An Indian initiative, Open Network for Digital Commerce (ONDC), which is launched to dominate the oligopolistic market and support small business as they were most affected during Covid-19. Open Network for Digital Commerce (ONDC) to E-commerce is as what UPI is to payments. Let’s see how it would work and compete against the big players of the market.
What’s Open Network for Digital Commerce (ONDC)?
Open Network for Digital Commerce is an initiative of the Department for Promotional and Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. It’s an open network protocol which aims to breach the power of the oligopolistic market by changing the centric model to open network model of the market. It also aims to support small and local businesses.
Open Network for Digital Commerce (ONDC) is currently being piloted.
The network has been piloted in five cities – Delhi NCR, Bengaluru, Shillong, Bhopal and Coimbatore. It has started real-time transactions and different types of companies such as Dunzo, Meesho, Paytm, Phonepe, etc have started functioning.
Functions of ONDC
It’s an Open Network which democratises online shopping, where buyers and sellers can use the same platform or app for all online business transactions. Like UPI, ONDC is a developed open network designed in such a way that all e-commerce platforms and apps can connect with each other in the same way that the UPI allows all payment apps to transfer the money. Small and Medium businesses are made online, this will be able to make a customer base. It acts as an intermediary between both sellers and buyers. Buyers have different choices and vice versa sellers too. It’s a Digital Revolution of E-commerce in India which will help to discover customer’s and unexpected growth. This will lead to dominate the oligopolistic market and generate employment.
The necessity of Open Network for Digital Commerce?
The Indian E-commerce space is platform-centric, which is dominated by Amazon and Flipkart. Platform-centric means where buyer and seller should use the same applications/platform to do a business transaction. Due to the oligopolistic market, they manipulate the data. With the help of data manipulation, they use an inventory model instead of a marketplace model, which results in generating great profit.
Inventory model
Inventory model means where the inventory of goods and services are owned by e-commerce entities and it is sold directly to the customer. They manipulate the data and use an inventory model to generate more profits rather than a marketplace model.
Marketplace model
Marketplace model means where e-commerce sites charge a fee/commission to the seller on the item listed/sold.
The main aim of Open Network for Digital Commerce (ONDC) is to support small and medium businesses because they suffered a lot during Covid-19 period. Due to more discounts on e-commerce sites, it becomes very hard for small businesses to survive in the offline market. This will help the buyers and sellers to get choices regarding quality & price. Most of the people have a habit of checking various prices of the same product as India is a price market.
Benefits of buyers & sellers?
Buyers:
Buyers can access more sellers, which leads to more choices related to price, quality, payment options, delivery partner, etc. They will receive faster deliveries and better services due to local retailers.
Sellers
Sellers can access more customers, which leads to discoverability of their goods and services to the new customers. A social reach without marketing. Also, they have multiple choices of being visible digitally and more options for services like logistics and fulfilment. It will lead to lower cost of doing business.
Biggies to join ONDC
E-commerce giants Amazon, Flipkart, Reliance and also Google plans to join the Open Network for Digital Commerce (ONDC). As it is being pitched to dominate the large E-commerce players in India. Biggies want them in, as it seems as a means of discovering business and a revolution in E-commerce. Major FMCG players of India like ITC, Unilever, Dabur, etc are in talks to join ONDC.
Grey Areas
As in the existing E-commerce Centric model, where a seller is required to get listed on various different e-commerce platforms, and the buyers browse through different e-commerce platforms for the same product. It seems that Open Network for Digital Commerce (ONDC) is a very useful initiative, but it too has some grey areas. Which can be seen as it started functioning. What if ONDC gets a smaller number of registrations of an E-commerce platform because while the big players can be considered as a competitor. Small and local businesses might face technical problems, while they have to be trained. This is the biggest challenge to overcome the slower pace at which the small and local businesses will get onboard.
Question of liability arises, as what if this online market faces glitches, scams, payment problems, etc. Will the government be able to compete with the smooth, glitch free networks? Who will be liable if a customer faces any problem? As of now it remains unclear as of now how various e-commerce laws will be applied.
The government has appointed an advisory council for ONDC. The council includes R.S Sharma (CEO of National Health Authority), Anil Agarwal (Additional Secretary, DPIIT), Nandan M. Nilekani (Non-Executive Chairman of Infosys), Adil Zainulbhai (Chairman, Quality Council of India), Anjali Bansal (Founder, Avaana Capital), Arvind Gupta (Co-Founder & Head of Digital India Foundation), Dilip Asbe (MD & CEO of NPCI), Kumar Rajagopalan (CEO of RAI), Suresh Sethi (MD & CEO of NSDL).
As we have gained in-depth insights on the topic “Open Network for Digital Commerce (ONDC)”, we get to know about its terms and concepts. What do you think? Is ONDC the next big thing for Indian business ecosystem as UPI was for fintech, or it’s just the initial hype? Let us know your views in the comments.
Happy Learning!
I am a third year finance student curious to know more about financial market. I love to read, write and learn new things. With learning and experience the blogs and newsletter we write tend to spread good insights among the readers.
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