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Overview: Open Network for Digital Commerce (ONDC)

The project aims to curb digital monopoly by creating a platform that can be utilised by all online retailers. It is going to go global. —Vinod Johri


ONDC launched by the Department for Promotion of Industry and Internal Trade (DPIIT) of the Union Commerce Ministry is an initiative aimed to promote open networks for all aspects of the exchange of goods and services over digital or electronic networks.According to a strategy paper by ONDC published in January, there needs to be a paradigm shift from an operator-driven monolithic platform-centric model to a facilitator-driven, interoperable decentralized network.The idea of an ONDC first came up in 2020 in order to standardise and streamline the country’s e-commerce industry. ONDC is based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform. Govt claims that as UPI is to the digital payment domain, ONDC is to e-commerce in Bharat. 

The DPIIT appointed an advisory committee for its ONDC project. ONDC has Infosys co-founder Nandan Nilekani, former McKinsey Bharat head Adil Zainulbhai and National Health Authority CEO R S Sharma as advisors.The task of implementing the project has been given to the Quality Council of India (QCI), which establishes and operates the National Accreditation Structure for conformity assessment bodies and provides accreditation in education, health and quality promotion.  The council aims at promoting open networks developed on open-sourced methods, leveraging open specifications and open network protocols that are independent of any specific platform. This project eases the operational aspects of running an e-commerce business. For instance, onboarding of sellers, vendor discovery, price discovery and product cataloguing can be made open source. The format will be similar to the Unified Payments Interface (UPI) model.Once mandated, sellers will be onboarded through open networks and marketplaces such as Amazon, Flipkart will also be asked to register on the ONDC platform. 

The project aims to curb digital monopoly by creating a platform that can be utilised by all online retailers. It is going to go global. The government’s intention is not to get into business but create standards through the Open Network for Digital Commerce (ONDC) that it expects will be adopted by the global e-commerce ecosystem. 

ONDC is expected to digitise the entire value chain, standardise operations, promote inclusion of suppliers, derive efficiencies in logistics and enhance value for consumers. When a project is made open-source, it is available for free for others to use and redistribute. Consumers can log in and search for products or services and based on their location they will be able to access a list of sellers, along with product details and price. The platform will support payment gateways and will also offer delivery and logistics services.Dynamic pricing, inventory management and optimisation of delivery cost are the three important things in ONDC which will help reduce the cost of doing business for everybody, including retailers.

On the platform, eSamudaay, ERP player Gofrugal, digital business platform for enterprise business Digiit, and digital marketing outfit Growth Falcon, will work with sellers on the app, while Paytm will be on the buyers’ side. 

About 20 entities have contributed a total of Rs 255 crore into the ONDC equity. These include NPCI and Punjab National Bank (Rs 25 crore each); Kotak Mahindra Bank (Rs 20 crore); Bank of Baroda, NSDL eGovernance and National Stock Exchange (Rs. 15 crore each); and BSE, State Bank of India, HDFC Bank and ICICI Bank (Rs 10 crore each).

Initially it was launched in five cities - Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore on 29th April 2022.  It is to be noted that the launch of the platform comes after Competition Commission of India (CCI) searched domestic sellers of Amazon and some of Walmart’s Flipkart following accusations of competition law violations.

The government plans to roll out ONDC for the public in 100 Indian cities by Diwali to provide millions of kirana stores and consumers an alternative to multinational platforms such as Amazon and Flipkart. 

The two large multinational players Amazon and Flipcart controlled more than half of the country’s e-commerce trade, limiting access to the market, giving preferential treatment to some sellers and squeezing supplier margins. The two global giants poured a combined $24 billion into Bharat and captured 80% of the online retail market with aggressive discounts and promotion of preferred sellers.

With ONDC, the government aims to help smaller businesses and reduce the domination of giants such as Amazon and Walmart-Flipkart. The exploitation of the e-commerce business has reached to an extent that lakhs of shops have been forced to close by unethical business practices of e-tailers in Bharat.  Our country has a fast-growing $1 trillion retail market, but the market is fragmented. Currently, there are over 4,000 small and big e-commerce companies in India, 500 logistics companies to deliver goods, and more than 20,000 entities including travel and hotels that provide services through e-commerce. 

Amazon India said that they were closely engaged with the ONDC team to better understand the proposed model and remained committed to the government’s vision of digitizing kiranas, local stores and creating opportunities for businesses across Bharat by simplifying technology adoption to help local stores and businesses contribute to Bharat becoming a $5 trillion economy. Amazon says that they are closely engaging with the ONDC team to better understand the proposed model and evaluate the role Amazon can play to better serve Indian customers and sellers.  

In the last quarter of 2020, the e-commerce order volume in our country increased by 36 per cent and the largest beneficiaries were the personal care, beauty and wellness segments, says IBEF report. The Bhartiya e-commerce market is expected to grow to USD 200 billion by 2026. According to a 2021 report by Bain & Company, India is home to the world’s fourth largest retail market in the world, pegged at around $810 Billion. An Inc42 report  said that the addressable ecommerce market in the country is expected to reach the $200 Bn mark by 2026. ONDC will surely boost swadeshi industries, entrepreneurship and generate employment with growth in FMCG sector by allowing level playing field to even medium and marginal industries scattered all over the country.    

Vinod Johri: Sah VicharVibhagPramukh, Swadeshi Jagran Manch, Delhi Prant

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