Open Network for Digital Commerce

What is the ONDC and how will it change e-commerce platforms? How will the ONDC network help with online applications?

What is the ONDC and how will it change e-commerce platforms? How will the ONDC network help with online applications?

The story so far: The Indian government announced in late April the launch of the pilot phase of the Open Network for Digital Commerce (ONDC) in five cities with the aim of “democratizing” the country’s fast-growing digital e-commerce space, currently dominated by two United States. – companies headquartered in Amazon and Walmart. The announcement was made by Trade and Industry Minister Piyush Goyal. “After UPI, another game-changing idea to democratize commerce: soft launch of ONDC today to select consumers, sellers and logistics providers. Get ready for a world of choice, convenience and of transparency, ”tweeted Mr. Goyal.

What is the ONDC?

According to the strategy document on ONDC, it is a non-profit organization that will offer a network for local digital commerce stores across all industries to be discovered and engaged by all network-enabled apps. It is neither an aggregator application nor a hosting platform, and all existing digital commerce applications and platforms can voluntarily choose to adopt and become part of the ONDC network.

The ONDC aims to enable the purchase of products from all participating e-commerce platforms by consumers through a single platform. Currently, a buyer must go to Amazon, for example, to purchase a product from a seller on Amazon. Under the ONDC, it is contemplated that a registered buyer at one participating e-commerce site (e.g., Amazon) may purchase goods from a seller at another participating e-commerce site (e.g., Flipkart).

The ONDC model attempts to replicate the success of the Unified Payment Interface (UPI) in digital payments. The UPI allows users to send or receive money, regardless of the payment platforms on which they are registered. The open network concept also extends beyond the retail sector, to all areas of digital commerce, including wholesale, mobility, food delivery, logistics, travel, urban services, etc.

What led to the formation of the ONDC?

The Department of Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, conducted an awareness campaign during the outbreak of the COVID-19 pandemic to understand its impact on small sellers and the operation of the hyperlocal supply chain. After which, he found that there is a huge mismatch between the scale of online demand and the ability of the local retail ecosystem to participate. Following this, consultations were held with several government departments and industry experts and “ONDC was envisioned to revolutionize digital commerce in India,” according to the strategy document.

The document adds that the ONDC was envisioned as an entity that should be able to work without the need for daily guidance and advice from shareholders/members. Management independence is tied to the financial independence of the entity, and therefore the entity will be required to obtain independent funding and have a self-sustaining financial model.

What is the current status?

Currently, ONDC is in its pilot phase in five cities – Delhi NCR, Bangalore, Bhopal, Shillong and Coimbatore – with an onboarding target of around 150 retailers.

The government has also set up an advisory council to analyze the potential of ONDC as a concept and to advise the government on the measures needed to accelerate its adoption. Its members include Nandan M. Nilekani, Non-Executive Chairman, Infosys; RS Sharma, CEO, National Health Authority; Dilip Asbe, Managing Director and CEO, NPCI; Anjali Bansal Founder and President, Avaana Capital; Suresh Sethi, Managing Director and CEO, Protean eGov Technologies Ltd. ; Arvind Gupta Co-Founder and Director, Digital India Foundation; Kumar Rajagopalan CEO, Retailers Association of India; Adil Zainulbhai Chairman, Quality Council of India and Capacity Building Commission; and Anil Agrawal, Assistant Secretary, Industry Promotion and Domestic Trade Department.

Over the next five years, ONDC plans to onboard 90 crore users and 12 lakh sellers to the network, enabling additional purchases of 730 crore and an additional Gross Market Value (GMV) of ₹3.75 crore . The GMV for the digital commerce retail market in India was 2.85 lakh crore ($38 billion) in 2020, which is only 4.3% of the total retail GMV in India.

What are the likely benefits of ONDC

ONDC will standardize operations such as cataloging, inventory management, order management and order fulfillment, making it simpler and easier to discover small businesses on the network and conduct business.

However, experts pointed to some potential issues such as getting enough e-commerce platforms to sign up for, as well as issues with customer service and payment integration.

THE ESSENTIAL

ONDC is a non-profit organization that will provide a network for local digital commerce stores across all industries to be discovered and engaged by all network-enabled apps.

The ONDC model attempts to replicate the success of the Unified Payment Interface (UPI) in digital payments.

Over the next five years, ONDC plans to onboard 90 crore users and 12 lakh sellers to the network, enabling additional purchases of 730 crore.