Can open networks for digital commerce take on Amazon & Walmart?
The govt-backed open network for digital commerce (ONDC) was launched last week in select cities. Will it emerge as a challenger to the ecommerce giants? Will it benefit small sellers and the public?
Bhaswar Kumar New Delhi
According to Arvind Gupta, the head of Digital India Foundation, a public platform is something that is built around the concept of openness, standard and trust. It is backed by the government and not by any private entity.
There are about nine platforms with billion plus users each across the world. Five of them are in the US and four in China. And none of them are government backed. With Aadhaar, India built the world’s first and largest public digital platform. It is now being used in banking, KYC and several other fields. It led to some sort of digital revolution, like the birth of UPI which ended the duopoly of two international operators in India. It allows you to send or receive money irrespective of the payment platforms on which you are registered.
And now, Nandan Nilekani -- who helped the government create the biometric identification for almost 1.4 billion people after co-founding Infosys -- believes that Open Network for Digital Commerce or ONDC meets all the criteria for the next revolution and disruption in India. It has the government’s commitment, the market condition is rife and there is a massive shift to e-commerce after the pandemic.
ONDC seeks to level the playing field for small merchants in the country’s fragmented but fast-growing $1 trillion retail market. While addressing a conference, Nilekani recently said that ONDC is very similar to National Payments Corporation of India (NPCI) -- which is also a non-profit section 8 company.
Giving some details, Nilekani said that ONDC will put in place the ground rules, the network participation rules, the obligation and dispute resolution. It will have set of top class protocols to govern the online trade. It will lead the country towards transaction-led internet from the western model of advertisement-led internet.
The small-scale implementation of ONDC kicked off on Friday last week. This pilot is being conducted across Delhi, Bengaluru, Coimbatore, Bhopal and Shillong. It will be later launched in 100 cities over a period of six months.
ONDC will set protocols in critical areas like price discovery, vendor match, and cataloguing, ostensibly in open source. So, you ideally get an open network with open specifications and protocols. Clearly, there's a lot of stress on the ‘open’ part.
Although, not everyone agrees on calling ONDC a public good either.
All of this is in the service of one goal -- to change the e-commerce market’s fundamental structure by moving from the current platform-centric model to an open-network model.
For instance, leather jacket seller Karan is only registered on Amazon. Meanwhile, Arjun, a prospective buyer who has heard of Karan's quality jackets, is registered on Flipkart alone. Arjun will first look for Karan on Flipkart. After failing to find him there, Arjun will have to register for an Amazon account. However, once ONDC is implemented, Arjun can directly purchase Karan's leather jackets without registering on Amazon.
Why is this such a big deal, though? There's no prohibition on Karan also registering as a Flipkart seller. Meanwhile, buyers shop across platforms as a matter of routine. With an account only on one e-commerce site, Arjun is probably an outlier.
Clearly, the real benefit would come in the form of future offerings that could be built on top of this platform-agnostic approach.
Once ONDC gets implemented, all e-commerce companies and online businesses in India will have to operate using the same processes and standards, as in the case of android-based mobile devices from different brands.
According to reports, this could mean a complete revamp of systems for e-commerce players. They could end up losing control over their user interface, and, even more importantly, consumer behaviour insights. Basically, their competitive advantages. All of this amounts to a far-reaching and difficult reconfiguration.
ONDC’s may also erode Amazon and Walmart-owned Flipkart’s online domination, which has alarmed small merchants and the millions of kirana stores that form India’s retail backbone. The two global giants have captured 80 per cent of India's online retail market with the help of aggressive discounts and promotion of preferred sellers.
That's easier said than done. Ask yourself, why do Amazon and Flipkart dominate the market? Well, both merchants and buyers flock to their platforms because of their tested technology. Both of them have invested huge sums in everything from smooth returns and refunds experience for buyers to merchant-onboarding processes.
However, despite the challenges involved, the government's backing will give ONDC an outsized advantage.
So, ONDC’s success depends on how the government and the panel having Nilekani, Quality Control of India Chairman Adil Zainulbhai and National Health Authority CEO RS Sharma take it forward and build a seamless platform which is user-friendly and capable of giving a better shopping environment than Amazon and Flipkart. And last but not least, a swift dispute resolution.
First Published: May 02 2022 | 7:00 AM IST