Predicting the ONDC narrative

ONDC is the e-commerce equivalent of UPI ?

• Penetration of online B2B commerce is only 2% in India (2022)
• Share of online B2B sales in China was about 25%, followed by the UK (20%), and the US (18%)

India's e-commerce market is estimated to be

→ $80 billion in 2022 and projected to be ~$200 billion by 2027 respectively.

→ Growing at a CAGR of 20%-22%.

The number of internet connections in 2021 increased significantly to 830 million, driven by the ‘Digital India’ program (IBEF )

Capitalising on this ONDC is trying to revolutionise the way people shop in India. This new hybrid retail model combines the convenience of online shopping and the immediacy of traditional brick-and-mortar stores, with a few additional benefits thrown in.

What is ONDC?

Open Network for Digital Commerce (ONDC ) is a government-led initiative that aims to create a common digital infrastructure for various stakeholders in the digital commerce ecosystem, including merchants, payment gateways, logistics providers, and regulators.

The platform seeks to provide an open, interoperable, and secure network that enables seamless integration of various digital commerce applications and services.

To share an example of something similar to ONDC: Have a look at Trivago’s aggregation backend, similarly ONDC is a large scale aggregator that possibly integrates all the industries within it.

e.g. Trivago

How does ONDC work?

The ONDC is a middleware layer that enables interoperability among different digital commerce platforms. It provides a standardized interface for various digital commerce platforms to interact with each other seamlessly.

ONDC provides a common language for digital commerce transactions, which will make it easier for merchants and consumers to transact with each other.

How ONDC can be a potential game changer :

A stride towards averting monopolies

ONDC will create fair competition by providing small businesses with access to processes and technologies typically deployed by large e-commerce platforms.

• Increased Visibility → Market expansion → Increased Revenue: Heightened visibility allowing to reach a broader audience, increasing your chances of securing more sales.
• Higher-Quality Traffic: Through ONDC the business gets customer in the advanced stage of decision-making process, where they have already decided to purchase. (difference with generic google listings). This results in a more qualified and conversion-ready audience.
• Enhanced customer engagement → Improved customer insights: Interactions across online and offline channels along with data from both channels to improve product offerings and marketing strategies
• Transaction based model → Lowered costs → Increased profitability: Reduced expenses: CAC, logistics from online stores / commission from established e-commerce players. (FKT, AMZ etc.)

For Sellers :

(source )

ONDC can cultivate an inclusive e-commerce ecosystem

ONDC aspires to transform the e-commerce landscape from an operator-centric platform-focused model to a facilitator-driven, interoperable decentralized network. This transformation will provide equal opportunities upon all stakeholders.

For sellers ONDC has unbundled offerings a large e-commerce player provides and is trying to provide them through various providers onboarded on the network itself.

Possible future:

The presence of local businesses in e-commerce could surge.

ONDC is slated for rollout in 75–100 towns across India this year. Over the next five years, it targets enlisting 900 million buyers and 1.2 million sellers, generating $48 billion in gross merchandise value (GMV). In 2020, the GMV for the Indian e-tail sector stood at $38 billion. Projections estimate it will reach $140 billion in 2025 and $350 billion in 2030.

• ONDC can shift the advertising model from impressions to transactions lowering CAC. Increased visibility of demand can also reduce logistical costs, which can account for as much as 10-15% of GMV.
• With access to customer data, businesses will: Gain the ability to derive actionable insights for effectively marketing their products across digital platforms. Enabling businesses to engage and have loyal customers
• ONDC could expand its influence globally much like UPI currently Offering advanced standardization framework for the global e-commerce ecosystem Even make cross-border trade easier