As the festive season draws near, the Open Network for Digital Commerce (ONDC) is expected to witness an uptick in overall orders with a soaring adoption rate, resulting in promising returns on investment (ROI), industry players said.
However, some hold the belief that being in its early stage, the platform may not experience a significant takeoff during festive seasons. This is primarily because it is currently more focused on small ticket item purchases.
Numerous brands, including Craftsvilla, IDFC (Firstforward), Kotak, Magicpin, PayTM, Boat, Marico, etc., are active players on ONDC. These brands play diverse roles within the platform, with some operating as buyer network participants, some as seller network participants and others engaging in both roles.
Shashank Rathore, Vice President, E-commerce, Interactive Avenues (the digital arm of IPG Mediabrands India), said that ONDC is promoting the participation of small retailers in the supply chain, which could provide brands with more localised and specific information.
“In contrast to conventional e-commerce, where modern and general trade might face disruptions, ONDC aims to support these channels by offering data around product performance, customer behaviour analysis and demand forecasting at the pin code level. With this, brands can even leverage local festive moments,” he added.
Rathore also spoke about how brands are betting on ONDC to reach their target audience.
Talking about projections on the expected increase in sales during the festive period compared to non-festive months, Rathore said that within just four weeks of joining ONDC, magicpin experienced remarkable growth seeing a surge in daily orders from 100 to 10,000. The momentum continued and in the fifth week, the orders further increased to an impressive 20,000 per day.
“This represented an incredible 200-fold increase in ONDC's daily orders through magicpin. In total, ONDC orders are now reaching the 40,000 per day mark. Based on historical observations, regular commerce destinations typically witness 7 to 10 times growth during festive months. Assuming a similar growth rate and a festive multiplier of 7 times, it is anticipated that overall orders during the festive season will touch 4 lakh per day,” Rathore added.
A Dunzo spokesperson said, "Dunzo4Business, a longstanding logistics partner of the ONDC Network, has been an integral part of its journey since inception. With the festive season approaching, we anticipate a surge in orders on ONDC. As a logistics provider, we stay prepared to scale up with additional fleet and resources on the ground as needed."
However, Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital said that these are still very early days as ONDC has been launched only in a few cities as of now. In terms of the festive season, ONDC will not see any big take-off because the platform is more driven by small ticket item purchases which is quick commerce, grocery and food items.
"The platform needs to get a reasonable amount of customers and transactions and then they will look at monetisation and advertising. The overall e-commerce landscape has not seen any impact because of ONDC. Some bit of impact was seen in terms of the order search because of the food segment but that was also short-lived because the user experience in ONDC was poor," he added.
While speaking about the kind of marketing support brands might need to stand out during the festive season, Rathore said it is crucial to recognise that ONDC is still in its early stages and early adopters are acclimating to a new shopping experience.
At this juncture, brands should prioritise availability and discoverability. This entails listing products effectively and leveraging the search capabilities of the various platforms to enhance visibility and accessibility to potential customers, he said.
“The return on investment on ONDC, during the festive season, is expected to be higher due to its increasing adoption rate. However, in absolute terms, the revenue percentage may remain relatively low compared to retail and large e-commerce channels,” Rathore said.
“Looking ahead, the 2024 festive season holds great promise as both the adoption rate and order frequency are projected to grow significantly. Brands should not anticipate substantial volume immediately but investing in ONDC now could offer the advantage of being an early mover in the platform, potentially leading to long-term benefits,” he added.
Madan TN, Associate Director - E-commerce Planning and Strategy, Dentsu Creative spoke about ONDC's targeting and audience segmentation capabilities compared to other digital advertising platforms, and whether there are any unique advantages that ONDC offers for reaching specific consumer segments during the festive season.
ONDC aimed at promoting open networks for all aspects of digital commerce, with the broader goal of boosting inclusive growth. Its main objective is to decouple the digital commerce layers to promote competition, allowing smaller players to compete more effectively with larger ones, TN said.
“During the festive season, the unique advantage ONDC can offer is the unbundling of the e-commerce components and leverages open protocols. Consumers can have one platform where all the different kinds of needs can be served in one go. For instance, consumers can buy flight tickets/bus tickets, book hotels, buy gifts, buy sweets/desserts, etc.”
Meanwhile, Taurani said that most of the brands are already there on the platform but in terms of how the customer traffic develops, it will all depend on how the user experience of the platform is.
"Currently, it's in the testing stage. ONDC has seen a lot of issues around customer experience and payment, etc and a lot of concerns need to be addressed first before this scales up in a very big way. A very small fraction of sales for the larger brands would come for ONDC for now," Taurani stated.
While explaining how ONDC’s presence in the market has influenced the overall e-commerce landscape in India, TN said that ONDC solves key factors across the value chain holding back participation including market penetration. ONDC could potentially reach a much larger and more diverse audience, especially in tier 2 and tier 3 cities and rural areas of India that traditional e-commerce platforms may not reach as effectively.
“Second is economic inclusivity, with the objective to democratise e-commerce and enable small and medium-sized merchants to participate, ONDC could potentially provide a platform for reaching consumer segments interested in local and regional products and services. Another thing is the trust factor. Being a government-backed initiative, ONDC might enjoy a higher level of consumer trust. This could be beneficial in reaching consumer segments that are more sceptical of other digital platforms,” TN said.
“Fourth factor is uniform customer experience: ONDC's standards aim to provide a seamless customer experience across all platforms, which could be an advantage in reaching consumers who prefer a consistent and hassle-free shopping experience. Another factor is localised marketing. Small and medium-sized enterprises (SMEs) have a strong understanding of their local consumer bases and through ONDC, these SMEs can leverage that understanding to target their local consumer segments more effectively,” he added.