ONDC: New World of Digital Transformation for Digital Commerce Driven India -TIDES Newsletter - Edition 17

Introduction

The ONDC (Open Network for Digital Commerce) is a new initiative by the Government of India aimed at creating a digital infrastructure for the country's e-commerce sector. While it is difficult to predict the future success of any initiative with certainty, there are several factors that suggest ONDC has the potential to be a success like UPI and UIDAI/Aadhaar.

Reasoning

Firstly, UPI and Aadhaar have already laid the groundwork for digital infrastructure in India, and the success of these initiatives has shown that the Indian government is capable of implementing large-scale digital projects. This suggests that the government has the necessary expertise and experience to successfully implement ONDC.

Secondly, ONDC aims to create a level playing field for all e-commerce players in the country, which could help to promote competition and innovation in the sector. This could potentially lead to the growth of a vibrant e-commerce ecosystem in India.

Thirdly, the government has already announced plans to work with industry stakeholders to develop ONDC, which suggests that it is taking a collaborative approach to the initiative. This could help to ensure that the needs of all stakeholders are taken into account and that ONDC is developed in a way that is sustainable and effective.

Overall, while it is difficult to predict the future success of any initiative, the factors discussed above suggest that ONDC has the potential to be a success like UPI and Aadhaar. However, it will ultimately depend on how effectively it is implemented and how well it meets the needs of all stakeholders in the e-commerce sector.

Forecasted Benefits

ONDC (Open Network for Digital Commerce) is expected to bring significant benefits to end customers in India. Here are some potential use cases for ONDC:

1. Seamless payments: With ONDC, customers can expect to make seamless and secure payments for their online purchases. The platform is expected to support a range of payment options, including credit and debit cards, net banking, and digital wallets.
2. Access to a wider range of products: ONDC could help customers to access a wider range of products and services from different e-commerce platforms. This could include everything from groceries and household items to electronics and fashion.
3. Better deals and discounts: ONDC could help customers to find better deals and discounts on their online purchases. By providing a level playing field for all e-commerce players, ONDC could help to promote competition and drive prices down, which could benefit customers.
4. Improved customer service: ONDC could also help to improve customer service by providing customers with access to a range of support services, including order tracking, returns and refunds, and customer feedback. This could help to ensure that customers have a positive experience when shopping online.
5. Faster and more reliable delivery: ONDC is expected to provide a reliable logistics infrastructure that can help to ensure fast and efficient delivery of products to customers. This could help to reduce delivery times and ensure that customers receive their products on time.

Strong Industry Partnership

The initiative is currently live and 100s of businesses are already using it. Across 85+ cities in India, an order volume of around 7000 is getting transacted and it will go beyond millions and billions of transactions in the upcoming years. Around 350+ brands are working across sectors to get onboarded to ONDC.

However, the government has announced plans to work with industry stakeholders to develop ONDC, and several companies have expressed interest in using the platform once it becomes available. Some of these companies include:

1. Flipkart: Flipkart is one of India's largest e-commerce platforms and has expressed interest in using ONDC to provide a level playing field for all e-commerce players in the country.
2. Amazon: Amazon is another major player in the Indian e-commerce market and has also expressed interest in using ONDC to promote competition and innovation in the sector.
3. Reliance Industries: Reliance Industries is one of India's largest conglomerates and has a significant presence in the e-commerce sector through its subsidiary JioMart. The company has expressed interest in using ONDC to further expand its e-commerce operations.
4. Paytm: Paytm is a leading digital payments company in India and has expressed interest in using ONDC to provide a seamless payment experience for its customers.

How it will help small players and MSMEs

ONDC (Open Network for Digital Commerce) has the potential to help small businesses in several ways. Here are some of the key benefits that ONDC could provide to small businesses:

1. Access to a level playing field: One of the main advantages of ONDC is that it could create a level playing field for all players in the e-commerce sector, regardless of their size. This means that small businesses could compete with larger players on an equal footing, which could help to promote competition and innovation in the sector.
2. Lower costs: ONDC could help to reduce the costs of doing business for small businesses by providing them with access to digital infrastructure and services at a lower cost. This could include services such as payments, logistics, and customer support, which can be expensive for small businesses to set up and manage on their own.
3. Increased reach: ONDC could also help small businesses to expand their reach by providing them with access to a larger customer base. By leveraging the digital infrastructure provided by ONDC, small businesses could potentially reach customers across the country and even internationally, which could help to grow their business.
4. Improved efficiency: ONDC could help to improve the efficiency of small businesses by providing them with access to digital tools and services that can help to streamline their operations. For example, ONDC could provide small businesses with access to inventory management systems, shipping solutions, and other tools that can help to reduce costs and increase efficiency.

