What is ONDC? – Government’s Open Network for Digital Commerce Explained
In a bid to curb monopoly in the Indian e-commerce ecosystem, the Government of India has launched ONDC – Open Network for Digital Commerce – a network based on an open protocol. The beta launch happened in Bengaluru with 161 orders placed through the network in a single day.
So, what is ONDC exactly and how would it help small merchants and retailers? Let’s dive in.
What is ONDC?
ONDC or Open Network for Digital Commerce is a Government of India initiative that aims to make the e-commerce segment more inclusive.
In the past and recent years, small retailers have been at loggerheads with the e-commerce giants operating in India, primarily due to the charges levied on the selling price of the products. However, due to the unavailability of a viable alternative, these small retailers are allegedly forced to buy products at a higher price.
ONDC aims to mitigate this monopoly by charging a quarter of what these e-commerce players have been charging. This would significantly help micro, small and medium enterprises and small traders get on online platforms. The basic idea behind the launch of ONDC is to shift from a platform-based model to an open network-based model.
So, how would ONDC operate and how can consumers and retailers benefit from it?
How will ONDC Work?
Since ONDC won’t function as a run-of-the-mill e-commerce platform, but more as an open network, it opens up a whole new opportunity in the e-commerce sector. Here’s how it will operate.
Local shop owners across segments can reach out to their potential customers by displaying their products and services on the search results of any app.
For instance, if Walmart’s Flipkart and Amazon have their platforms integrated with ONDC, a consumer searching for any product on Amazon would also see results from Flipkart and other sellers on the Amazon app. However, for any of the existing e-commerce platforms like Flipkart and Amazon to be part of the network, they have to onboard their existing buyers and sellers on the platform.
Currently, buyer-facing apps such as Paytm, IDFC First Bank, SpiceMoney and Mystore, are acting as a gateway for online shopping. The seller apps include names such as Bizom, Digiit, e-Samudaay, eVitalrx, Go Frugal, Growth Falcons, Innobits Mystore, nStore, SellerApp, Ushop, and Uengage.
These apps enable sellers to join the network and display their catalogues and inventory to buyers. This is a complete shift from the workings of e-commerce platforms like Amazon and Flipkart, which are both buyer and seller platforms. However, ONDC will be hosting buyers and sellers separately.
Though initial reports suggest that the network would be charging far less on the selling price of the products compared to other e-commerce platforms, a commerce ministry official while speaking to the New Indian Express has stated that the Government has no plans on putting a cap on commission charged by the platform and that the fee/commission will be entirely decided by the market forces.
Currently, more than 500 companies, including small startups, are talking to ONDC to be a part of the network. Blowhorn, Craftsvilla, CSC Grameen eStore, Ekart, Global Linker (Faiita IT Mall), Grab, HDFC Bank, IDFC First Bank, ITC Store, Kotak Bank, Magicpin, Microsoft, Peppo, Petpooja, PhonePe, Shopalyst, Snapdeal and Zoho are among those who are expected to go live on the network soon.
Features of ONDC
Here are a few pointers on ONDC to take note of:
- ONDC plans to enable local commerce, such as mobility, grocery, food order and delivery, hotel booking and travel, among others, to be discovered and engaged by any network-enabled application
- It would create a single open network for buyers and sellers to be digitally visible to each other irrespective of the platform or app they use
- Through ONDC, merchants will be able to save their data and build credit history. As per the Government’s statement, ONDC shall take all measures to ensure the confidentiality and privacy of data in the network
- The network/platform will also be compliant with the Information Technology Act, 2000
- Currently, consumers can place orders in two segments – groceries and restaurants
- Consumers can use any of the participating buyer apps of their choice like PayTM to place their orders from multiple categories
How will Small Merchants Benefit from ONDC?
Here’s how ONDC aims to help small merchants:
- Increased visibility to customers through a single open network irrespective of the consumer app
- Probable fewer charges on the selling price of the products
- A single network that links retailers, consumers, and logistical and financial service providers
- More inclusivity, discoverability and interoperability translate to more opportunities for small merchants to grow
Final Word
Currently, there hasn’t been any response from the existing e-commerce platforms regarding whether they would integrate ONDC in their concerned platforms. Also, only a small-scale launch cannot predict whether the network is 100% foolproof.
That being said, ONDC is already being positioned as something that has the potential to have as much impact as UPI. So, what do you think about the Government’s foray into the e-commerce sector? Will ONDC be able to break the existing e-commerce giants’ monopoly?
Let us know in the comments.
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
