Quick Summary: India’s technology-focused economy has been significantly impacted by the rise of E-commerce. The widespread acceptance of the “anything-anywhere-anytime” shopping concept has led to substantial growth in the nation’s digital commerce market. As a result, it is projected that the revenue generated from E-commerce will reach US$71. 9 billion by 2023, with a potential growth rate of up to 13. % over the next five years. This suggests that the E-commerce sector will continue to play a crucial role in India’s economic progress and development.

The Indian government has implemented measures to address monopolistic behaviors in the e-commerce industry by introducing the Open Network for Digital Commerce (ONDC), which operates on an open protocol. The network was launched in Bengaluru, where it successfully processed 161 orders in a day during its beta phase. The purpose of this initiative is to encourage fair competition and establish an equitable environment for all e-commerce players in India.

What is ONDC?  

The Open Network for Digital Commerce (ONDC) is an initiative by the Indian government that aims to promote inclusivity in the e-commerce sector. Small retailers in India have been facing challenges in dealing with large e-commerce companies that charge exorbitant fees, leading to higher purchase costs and limited options for small retailers. ONDC seeks to address this issue by offering an alternative platform that charges significantly lower fees, thereby enabling micro, small, and medium enterprises, as well as small traders, to participate in online marketplaces. 

The primary objective of ONDC is to transition from a platform-based model to an open network-based model. This shift is intended to increase market competition and reduce monopolies in the e-commerce sector. 

How does ONDC Work? 

The platform will serve as an access network that creates opportunities within the e-commerce industry. Local merchants will have the ability to connect with potential customers by showcasing their products and services on the search results of any app. By utilizing the ONDC integrated platform, consumers can easily shop for these products. This integration will enable consumers to view search results from multiple integrated platforms, such as Flipkart when searching for a product on a specific app like Amazon. However, this capability is only possible if current sellers and buyers have onboarded their data onto the platform. It will be intriguing to observe how both consumers and businesses react to this innovative approach.

ONDC is a step in the right direction to prevent monoliths

The Open Network for Digital Commerce (ONDC) uses open-source protocols to avoid monopolies in the electronic commerce ecosystem. In a platform-centered electronic commerce model, the Indian retail system’s backbone is at a disadvantage because most Kirana stores lack technological skills. ONDC will establish equitable competition by granting them access to processes and technologies usually used by large electronic commerce platforms. As more of these sellers go online, their digital visibility, and reach will expand throughout the electronic commerce network.

ONDC can assist small business owners in lowering their online business expenses by standardizing inventory management, order management, and fulfillment, along with other operations. Additionally, ONDC can control deep discounting, predatory pricing, collusion, and inventory-owning practices in e-commerce through open-source protocols for vendor match, product cataloging, and price discovery.

How ONDC Helps E-commerce And Logistics Business

ONDC offers several benefits to both e-commerce and logistics businesses by promoting interoperability, enhancing efficiency, and enabling growth. Here are some ways ONDC helps these sectors:

Interoperability and Integration: ONDC provides standardized APIs and data formats, allowing e-commerce platforms and logistics providers to seamlessly integrate and communicate with each other. This interoperability streamlines processes, reduces manual effort, and enables smooth data exchange between different systems. 

Expanded Reach and Access: ONDC creates a level playing field by enabling smaller e-commerce businesses and logistics providers to connect and transact with larger platforms and players. It offers them the opportunity to expand their reach, access a broader customer base, and offer their services to a wider audience. 

Enhanced Efficiency and Cost Savings: Through ONDC, e-commerce businesses can optimize their logistics operations by accessing a wide network of logistics providers. They can compare and select the most suitable logistics partners based on factors like price, delivery speed, and service quality. This leads to improved operational efficiency, cost savings, and faster order fulfillment, ultimately benefiting both e-commerce businesses and their customers.

Data Empowerment and Insights: ONDC emphasizes data empowerment, giving e-commerce and logistics businesses access to valuable insights. By leveraging standardized data formats and APIs, these businesses can gather and analyze data related to customer behavior, order patterns, and logistics performance.

Regulatory Simplification: ONDC aims to simplify regulatory compliance for e-commerce and logistics businesses. It provides a unified registration mechanism, reducing the administrative burden and ensuring compliance with relevant regulations. 

Features and Benefits of ONDC-

Features of ONDC:

1. Standardized APIs and data formats for seamless integration and data exchange.
2. Interoperability among e-commerce platforms, logistics providers, and other stakeholders.
3. Unified registration mechanism for simplified onboarding and regulatory compliance.
4. User-centric approach ensuring data empowerment and privacy.
5. Promotes fair competition and prevents the dominance of monolithic platforms.
6. Enables small and medium-sized enterprises (SMEs) to access and participate in the digital commerce ecosystem.
7. Facilitates collaboration and innovation among diverse players in the industry.
8. The emphasis on transparency, accountability, and trust in digital transactions.

Benefits of ONDC:

1. Enhanced market access and expanded customer reach for e-commerce businesses.
2. Streamlined logistics operations, improved efficiency, and cost savings.
3. Increased competitiveness for SMEs through access to a level playing field.
4. Data-driven insights for informed decision-making and optimization of supply chain processes.
5. Improved customer experience through seamless integration of logistics services.
6. Simplified regulatory compliance, reducing administrative burdens.
7. Fostered innovation and collaboration, driving industry growth.
8. Promotes transparency, accountability, and user privacy in the digital commerce ecosystem.

Why ONDC is crucial for India?

India has been rapidly adopting digital payments, particularly through the Unified Payments Interface (UPI), which has made it incredibly easy and convenient for customers to make cashless transactions. As a result, many Indians are increasingly opting for contactless payment modes, leading the nation to emerge as a leader in the field of digital payments. This trend has had a positive impact on the E-commerce sector in India, which has witnessed an impressive growth of 11.8% in digital payments.

One promising development in the field of digital payments is the Open Network for Digital Commerce (ONDC), a network for financial services that is set to offer exciting prospects to industry players. With such innovations on the horizon, India is poised to continue leading the way in the world of digital payments.

The Online National Database of Commerce or ONDC, as it is commonly known, has been making waves in the e-commerce industry. It is set to revolutionize the way apps function for both buyers and sellers. ONDC offers a unique platform where both buyers and sellers can come together, while still being hosted separately, unlike other apps in the market. The Ministry of Commerce has not yet decided to cap the commission charged on the platform, but there is a promise of low buying and selling prices, making it a highly attractive option for users.

Conclusion  

The ONDC initiative has received a great deal of attention and praise from both domestic and international investors. Despite the challenges that come with such a bold move, the Indian government has shown tremendous foresight and determination in launching this platform. The advantages of ONDC are undeniable, and it has the potential to revolutionize the e-commerce industry in India. With big names like PhonePe and Dunzo already on board, it is clear that this platform has a bright future ahead.