Retail growth slows on ONDC as platform caps financial incentives

Logistics and mobility segments grow on Open Network for Digital Commerce, but retail segment - which includes e-commerce, grocery, and food delivery - slows down

The government-backed Open Network for Digital Commerce (ONDC) has surpassed 200 million total orders across retail, logistics, and mobility. However, its retail segment, which includes e-commerce, grocery, and food delivery, has witnessed a steady decline in orders as the network gradually reduces financial incentives to sellers and customers, according to a report by The Economic Times.

 

Launched in 2022, ONDC currently has 764,000 sellers and service providers across 616 cities. It hosts 13 domains, including food and beverage, grocery, fashion, electronics, and financial services.

 

Retail transactions on ONDC peaked at 6.5 million orders in October 2024 but fell to 4.6 million in February 2025, reflecting the impact of shrinking subsidies.

 

 

ONDC caps financial incentives

The network had initially provided financial incentives to onboard sellers, drive transactions, and fund customer discounts, but the monthly cap on these incentives has been cut from ₹3 crore in July 2024 to around ₹30 lakh now.

 

The reduction in incentives has particularly affected smaller players such as Magicpin, Paytm, and Ola Consumer, which previously relied on these subsidies to offer customer discounts. Additionally, major platforms like PhonePe’s pincode exited ONDC last year, opting instead to develop their own independent services. Paytm, an early advocate of ONDC, has also removed the network’s shopping icon from its app’s homepage as it refocuses on payments, lending, and wealth management.

 

ONDC to introduce service fee

Starting April 2025, ONDC will introduce a service fee of ₹1.5 per transaction on orders exceeding ₹250 through seller apps, the report said. Industry insiders note that ONDC’s earlier model of significant incentives effectively acted as a subsidy for network participants, but as these have declined, many sellers have scaled back discounts and offers to customers.

 

ONDC mobility, logistics sector grow

Even as retail orders cool down, the mobility segment has seen growth in terms of transaction volumes. In February 2025, ONDC logged 8.1 million mobility transactions, up 47 per cent from 5.5 million in October 2024.

 

Similarly, the logistics sector has also witnessed growth after onboarding players such as Loadshare, Ola, and Shadowfax, ONDC’s logistics vertical logged two million orders in February, a sharp rise compared to 35,000 orders in April 2024 when the segment was launched. Company executives remain optimistic that numbers will rebound.