The ONDC would enable the government to regulate the e-commerce segment in a much more systematic manner, given that all transactions between the buyer and the seller would take place on one independent portal.

By Kumar Saurav

The One Nation One Digital Commerce (ONDC) platform has launched its beta testing in Bengaluru, India. The government-backed initiative aims to create a shared network for online and offline retailers and will focus on the fashion, travel, pharmaceuticals, mobility, home decor, and gadgets sectors. ONDC, which aims to facilitate 8% of consumer purchases within the next two years, currently enables buyers to use payment gateways such as Paytm and IDFC First Bank to complete purchases. It also hopes to empower small, offline sellers to compete with the likes of Flipkart and Amazon.

What is ONDC?

A government of India initiative launched in a bid to promote open networks for all aspects of the exchange of goods and services adhering to an open-network methodology which will be unconstrained to a specific platform. The rationale behind this decision is to empower small merchants and put an end to the duopoly of global e-commerce giants like Amazon and Walmart-owned Flipkart, which jointly account for over 50% of the industry. This revolutionary move by the Government aims at shifting electronic commerce from a platform-centric model to an open-source one.

The move has been brought about by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. This model would enable the merchants to save data, build credit history and expand their consumer base. This would allow platforms with significant business-to-business sectors to connect to new consumers alongside tapping into the seller side of the ONDC network to source products. The design, operation and future growth of ONDC have been strategized by a 9-member advisory council comprised of eminent names such as (Nandan Nilekani, Infosys) and RS Sharma (CEO, National Health Authority).

Just like the UPI had provided unparalleled empowerment to crores of Indians across the country, ONDC would also foster interoperability and pave the way for democratizing the entire e-commerce ecosystem.

The launch

ONDC went live with its beta launch in Bengaluru in the month of September 2022. Day 1 of the launch witnessed 161 orders across two available segments – groceries and restaurants. Buyer-facing apps that function as online payment gateways, such as Paytm, IDFC First Bank, SpiceMoney and MyStore, are the driving forces in this experience. Platforms like Bizom, SellerApp, Ushop, Uengage, Innobits Mystore, nStore, e-Samudaay, eVitalrx, Go Frugal, and Growth Falcons are the seller apps included in this initiative.

Reports suggest that ONDC plans to extend beta testing into regions where its network members have significant delivery and logistical footprints and where these players have the capacity to be deployed. In addition, it is anticipated that the initial sectors will focus on fashion, travel, pharmaceuticals, mobility, home decor, and gadgets. Alongside Bengaluru, ONDC has been rolling out in other cities like Delhi NCR, Bhopal, Coimbatore and Shillong.

What problems does ONDC aim to solve?

The ONDC would enable the government to regulate the e-commerce segment in a much more systematic manner, given that all transactions between the buyer and the seller would take place on one independent portal. The platform would empower offline retailers and allow them to compete with major online sellers on a single platform. The entire framework of Digitisation, which is widely advocated and implemented by the government at all levels possible, is the underpinning of this move.

According to a joint report by FICCI-Anarock, India’s skyrocketing e-commerce business is anticipated to grow by more than three times to US$170 billion by 2026 from US$38 billion in 2021.

Despite a thriving industry, a handful of major firms, such as domestic online retailer Flipkart and global digital behemoth Amazon, control a huge portion of the Indian e-commerce market. The government’s efforts to support the industry through supportive regulations and the development of tech infrastructure are anticipated to democratise digital trade in the nation and launch the next phase of e-commerce sector growth.

AN ONDC strategy paper identified the incapacity of marketplace vendors to leave the ecosystem of the platform, given the fact that the value these small players create is maintained by the bigger platforms. In light of this, ONDC seeks to change the marketplace ecosystem from a facilitator-driven interoperable decentralised network to an operator-driven platform-centric model.

How will this digital equaliser pave the way for Indian retail?

In a nation of more than 1.35 billion people, ONDC sets its eyes on expanding the e-commerce reach to 25% of consumer purchases in India during the next two years from the present 8%. According to Bain & Company, the e-retail sector in India is projected to grow from US$150 billion to US$170 billion by 2026. The government anticipates that the ONDC project would ultimately benefit consumers by driving competition and innovation in the e-commerce sector.

Within the next five years, the initiative hopes to register 900 million buyers and onboard 1.2 million sellers on the shared network, with a gross merchandise value of 48 billion dollars. An investment of $33.4 million has been garnered from 20 Government and private companies, including State Bank of India, HDFC Bank, Bank of Baroda, ICICI Bank, etc. 24 companies, including Flipkart-backed Ekart Logistics, Google, Reliance-backed hyperlocal delivery platform Dunzo, digital payment and financial services company, PhonePe are reportedly in the process of integrating with ONDC.

The ONDC has recently released a 43-page consultation paper seeking public comments on 24 issues in a bid to strengthen its network. The questions are centred around order placement, order fulfilment, payment and settlement, returns, refunds, and cancellations, grievance management, enforcement and compliance, and local government.

India will have 500 million online users by 2030, securing its spot as the third-largest global market. In the years to come, this number as people are increasingly using the internet via desktop computers and more via mobile devices. But data privacy is the biggest issue raised by this increase. Since India doesn’t have a comprehensive data privacy regulation in place, e-commerce companies may collect, keep, and utilise customer data in ways that might not always be equitable. The administration is allegedly considering answers to these issues before enacting any e-commerce rules.