unbundling the existing closed network of digital commerce and enabling small businesses to participate in the space. Before we dig deeper, let's examine why ONDC is becoming India's priority. 

So, What is ONDC?

ONDC is the government's answer to the growing monopoly of select eCommerce and aggregator platforms in India. Like UPI for payments, ONDC plans to integrate all digital commerce activity on a single platform. 

Launched on April 29, 2022, ONDC is currently in beta testing mode in 15 Indian cities, including Bengaluru, Delhi NCR, Shillong, Bhopal, and Lucknow with 30+ platforms already integrated on ONDC. 

What is ONDC, exactly? Will it end the monopoly of  e-commerce behemoths like Amazon & Flipkart? 

Well, that's for time to tell. But for now, ONDC is envisioned as a platform that incorporates everything associated with online buying and selling — logistics, inventory, discovery, payments, dispute resolution, and more. 

Think of it like an interconnected network of eCommerce platforms, like Google. As a buyer, you can search for a product and see listings from Amazon, Flipkart, Snapdeal, or other websites on a single platform. It's just like Google Shopping snippets but better. 

It will give a level playing field to small businesses and local merchants and make it easy for buyers to discover products, compare prices, and make an informed decision. 

And the best thing — platform commission for sellers will be capped at 3% per sale, a sharp downgrade from approximately 30% commissions that platforms charge from third-party sellers. This means more choice, easy discovery, and affordable rates, for buyers and more control and better profits for the sellers. 

ONDC aims to become the D2C (Direct to consumer) hub for small businesses and unorganised sellers in local bazaars across India — which accounts for 80% of the total retail sector in India. 

If executed well, ONDC has potential to connect the digitally excluded business/retail segment and add transparency and better control to eCommerce operations in India. 

How will ONDC work in India? 

ONDC is not another platform, mobile app, or aggregator platform like millions of others already operating worldwide. 

Technically, it’s an open protocol or an open Network just like UPI — a set of rules, specifications, and code to facilitate connections between buyers, technology, and sellers. 

The applications and usefulness of a solution like ONDC in India are immense. For starters, ONDC may finally bring all small offline businesses, like local Kirana stores, online — Just like UPI made them accept online payments. 

Today, we rarely see a local shop without a QR code on its counter. You might use an app like PayTM, Google Pay, or PhonePay, but the UPI technology is independent of the control of these apps. Similarly buyers will be able to see multiple listings from platforms like Amazon and Flipkart on a single screen. As an illustration Amazon will bid for visibility on the Flipkart platform, Flipkart would be able to integrate into any other platform, like eBay, and buyers will be able to pick and choose the product from sellers that offers them the best deal. 

ONDC will empower all such small businesses and give them an edge over prominent eComm players because of their personal connection and years of relationship building. 

The core of ONDC lies in transparency, fluidity, and connectivity — no restrictions due to platforms for buying, selling, logistics, payments, and even more. 

 The bottom line is…

ONDC is envisaged as a way to address the shortcomings and restrictions that come with the current model of a multitude of online retail platforms, especially keeping in mind the sellers and buyers. 

It is poised to bring some degree of integration in the fragmented landscape by taking a "whole-of-economy" approach and amplifying the economies of scale benefits.

ONDC will result in the creation  of platforms that will be designed to combine and rationalise supply chains, distribution channels, warehouses, and last-mile delivery mechanisms by realising the 6Ps of digital services - Personalized, Paperless, Presenceless, Proactive, Perceptive, and Pervasive.