How is ONDC a game changer for e-commerce players in India?

The core objective of the Open Network or Digital Commerce (ONDC) is to achieve widespread adoption of e-commerce in India by enabling population-scale inclusion of all types and sizes of sellers, Shireesh Joshi, Chief Business Officer (CBO), ONDC, said while highlighting that the platform's first big impact is that it provides an opportunity to buyers, sellers and many solution providers.

In 2021, the Indian government established ONDC as a non-profit organisation to democratise digital commerce within the nation. Recently, ONDC expanded its services to boost B2B commerce.

In an exclusive interview with BestMediaInfo.com, Joshi explained how ONDC will bring about a revolutionary transformation in the country's e-commerce landscape. He elucidated the workings of the network, detailing its impact on both buyers and sellers. Moreover, he highlighted the network's potential to be a game-changer in both B2C and B2B e-commerce realms.

Joshi said that ONDC aims to attain population-scale penetration in India. Presently, the level of e-commerce penetration is relatively low, standing at approximately 6-7%. When ONDC was initially conceived, the penetration rate was even lower, below 2%. Despite the boost provided by the pandemic and subsequent lockdowns, after four years, the e-commerce penetration for consumer business remains at only 6-7%.

“It's only 1% or less for B2B so B2B is even less represented digitally. Just the way UPI has enabled much greater participation in financial transactions by enabling anybody and everybody to send and receive money, similarly ONDC aims to achieve the same for commerce for anybody to buy and sell,” he added.

Joshi highlighted that ONDC's first big impact is that it provides an opportunity to buyers, sellers and solution providers.

“Sellers can get their existing customers to shop online with them, build their reputation, build their strength and from there grow even further and acquire new customers. On top of that, more new opportunities will come. Innovation builds upon one thing after another. As the first set of sellers and their use cases get digitised, there will be ideas and opportunities that emerge because of this large-scale digitisation. Therefore you should expect that there will be new kinds of use cases and ecosystems,” he added.

Highlighting the factors that will incentivise consumers to utilise ONDC over existing e-commerce platforms, Joshi said, “Today, we have to go to specialist applications for specialist things. If I am going on a holiday, I'll book my flight on one app, I'll book my hotel on another app, and then book a taxi to the airport on a third app. For other services, l will probably have to do an internet search and find phone numbers and do it. So, we end up putting together things we need for a single occasion or a single use case through multiple places.”

“In our daily activities, we have come to accept the notion that different places require different actions. This presents one of the use cases we consider. Presently, there are numerous stores located in our vicinity that we are familiar with. However, when we transition to online platforms, we are often presented with unfamiliar stores from various locations. While these stores may be highly rated, we end up making purchases from completely unknown establishments. This highlights another opportunity available to consumers. For instance, if you were searching for food, you would not only find the restaurants you already know in your neighbourhood, but you would also discover additional local eateries that you may not have been aware of. This aspect contributes to exploring what is available in your surroundings. Consequently, today you might order food online, but tomorrow you could choose to visit and dine in at these restaurants. This creates an opportunity for sellers to attract more customers and allows consumers to make exciting discoveries,” explained Joshi.

Speaking about the growth potential for e-retail penetration in India, Joshi said, “Currently, we are at 7% penetration. India, particularly in physical and early-stage digital services, is an under-penetrated country with enormous opportunities for expansion. With only 6-7% penetration in B2C and 1% in B2B, there is a potential for huge growth in B2C and B2B. The prospects for e-retail expansion in India, therefore, are massive.”

Joshi shed light on the evolving perception of ONDC and its differentiation from players like Amazon and Flipkart. “They are a service whereas we are a network and those services can and should be on our network as well. It’s almost like comparing a taxi company with a highway. We are equivalent to a highway and we are an infrastructure on which any kind of vehicle can run. So ONDC is a commercial highway on which any kind of commercial operation can work. It's agnostic.”

Furthermore, Joshi highlighted that even major players like Flipkart's logistics arm, e-cart, are already utilising ONDC's network.

The platform has already attracted nearly 40,000 merchants for retail products and this number continues to grow rapidly daily. Additionally, there are over 50,000 providers of auto rickshaws and taxis as mobility services, bringing the total number of participants to around one lakh.

“In the first year of operation, ONDC received interest from approximately 3,000 organisations, and in the past two months alone, we have seen an additional 7,000 organisations expressing interest. These figures indicate a growing interest and participation in the ONDC platform,” Joshi added.

As of now, ONDC plans to implement two types of fees to sustain its long-term operations. Initially, while the network is small, the services are provided free of charge to avoid hindering user adoption. As the network and the need for core services grow, ONDC may introduce very nominal fees, Joshi stated.

“These fees would include a registry fee, similar to paying for a URL on the internet to maintain a presence on the network, and a small percentage fee on each transaction. The goal behind these fees is to ensure they are negligible for individual transactions but collectively generate a pool of funds when billions of transactions occur. As a non-profit organisation, ONDC's objective is not profit-making or declaring dividends but rather to cover its operational costs. Therefore, any charges implemented will adhere to the principle of being very small and solely aimed at sustaining the organisation,” he added.

Talking about the challenges, Joshi said the only challenge is time and comprehension. For example, today we take the internet for granted but the internet also did not grow to its current position like this. It took many years, many kinds of participants and many stages. ONDC will grow through the participation of multiple sectors, multiple types of organisations, and multiple use cases and will grow in stages. The challenge is for all of these to come one by one and make that viable and live on the network. That requires collective participation.

When asked about the key initiatives taken by MMA Global India to promote and support the implementation of ONDC, Joshi said MMA has been one of the early supporters and collaborators. They have held workshops for their members where people come and explain ONDC. So that has helped get the first level of awareness.

“They recently did a survey and based on that survey and a variety of inputs together, they published a playbook which is like a quick start guide to ONDC. MMA does not report to us but they had an interest in it so they took the step ahead to do all this. They have invested their time, energy, expertise and their network to build something useful,” he added.

While explaining how major e-commerce players in the MMA marketing ecosystem are reacting on ONDC, Joshi said that all of them have reacted positively and some of them are even live on the platform now. Many major technology giants have also given positive responses.

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