ONDC (Open Network for Digital Commerce) can provide significant benefits to neighbourhood corner stores, also known as kiranas, by providing them with access to digital infrastructure and services that can help to streamline their operations and increase their reach. Here are some examples of how a neighbourhood corner store could use ONDC:

1. Digital payments: ONDC could provide neighbourhood corner stores with access to digital payment options, allowing them to accept payments through various digital modes, such as credit and debit cards, net banking, and digital wallets. This could help to reduce cash handling, improve accounting and inventory management, and provide customers with a more convenient payment experience.
2. Inventory management: ONDC could provide neighborhood corner stores with access to digital tools for inventory management, such as tracking of stock levels, automatic order placement, and stock alerts. This could help to reduce stock-outs and overstocking, optimize inventory, and improve customer satisfaction.
3. Online presence: ONDC could help neighborhood corner stores to establish an online presence by providing them with a digital storefront, enabling them to sell their products online, and reach a wider customer base. This could help to increase their visibility and sales, and also provide customers with more convenient access to their products.
4. Access to suppliers: ONDC could provide neighborhood corner stores with access to a wider network of suppliers, enabling them to source products at competitive prices, and offer a wider range of products to their customers. This could help to increase their margins and provide customers with more variety.
5. Logistics support: ONDC could provide neighbourhood corner stores with access to reliable logistics infrastructure, enabling them to deliver their products to customers efficiently and on time. This could help to improve customer satisfaction and enable neighbourhood corner stores to compete with larger e-commerce players.

Overall, ONDC could provide significant benefits to neighbourhood corner stores by providing them with access to digital tools and services that can help to streamline their operations, increase their reach, and improve their competitiveness in the market.

While ONDC has the potential to be a game-changer for the e-commerce sector in India, there are several challenges that need to be overcome to ensure its success. Some of these challenges include:

1. Resistance from existing players: The existing e-commerce players may resist the implementation of ONDC as it would create a level playing field for all players, and they may see this as a threat to their market dominance.
2. Technical challenges: Developing a robust and secure digital infrastructure for ONDC will be a significant technical challenge. There will be a need for large-scale investment in technology and a need to ensure that the infrastructure is scalable and can handle large volumes of transactions.
3. Ensuring privacy and security: With the increase in the use of digital infrastructure for e-commerce, ensuring the privacy and security of user data is a critical challenge that needs to be addressed.
4. Collaboration with multiple stakeholders: ONDC is an initiative that involves collaboration with multiple stakeholders, including the government, e-commerce players, and payment service providers. Ensuring effective collaboration among these stakeholders will be critical to the success of the initiative.
5. Adoption by consumers: Finally, the success of ONDC will depend on the adoption of the platform by consumers. Ensuring that consumers understand the benefits of using ONDC and are willing to adopt it will be essential to its success.

Overall, addressing these challenges will be critical to ensuring the success of ONDC, and the government will need to work closely with all stakeholders to address these issues effectively.

A comparison with UPI and UIDAI growth

UPI (Unified Payments Interface) was launched in August 2016, so there is no data available for the years 2014 and 2015. However, here is the year-on-year growth trajectory of UPI usage from 2016 to 2020:

1. In 2016-17, UPI processed 0.07 billion transactions worth Rs. 13.14 billion.
2. In 2017-18, UPI processed 0.915 billion transactions worth Rs. 1,09,641.14 crore. (1.09 Trillion Rs or ~$0.01341 Trillion)
3. In 2018-19, UPI processed 5.35 billion transactions worth Rs. 8,76,041.92 crore. (8.76 Trillion Rs or ~$0.11 Trillion)
4. In 2019-20, UPI processed 10.78 billion transactions worth Rs. 18,36,498.36 crore. (18.3 Trillion Rs or ~$0.25 Trillion)
5. In 2020-21, UPI processed 22.81 billion transactions worth Rs. 41,00,369.97 crore. (41 Trillion Rs or ~$0.5 Trillion)

