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ONDC : Open Network for Digital Commerce

Updated: Jun 8, 2023

What is ONDC ?

The Open Network for Digital Commerce (ONDC) is a network built on open protocol that enables local commerce across segments to be identified and engaged by any network-enabled application, including mobility, shopping, food order and delivery, hotel booking, and travel, among others.

The platform promises to open up new opportunities, break up digital monopolies, and let micro, small, and medium-sized businesses and independent merchants join online marketplaces. It is an initiative of the Ministry of Commerce and Industry's Department for Promotion of Industry and Internal Trade (DPIIT).

In April 2022, the Department for Promotion of Industry and Internal Trade (DPIIT) initiated a test run of ONDC in five cities: Delhi-NCR, Bengaluru, Coimbatore, Bhopal, and Shillong, with plans to add 150 merchants in the pilot phase.

Aim of ONDC

According to an ONDC strategy paper released earlier this year, 1.2 crore hyperlocal Kirana retailers make up the majority of the retail market in India and account for 80% of it.

Even though the COVID-19 pandemic gave e-commerce in India a massive benefit, the benefits have mostly gone to the major players like Amazon and Walmart's Flipkart, which together own more than 60% of the industry.

The goal of ONDC is to ease the transition from an operator-driven, monolithic, platform-centric system to a facilitator-driven, interoperable, decentralised network so that small sellers can be free of such limitations.

According to Reuters, ONDC aims to raise the prevalence of e-commerce from around 8% to 25% over the next two years. It also plans to sign up 90 crore buyers and 12 lakh sellers over the next five years, while increasing gross merchandise value by $48 billion.

Features of ONDC

A UPI for e-commerce, ONDC aims to democratise electronic or digital trade by shifting it from a platform-centric model to an open-network. Merchants will be able to save their data through ONDC in order to reach customers and establish credit histories.

The proposed government-backed platform aims to level the playing field for online retail giants like Amazon and Flipkart as well as offline merchants who have been complaining about the unfair business practices of these e-tailers. The platform will also be in compliance with the upcoming Personal Data Protection Bill as well as the Information Technology Act of 2000.

The ONDC system will make it feasible for buyers and sellers to trade over an open network independent of the platform or application they use. By dissolving silos and creating a single network to spur innovation and scale, it will also enable businesses across all industries, from retail to food to mobility.

The new framework seeks to support open networks created using open standards and open network protocols that are independent of any particular platform.

It is expected to digitalize the entire value chain, standardise operations, encourage supplier inclusion, increase logistics efficiency, and improve value for customers.

How does ONDC work ?

  1. Connecting buyers to the network: Developing applications or websites that users can use to browse and search for products available on the ONDC network. Currently, only Paytm has created a buyer-side interface.

  2. Connecting sellers to the network: Creating software that will provide vendors access to the ONDC network, allowing them to list their goods for sale and accept orders. Additionally, these facilitators are responsible for promoting ONDC to retailers.

  3. Gateway: Applications that, based on search keywords, broadcast the search request received from buyer-side apps to seller-side apps listed on the ONDC registry.

  4. Technology services: Providing software and other technical support for the other three roles.

ONDC participants

The following participants offer seller, buyer interface and logistics on the ONDC platform:

PayTM, Meesho, Kotak, craftsvilla, EKart logistics, Dunzo, IDFC, Mystore, Phonepe, Shiprocket, Bizom, Digiit, eSamudaay, Gofrugal Technologies, Growth Falcons, and SellerApp, eVitalrx, Ushop, uEngage, ITC Store, sellerapp, Addble, Petpooja, Snapdeal, Sonata and Delhivery.

According to Union Minister Piyush Goyal, the network's more than 2,200 transactions have already been made possible via the state-sponsored Open Network for Digital Commerce (ONDC).

Chief Executive Officer (CEO) T Koshy of ONDC chimed in and stated that the order fulfilment rate of the aforementioned 2,200 transactions ranged from 60% to 80%. He stated that after breaking down the data, 70% of these orders were for groceries and the other 30% were for food.

As many as 22 pincodes in Bengaluru are currently operational on the network, according to Koshy, who also stated that there are currently 21 active ONDC network participants. Of these, three were logistics firms, three were purportedly buyer apps, and the remaining ones were on the seller side.

By the end of the year, the portal also intends to add sections for electronics, home decor, and fashion and apparel.


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