ONDC: The New Frontier in India’s Digital Commerce Landscape

Understanding India's e-commerce landscape provides important context for initiatives like the Open Network for Digital Commerce (ONDC).

Here’s an overview of India's e-commerce landscape and its expected growth trajectory:

Current E-Commerce Landscape in India

Market Size and Growth:

• India’s e-commerce market has been experiencing rapid growth. As of 2023, it was valued at over $70 billion and is expected to continue expanding. Projections suggest that it could reach $200 billion by 2027.
• The sector has been growing at a compound annual growth rate (CAGR) of around 20-25%.

Key Segments:

• Retail: This is the largest segment, including categories such as fashion, electronics, and groceries.
• Travel and Hospitality: Booking platforms for flights, hotels, and travel services also represent a significant portion of the market.
• Digital Services: This includes streaming services, online education, and other subscription-based models.

What is ONDC?

ONDC stands for Open Network for Digital Commerce, a pioneering initiative by the Indian government aimed at creating an open, inclusive, and interoperable digital commerce ecosystem. Unlike traditional e-commerce platforms, ONDC is not a single marketplace but a framework that connects buyers and sellers across various platforms through standardised protocols. The initiative seeks to expand the opportunities in the digital commerce space by reducing entry barriers for businesses and promoting fair competition.

Read more at: https://ondc.org/

A New Paradigm for Digital Marketplaces

Traditional digital marketplaces have long dominated the online commerce space, particularly in the food delivery sector. These platforms have built extensive networks of consumers and vendors but have often been criticised for their high commission fees and restrictive practices. Here’s how ONDC is changing the game:

1. Lowering Commission Fees

One of the most significant ways ONDC is challenging established players is through its approach to commission fees. Traditional food delivery platforms typically charge high commissions on each order, which can range from 15% to 30%. These fees place a considerable financial burden on restaurants, especially small and medium-sized enterprises (SMEs).

ONDC’s approach is fundamentally different. By providing a standardised, open network, ONDC aims to reduce commission rates to more reasonable levels, potentially as low as 5% to 10%. This shift promises to significantly lower the operational costs for vendors, giving smaller players the chance to compete on a more level playing field.

2. Promoting Fair Competition

ONDC is designed to break the monopolistic hold of a few major players in the market. By providing a common infrastructure that all participants can use, ONDC ensures that no single company has undue influence over the market. This open and transparent system fosters a more competitive environment where businesses of all sizes can thrive.

For example, a small, local restaurant can now compete with larger chains on equal footing without having to pay exorbitant commissions or invest in costly technology. This level playing field encourages innovation and offers consumers a broader range of choices.

3. Expanding Market Reach

ONDC’s open network model allows businesses to reach customers across various digital platforms. Unlike traditional marketplaces, where businesses are locked into a single platform, ONDC enables vendors to connect with customers through multiple interfaces. This increased visibility can lead to greater sales opportunities for businesses and a more diverse shopping experience for consumers.

The Impact on Consumers

The benefits of ONDC extend well beyond vendors. Consumers stand to gain significantly from this new framework:

• Lower Prices: With reduced commission fees, vendors have the flexibility to offer better prices and more promotions.
• Greater Choice: The open network model increases the number of available vendors and products, offering consumers more options.
• Improved Services: Competition will drive vendors to enhance their service quality and customer experience to stand out in the market.

Order Volume & Categories Expansion

As per sources, ONDC facilitates 60,000 orders per day in the food domain, capturing 3% of the total order volumes managed by Swiggy and Zomato across India individually who receive 20 lakh orders each. Its total order volumes touched around 4 lakh orders in a day which includes mobility bookings as well.

Read more at: https://economictimes.indiatimes.com/tech/tech-bytes/ondc-corners-3-of-order-volumes-of-swiggy-zomato/articleshow/111842031.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Open Network for Digital Commerce (ONDC) is designed to create a more inclusive and competitive digital commerce ecosystem. Beyond food and beverages, ONDC's focus on various other domains aims to cover a wide range of consumer needs and promote a diverse marketplace such as Grocery, Fashion & Footwear, Electronics, Beauty & Personal Care, Mobility, Financial services, Agriculture.

Read more at: https://ondc.org/

Conclusion

ONDC offers a transformative approach to digital commerce with its open, interoperable network and potential for lower costs and broader market reach. However, it faces challenges in implementation, adoption, and ensuring a consistent consumer experience.

Existing Platforms like Zomato, Swiggy, Amazon, Flipkart are well-established with robust technology and extensive networks. They offer a high level of convenience and efficiency but operate within more closed ecosystems with higher costs for vendors and consumers.

The success of ONDC in challenging these established players will depend on its ability to effectively implement its vision, attract a diverse range of vendors and users, and provide a seamless, competitive alternative.

What are your thoughts on ONDC and its potential to disrupt the current market dynamics? Share your views in the comments below!