What Is ONDC? How Will ONDC Impact the Ecommerce Industry of India?

Shikha Tyagi Shikha Tyagi
Jun 19, 2022 6 min read
What Is ONDC? How Will ONDC Impact the Ecommerce Industry of India?

Open Network for Digital Commerce (ONDC) was formed on 31st December 2021. However, the initial pilot phase of this program was launched on 29th April 2022. The target behind the introduction of this platform in India is to bring scalability and accessibility to the field of e-commerce.

The initial idea of ONDC came from the Piyush Goyal-led Department for Promotion of Industry and Internal Trade (DPIIT).

The project is moving forward under the leadership of Nandan Nilekani, co-founder of software powerhouse Infosys Ltd. It is aimed to provide equal opportunity to the small retailers and merchants in the e-commerce market alongside big players like Amazon and Flipkart.

Nilekani has also earlier helped the Indian government in developing Aadhar biometric ID system. As per him, ONDC is meant to democratize digital commerce in India.

As per a survey, India in 2021 had around 289.1 million digital buyers. This number is expected to increase and reach around 377.6 million in 2025.

Number of Digital Buyers in India
Number of Digital Buyers in India

To date, the maximum share of e-commerce in India is in the hands of a few big companies. However, the growing number of buyers invokes the need of including small sellers from remote places to become a part of this huge market.

To help resolve this issue with the aim of bringing more retailers and sellers online government brought forward the concept of Open Network for Digital Commerce (ONDC).

What is ONDC?
Why is ONDC needed?
How will ONDC impact the e-commerce industry in India?

Impact of ONDC on E-commerce Industry of India

What is ONDC?

ONDC Logo
ONDC Logo

Before understanding how the government will implement this and what are its benefits, let us first understand clearly what ONDC is.

Until now, digital commerce across India is abiding by the platform-centric model. This means there are different platforms available online through which a seller can sell his product and a buyer can purchase them by registering on the same platform.

This means that the buyer and seller have to be on the same platform for an online deal to occur.

The idea behind ONDC is to bring e-commerce to the open network model instead of the platform-centric model. This will make e-commerce approachable for all types of buyers and sellers.

The idea is to bring the buyers and sellers from different platforms into each other’s approach without any of them having to register on the platform on which the other exists.

It will allow the buyers and sellers from different platforms to connect with each other, provided that both the platforms are linked to ONDC. This is similar to the role UPI plays in terms of transactions.

Therefore, the ONDC network allows the buyer to connect with the seller and make transactions to settle the deal irrespective of which applications they are using for buying or selling the products.

Why is ONDC needed?

Presently, if a retailer or merchant wishes to take his business online, there are only two options available for them.

The first option is to create its own website. This might require some technical support. Further, this is a cost-intensive process as it involves a lot of extra charges such as website creation and management costs, logistic charges, etc.

Also, even after the website is built and functional, the seller will have to invest a lot of money in advertising for his website in order to attract buyers.

The second option is to sell the products on aggregator platforms or so-called online marketplaces. Although this system appears quite convenient in comparison to building a website, it has its own issues.

The two top players in this field i.e. Amazon and Flipkart are both U.S.-based companies. They keep a large share of profit in return for displaying and selling your products on their platform. In addition, sometimes there have been complaints of brand preferences where these platforms are said to exhibit favoritism towards a few brands.

Moreover, sometimes these marketplaces collect data from the sellers and depending on the market inclination introduce their own products

Another main concern associated with e-commerce is the lagging of small retailers, merchants, MSMEs, etc. Owing to the limited reach of e-commerce in small towns and villages, these small businessmen are deprived of the benefits associated with e-commerce.

Most of them have not been able to begin their online journey on these digital selling platforms due to restricted technical knowledge and the small number of options available.

To counter these problems and take digital commerce to a whole new level ONDC has been formed. The aim is to make e-commerce reachable even for small retailers and merchants.


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How will ONDC impact the e-commerce industry in India?

The introduction of ONDC will encourage small retailers to step foot into e-commerce. ONDC will result in bringing separate buyer-centric and seller-centric apps that will be beneficial for anyone who is invested in e-commerce.

The new apps that may appear in the market can help resolve other issues for buyers as well as sellers. For example, it may help the sellers with logistics solutions while the buyers may be benefitted by shopping from the nearest available or cheapest store in town.

The main benefits expected out of ONDC are as follows:

  • Formalization and democratization of e-commerce.
  • Large scope for discovering prices and comparing them.
  • Growth of local retail businesses especially MSMEs.
  • Increased number of choices for buyers.
  • Auxiliary support and services for both buyers and sellers.
  • Enhanced business opportunities owing to open platform.
  • Option to outsource for both buyers and sellers
  • Reducing the monopoly of big shots in the e-commerce
  • Rational process of business

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Conclusion

With the schemes like digital India, no doubt e-commerce is the future of the Indian market. This is also clear from the fact that the Indian e-commerce industry is expected to rise from $46.20 billion in 2020 to $111.40 billion in 2025, the small retailers from the remote regions may lose their business.

At this stage, the e-commerce platforms being totally captured by a few large companies can certainly impact the small businessmen from the remote areas of the country who still are unable to utilize this amazing platform.

This is sure to have an adverse effect on the economy with these small retailers losing their business to a few big players.

The introduction of the Open Network for Digital Commerce (ONDC) at this point is certainly a great initiative by the government to help these small businessmen to maintain their position in the race.

This will also give them the opportunity to escalate their businesses to a larger scale by making their products reach a larger audience.

FAQs

What is ONDC?

Open Network for Digital Commerce( ONDC ) is a non-profit organisation in collaboration with the Government of India that brings e-commerce to the open network model instead of the platform-centric model. This will make e-commerce approachable for all types of buyers and sellers.

Who owns ONDC?

ONDC is owned by the Department for Promotion of Industry and Internal Trade.

Who is developing ONDC Project?

Nandan Nilekani, the co-founder of Infosys Ltd., is leading the Open Network for Digital Commerce (ONDC) project.

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