As for Aadhaar registrations, here is the year-on-year growth trajectory:

1. As of December 2012, Aadhaar had enrolled 20 crore (200 Million) people.
2. As of December 2013, Aadhaar had enrolled 56 crore (560 Million)people.
3. As of December 2014, Aadhaar had enrolled 73 crore (730 Million)people.
4. As of December 2015, Aadhaar had enrolled 98 crore (980 Million)people.
5. As of December 2016, Aadhaar had enrolled 113 crore (1.13 Billion) people.
6. As of December 2017, Aadhaar had enrolled 119 crore (1.19 Billion) people.
7. As of December 2018, Aadhaar had enrolled 122 crore (1.22 Billion) people.
8. As of December 2019, Aadhaar had enrolled 128 crore (1.28 Billion) people.
9. As of December 2020, Aadhaar had enrolled 132 crore (1.32 Billion) people.

It is worth noting that while the growth of UPI and Aadhaar has been impressive, there have also been some concerns around issues such as privacy and security. The government has taken steps to address these concerns, but it remains an ongoing challenge.

Some References

• ONDC official website: https://ondc.in/ - This is the official website of ONDC, where you can find information about the initiative, its objectives, and its progress.
• ONDC aims at 5-fold rise in India's digital consumption to $340 billion: McKinsey (moneycontrol.com)

The government’s e-commerce project, the Open Network for Digital Commerce (ONDC), has the potential to increase India’s digital consumption by 5X to around $340 billion by 2030, consulting firm McKinsey said in a report. Along with propelling the digital products and services consumption from $60-$70 billion in FY22 to $320-$340 billion by FY30, the ONDC will also help push up the number of digital transacting consumers by 3-4X from 165-190 million to 450-500 million users during the same period.

• McKinsey report on ONDC: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/open-network-for-digital-commerce-in-india-a-new-chapter-for-the-countrys-e-commerce-sector - This is a report by McKinsey & Company on ONDC, which provides an overview of the initiative, its potential impact, and the challenges that need to be addressed.
• Press release by the Ministry of Commerce & Industry: https://pib.gov.in/PressReleasePage.aspx?PRID=1767366 - This is a press release by the Ministry of Commerce & Industry, which provides details about the launch of ONDC and its objectives.
• Business Standard article on ONDC: https://www.business-standard.com/article/economy-policy/what-is-ondc-and-why-india-s-answer-to-big-tech-s-e-commerce-dominance-matters-122092700488_1.html - This is an article by Business Standard that provides an overview of ONDC, its objectives, and its potential impact.
• Livemint article on ONDC: https://www.livemint.com/industry/retail/open-network-for-digital-commerce-decoded-11630470703480.html - This is an article by Livemint that provides a detailed explanation of ONDC, including its features, benefits, and the challenges that need to be addressed.

Conclusion

In conclusion, the Open Network for Digital Commerce (ONDC) has the potential to revolutionize the e-commerce sector in India by providing a digital infrastructure and services to small businesses, including neighbourhood corner stores. By offering access to digital payments, inventory management, online presence, suppliers, and logistics support, ONDC can help small businesses improve their operations, increase their reach, and compete with larger players in the market. While there are some challenges to be addressed, the initiative has the support of the Indian government and industry experts and is poised to drive significant growth in the e-commerce sector. As we continue to navigate the post-pandemic world, ONDC could play a critical role in enabling small businesses to recover and thrive in the digital economy.

I hope you liked the article. Your comments are welcome!

Note: The author took help from ChatGPT for rapid collation of summary and statistics

What do you think?

#WhatInspiresMe?#TIDES?#KRPoints??#technology?#krpoints #ONDC #DigitalCommerce #EcommerceIndia #SmallBusinessIndia #Kiranas #DigitalPayments #InventoryManagement #LogisticsSupport #SupplyChainManagement #RetailTechnology #DigitalTransformation #RetailInnovation #RetailStrategy #McKinsey #GovernmentInitiatives

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