ONDC, the open-source network, creates level playing field in e-commerce for millions of small and mid-sized businesses in India
Increased access to the internet and smartphone has equipped more Indians to shop online now. From 75 million in 2015, there were reportedly 210 million online shoppers in 2021. E-commerce presents significant business opportunities to keep up with the changing buying behaviour of digital-first natives.
E-commerce has transformed the retail business model, powering the sector to an unprecedented double-digit growth post-Covid. More businesses are jumping on the e-commerce bandwagon to remain competitive. Post the 2020 lockdown, over 70% were from small towns.
The Indian government’s Open Network for Digital Commerce (ONDC) is a step in the right direction in realising this transformative power of e-commerce and further supporting the small and mid-sized segment. ONDC will democratise e-commerce, leveling the playing field for SMEs and micro-entrepreneurs.
By promoting open-source networks for all aspects of e-commerce, ONDC is the government’s initiative, allowing buyers and sellers to move away from the current platform-centricity.
ONDC, a step in the right direction to prevent monoliths
ONDC leverages open-source protocols to prevent monopoly in the e-commerce ecosystem. Most Kirana stores lack tech prowess putting the backbone of the Indian retail system at a disadvantage in a platform-centric e-commerce model. ONDC will create fair competition by providing them with access to processes and technologies typically deployed by large e-commerce platforms. As more of these sellers go online, their digital visibility and reach will increase across the e-commerce network.
By standardising inventory management, order management and fulfilment, and other operations, ONDC can further help small business owners by reducing their costs of doing business online.
With open-source protocols for product cataloguing, vendor match, and price discovery, ONDC can bridle deep discounting, predatory pricing, collusion, and inventory-owning practices in e-commerce.
ONDC can foster an inclusive e-commerce ecosystem
ONDC will develop the e-commerce ecosystem from an operator-driven platform-centric model to a facilitator-driven interoperable decentralised network. Everyone will have equal opportunities.
With no need for large investments, barriers to sellers’ entry into digital marketplaces will be eliminated. As value creation will not be locked in the large platforms, the representation of local start-ups in e-commerce could increase.
With more sellers digitally visible, ONDC will present consumers with the freedom of choice with varied options to buy across a range of price points. Matching demand with the nearest available supply, ONDC will also enable consumers to choose their preferred local businesses.
Digitising the entire value chain, ONDC would not only standardise operations but also ultimately promote local supplier inclusion, curb digital monopoly, drive logistic efficiencies, and enhance consumer value.
ONDC set to unite the e-commerce ecosystem
Several participants are already joining the ONDC network. More digital payment participation, offering a seamless, instant, and convenient user experience, is needed to enhance conversion in ONDC.
Currently, pilots are ongoing in Delhi, Bengaluru, Coimbatore, Bhopal, and Shillong, ONDC is expected to be rolled out in 75–100 towns across India this year. In the next five years, it targets signing up 900 million buyers and 1.2 million sellers and $48 billion in gross merchandise value (GMV). The GMV for the e-tail sector in India was at $38 billion in 2020. It is projected to reach $140 billion in 2025 and $350 billion in 2030.
ONDC will revolutionise e-commerce with its far-reaching impact
In creating a fair game for all players to co-exist and benefit mutually, ONDC holds the promise to transform the e-commerce business landscape in India. For starters, ONDC will bring the benefit of limitless visibility and discovery opportunities to consumers, sellers, and logistics service providers.
Additionally, as the seller’s passport to go anywhere on the network, ONDC will reduce the seller and e-commerce platform’s cost from discrete onboarding at individual marketplaces. By bridging content and commerce, ONDC can shift the advertising model from impressions to transaction to reduce customer acquisition costs. Higher visibility of demand can reduce logistics costs, which are as high as 10% of the GMV.
As ONDC opens access to customer data, businesses will be empowered to derive analytical actionable insights into selling their products across digital platforms. Eventually, ONDC could go global. Heralding an advanced standardisation framework for the global e-commerce ecosystem to adopt, ONDC can ensure consistency across an online store, notwithstanding the presence of a large volume of sellers (domestic or cross-border).
Views expressed above are the author’s own.
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