Open network for digital commerce

News: The government of India announced the launch of the pilot phase of open network for digital commerce (ONDC) in five cities in late April.

The aim was to “democratise” the country’s fast growing digital e-commerce space that is currently dominated by the two U.S.-headquartered firms — Amazon and Walmart.

What is ONDC?

As per the strategy paper on ONDC, it is a not-for-profit organisation that will offer a network to enable local digital commerce stores across industries to be discovered and engaged by any network-enabled applications.

It is neither an aggregator application nor a hosting platform, and all existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network.

The ONDC aims to enable buying of products from all participating e-commerce platforms by consumers through a single platform.

– Currently, a buyer needs to go to Amazon, for example, to buy a product from a seller on Amazon. Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).

The ONDC model is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments.

What led to formation of ONDC?

The Department for Promotion of Industry and Internal Trade (DPIIT), under Ministry of Commerce and Industries, conducted an outreach during the outbreak of the COVID-19 pandemic to understand its impact on small sellers and hyperlocal supply chain functioning.

It found that there is a huge disconnect between the scale of online demand and the ability of the local retail ecosystem to participate. Following this, consultations were held with multiple ministries and industry experts and “ONDC was envisioned to revolutionise digital commerce in India,” as per the strategy paper.

What is the current status?

Presently, ONDC is in its pilot stage in five cities — Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore — with a target of onboarding around 150 retailers.

The government has also constituted an advisory council to analyse the potential of ONDC as a concept and to advise the government on measures needed to accelerate its adoption.

Over the next five years, the ONDC expects to bring on board 90 crore users and 12 lakh sellers on the network.

What are the likely benefits of ONDC?

The ONDC will standardise operations like cataloguing, inventory management, order management and order fulfilment. Hence, it’ll be making it simpler and easier for small businesses to be discoverable over the network and conduct business.

However, experts have pointed out some likely potential issues such as getting an enough number of e-commerce platforms to sign up, along with issues related to customer service and payment integration.

Source: This post is based on the article “Open network for digital commerce” published in The Hindu on 23rd June 22.