Decoded: How ONDC plans to level e-commerce playing field in India

On Friday, the government launched a pilot of its ambitious Open Network for Digital Commerce (ONDC) initiative, which aims to democratise e-commerce and check the dominance of US-based players such as Amazon and Walmart. The pilot was launched in five cities. ONDC intends to transform the e-commerce space the way the Unified Payments Interface (UPI) did for India’s digital payments system. Let’s find out how it plans to achieve this.

What is ONDC and how will it work?

ONDC will work on the principle of open network, where a buyer and a seller don’t have to be on the same platform to conduct business with each other. Rather, the network will enable them to be digitally visible and transact no matter what platform or application they use.

Imagine ONDC as a common catalogue or a registry where the seller doesn’t need to follow a separate set of compliances or rules for different marketplaces. Similarly, consumers will be able to see sellers from all marketplaces such as Amazon and Flip­kart, and even their neighbourhood kirana store(s).

The aim is to enable large-scale democratisation of digital commerce by providing a level playing field to both large and small merchants in the country.

The network will enable buyers and sellers registered with it to be visible and discoverable by adopting the ONDC architecture. Over a period of time, the hope is that this will result in rapid digitalisation of small businesses and consumers.

The open network concept will not be restricted to the retail sector but will extend to mobility, food delivery, travel, among others.

What is the pilot all about? And when can we expect a full-fledged launch?

The pilot aims to test end-to-end transactions on the ONDC architecture across different platforms, including placing an order, making the payment and making the delivery. For now, the pilot is being tested in Delhi, Bengaluru, Coimbatore, Bhopal and Shillong.

The plan is to scale it up and launch it in 100 cities over the next six months.

As many as 150 retailers and five seller platforms — SellerApp, GrowthFalcons, Gofrugal, Digiit and eSamudaay — are currently participating in this exercise. For the pilot, a buyer-side application, Paytm, has been connected with the seller-side app via the ONDC architecture. This means that a consumer can use the Paytm app and place the order with the retailers currently participating in the pilot. Both the number of buyer-side apps and retailers is expected to increase as ONDC is scaled up.

Also on board is a logistics provider, LoadShare, for delivering the goods. Going forward, as more logistics providers adopt the ONDC architecture, consumers will have greater choice to pick a delivery partner according to their budget and requirement.

Government officials say it will take at least two-and-a-half years for the ONDC to be fully launched.

Infosys non-executive chairman and Aadhaar architect Nandan Nilekani, and National Health Authority Chief Exe­cu­tive Officer R S Sharma are among the experts advising the government on ONDC.

Who are the beneficiaries and how will consumers gain?

Through ONDC, sellers, especially kira­na store owners, are expected to get wid­er access to buyers. Officials say adopting ONDC will significantly increase the discoverability of their businesses, while also lowering the cost of doing business, leading to better prices and profit margins for them in the long term.

Consumers, meanwhile, will have a wider range of choice and better customer experience because of greater access to more sellers at any given point of time, officials say.

Can ONDC arrest digital monopolies?

Government officials believe that ONDC will create a level playing field between e-commerce behemoths such as Amazon and Flipkart, which hold a lion’s share of the market, and offline traders who have been accusing big e-tailers of unfair trade practices.

The officials say e-tailers such as Amazon and Flipkart, too, can benefit by adopting the ONDC architecture. As of now, adopting ONDC is voluntary.