ONDC - Democratizing Digital Commerce, For Whom and How?
Do you prefer Amazon or Flipkart? Bigbasket or Blinkit? In a few years you might not have to worry about this choice at all - if the government has its way with the Open Network for Digital Commerce (ONDC), online shopping, specifically the ecommerce marketplace part of it, could become like the next UPI.
What does that mean? For example, with UPI, if the vendor you are paying is registered with PhonePe, but you only have an account with Paytm, you can still send them money without having to install or create a separate account with PhonePe. Similarly, it could be hypothesised that, once a vendor is on one ecommerce website registered with ONDC, users from other ecommerce websites would be able to discover and buy their products too.
Does this mean ecommerce marketplaces would lose their relevance and competitive advantage? Well, we don’t really know for sure. Read on below for a deep-dive into the topic and Krish Sanghvi’s take on it.
What is ONDC?
The Open Network for Digital Commerce (ONDC) is an attempt by the government of India to help small businesses and MSMEs compete with the likes of Flipkart and Amazon, who it argues have an over dominant role in the market. ONDC seeks to expand the reach of shops by giving them an online channel to distribute their products, thus enabling them to expand their total addressable market (TAM) beyond the 1 km radius that they can physically serve. The government's vision entails to eventually bring all small and medium-sized businesses online on a public platform as it seeks to break the dominance of Amazon and Flipkart. In India the government has consistently regulated in the direction of making ecommerce websites marketplaces by outlawing them from adopting a inventory-based model or having a stake greater than 25% in the sellers on its platform.
ONDC aims to be the UPI moment for digitisation on the country's economy as it sets the foundational infrastructure on which digital commerce may then be fit. Multiple companies such as Dunzo, Infibeam amongst others are already developing and testing their ONDC integrations. While the beta pilot is already operational in Bangalore, it is likely to be expanded to cover additional fields such as fashion and merchandising in the near future.
How does it work and who is it likely to benefit from it
The ‘infrastructure’ of ONDC would lie in the middle of buyer and seller-side interfaces made by companies such as Paytm and GoFrugal. A customer can search for a product on any buyer-side app and ONDC would connect it on the seller side to all sellers offering the product. The promise is to make small sellers more visible on the internet, and give customers more choice over whom to buy the product from. The customer can also choose from a range of delivery partners, thus de-linking the seller from the delivery partner. This seeks to reduce barriers to entry that the integrated solutions of established marketplaces pose to the entrance of new competitors in the market. Besides increasing options to customers it can also help improve delivery times and liberate sellers from the dictates of ecommerce platforms who allegedly (mis)use seller data to further their own products.
Opinion
While the idea of ONDC is potentially revolutionary and holds great promise, it is also in its novelty where the uncertainty of this experiment lies. Many questions such as “How does the government ensure neutrality of the platform?'“ ‘How do you finance the maintenance and upgrade of the system?” “What would be the implications of a centralized ecommerce platform (which ONDC is not) on user privacy in the context of a surveillance state?” remain unanswered. It is perhaps the hardest to imagine because of the lack of a direct international parallel to it; however UPI was also one before it and there is good reason to believe in the promise of ONDC.