How ONDC is set to democratise and transform India's e-commerce landscape

Described as the next UPI (Unified Payments Interface) moment for Indian shoppers, the government’s Open Network Digital Commerce, or ONDC, which is undergoing initial trials, is believed to have the potential to transform India’s e-commerce landscape. The government both hopes and claims that, once it is implemented, almost every mom-and-pop store will gain an online presence, thus truly democratising online commerce in India.

However, the biggest challenge will be to ensure that the network, and the technology that supports it, is standardised, seamless and scalable. That is how the largest e-tailers, Amazon and Flipkart, have managed to attract sellers and buyers.

While the pilot is being conducted in five cities — Delhi, Bengaluru, Coimbatore, Bhopal and Shillong — ONDC is on course for a pan-India launch by August that will see it introduced across 100 cities.

“We launched our beta testing in five cities in the challenging domains of grocery and restaurants. It has helped us observe and appreciate the expectations of merchants and end-consumers and fine-tune the playbook for scaling,” Thampy Koshy, ONDC’s chief executive officer, told Business Standard. 

The seller apps that are part of the pilot are GoFrugal, GrowthFalcon, Seller App eSamudaay and Digiit. Paytm is the buyer app and Loadshare is the logistics company. 

Why is the government creating ONDC, when several startups have already been trying to get local businesses online? The answer is that all these initiatives have been working in silos, and while businesses do come online, they get restricted to users in that region. Also, ONDC is a network and not a platform. This in itself is a huge development, in so far as the way e-commerce businesses are built.

Boost for small business

Take the case of eSamudaay, which is piloting on ONDC. The idea behind eSamudaay is to give local businesses an online presence as well as bring them to buyers. So, if you want jaggery from southern Karnataka, then one can buy products from Samvidha Foods, a sustainable agritech company that has a presence on eSamudaay (which itself is headquartered in Manipal, Karnataka).

While a buyer can sign up on ONDC, and buy products of Samvidha Foods using eSamudaay, the payment can be made via UPI or Paytm, or any other digital format, and delivery partners like Dunzo or Loadshare can get the package across to you.  

In India, which has over 10 million small kirana stores, ONDC could be a game-changer, by getting them into the online space. The Covid-19 pandemic highlighted the need for a digital presence for these businesses, which were severely impacted by lockdowns.

Providing handholding support to small businesses, the ONDC application is set up as per its protocol and tested with ONDC’s sandbox. The first gateway was provided by Protean eGov Technologies, while Beacon provided the open-source support. 

In the prevailing model of e-commerce, the same entity can provide an end-to-end solution as a marketplace with both customer experience management and seller interface. Such end-to-end control offers significant influence to the platform providers, enabling them to prioritise customer satisfaction and allow refund or return of goods, if needed.

More options than before 

According to an internal presentation of ONDC accessed by Business Standard, the network would give buyers and sellers more options than the prevailing e-commerce ecosystem. It said that with the unbundling of the building blocks of the transaction — such as seller interface, buyer service and logistics — there is a possibility for different models to emerge.

Some buyer applications can offer the same services as existing e-commerce players. They can get refunds and make returns without any questions asked. If such an offer exists, its details and conditions would be shared with the customer, the internal presentation said. 

But then, there may be seller apps that might give products with no offer or no return/refund policy. In this case, too, a customer will be told about such a policy and only those who agree will be serviced. The important point is that the ONDC network gives sellers the opportunity to offer different price/service combinations and gives buyers different price/service preferences, and allows both to come together and transact in a transparent fashion, the presentation said.

Moreover, as a community manager, the network aims to develop an enhanced set of checks and balances to offer a better experience for both the buyer and the seller. For example, ONDC will onboard buyer and seller apps only after establishing their credentials.

It will also get a commitment from the sellers that they will follow the policies of ONDC, which include a credibility score for platforms that are meant to act as a strong check on quality and service. ONDC is also establishing a framework and platform for online dispute resolution, following the guidance issued by NITI Aayog.

“In a few months, we should see the execution move towards many more cities and partners, both for demand generation as well as fulfillment of demand from small businesses. There is also very good participation from many top companies across India who have bought into the government vision of the future of retail,” said a source who spoke on the condition of anonymity.

He added, “While consumers move online and expect world-class service with best prices and lightning-fast delivery, the vision can only be fulfilled with a level playing field where brick and mortar mom-and-pop retailers, wholesalers and distributors are able to compete with giants like Amazon and Flipkart on the same digital platform. This will be a true democratisation of digital retail or e-commerce as we know it.”