With open arms: How far can ONDC democratise ecommerce in India?

Magicpin, the hyperlocal discovery platform, had a slow start. Things changed once it joined the Open Network for Digital Commerce (ONDC) in March 2023, not just acting as a buyer app but also fulfilling the backend logistics related to orders and delivery. Going toe to toe with food delivery majors by offering cheaper prices for the same items, Magicpin began to pull in around 20,000 orders a day, much more than some better known outfits, which were getting roughly 5,000 orders a day.

It is now the largest food aggregator platform on the ONDC network. “Most of the delivery orders on the network are coming from Magicpin. The platform has grown to a double-digit market share in many localities of Delhi and Bengaluru. Overall, in these cities, the company is in high single digits. This number has grown 10-fold over the last year,” said a person familiar with the matter.

Magicpin CEO Anshoo Sharma told Business Standard the growth had come on the back of its seller base. “The reason it (ONDC) has worked is because the merchant ecosystem wants this to exist. The way it is growing, by the end of the year, ONDC will have made a meaningful impact in the food delivery category,” he said.

Sharma is not the only one extolling ONDC’s role in the way ecommerce is evolving in India.

Saahil Goel, CEO of ecommerce logistics unicorn Shiprocket, says his company’s business through the platform has grown more than 10-fold since its integration with ONDC in June last year, when it became one of the first large seller apps to integrate with the network.

“Though the base is still small, growth has been rapid. We are already one of the largest catalogue suppliers to ONDC and among the largest seller apps,” says Goel, adding that the company now has more than 10,000 sellers.

In the beginning, it was difficult to integrate with the network, but the problem has been addressed.

The Economic Survey, which was tabled in Parliament the day before the Union Budget, cited Sri Vidhya Handlooms in Kanchipuram, Tamil Nadu, as having transitioned to digital commerce via ONDC. As a result, the family-owned business expanded its reach to 54 cities. Monthly revenues rose to nearly Rs 2 lakh, compared to previous earnings of Rs 10,000-20,000 on mainstream platforms. Lower commission rates on ONDC enhanced profitability.

“Sellers are very keen on seeing their products listed on the various buyer side platforms like Paytm and others. Aside from sales, the network is also providing them with a lot of branding. Most of the sellers now do not require much input. After familiarising them with the ONDC panel and telling them about the benefits, they now just require a support call once in a while. There has been a general interest in exploring the network,” says Goel.

With the boom in ecommerce in India, concerns arose about the seeming lack of a level playing field between the cash-rich e-tailers and the small offline stores. The ONDC was born out of this.

Level playing field

Initiated by the Department for Promotion of Industry and Internal Trade (DPIIT) three years ago, ONDC promotes open networks for exchange of goods and services digitally. Its platform-agnostic architecture allows buyers and sellers to transact irrespective of the platform they use.

“ONDC is an inclusive agenda, giving a level playing field to existing players like Amazon, Flipkart, Ola, Uber, Swiggy, Zomato, etc, as well as to small startups and players like artisans, FPOs, SHGs, kirana stores etc,” T Koshy, ONDC’s MD and CEO, told Business Standard in an interview.

The government believes this will increase visibility for products and services, resulting in additional revenue for sellers, and aid onboarding of small, local sellers so they can take advantage of the ecommerce boom.

“We’re not trying to replace anybody, but collaborate and co-exist, benefiting everyone. This is similar to physical markets, where big players and small players thrive side by side, both adding value and catering to their particular segments,” Koshy said.

ONDC is currently fully operational across more than 1,200 cities, with the digital infrastructure completed and rolled out to businesses and the public at large. More than 535,000 sellers have been onboarded on the platform, of which 85 per cent are small sellers. In June, ONDC facilitated 9 million transactions.

It operates across broad categories, such as food and beverage, grocery, agriculture, fashion and footwear, home and kitchen, electronics, beauty and personal care, mobility, financial services. The adoption has been the most across mobility, grocery, and food, as well as fashion.

No cakewalk

A Parliamentary standing committee report in 2022 had stated that ONDC’s success was contingent upon factors such as successful onboarding of the existing digital commerce apps and platforms, compatibility and interoperability of the existing applications of the buyers and sellers, and the technical capability of small and medium enterprises to be onboarded on the digital network.

For instance, fintech major PhonePe’s journey with ONDC has not been smooth. In July last year, it launched its ecommerce app, Pincode, on ONDC in 10 cities, offering grocery, food, medicines, fashion, electronics, etc. Nine months later, it exited non-food categories such as fashion and electronics. Meanwhile, it continues to operate in the travel ticketing segment on ONDC through its main app.

Though the company had then said it was realigning its focus more on hyperlocal segments, such as food delivery and grocery, people in the know say the end consumer’s experience on the platform was not perfect.

“It is still early days for the network. If ONDC can scale up quickly, it will be able to iron out the kinks and more apps would be keen to list on the platform. We are also in regular talks with them,” says a top executive of a food delivery firm.

Food delivery is no problem. Several restaurants, owing to platforms like Swiggy and Zomato, have acclimatised to the process of food delivery — from managing inventory to packaging food. But the neighbourhood kirana stores are yet to reach similar levels of standardisation, contributing to product returns, according to a person familiar with the matter.

What is ONDC?

ONDC intends to transform the ecommerce space the way UPI changed digital payments. It works 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.

It works with a common catalogue, where a seller doesn’t need to follow a separate set of compliances for different marketplaces. Similarly, consumers can see sellers from all marketplaces such as Amazon and Flipkart, and even their neighbourhood stores. Over a period of time, the hope is that there will be rapid digitalisation of small businesses and consumers.