Can ONDC Usher In Inclusiveness & Fair Competition?

The Open Network for Digital Commerce (ONDC) is a network based on open protocol to enable ecommerce in products and services in India. It has been set up this year (2022) as a non-profit Section 8 company established by the Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India. The ONDC is like the hypertext transfer protocol (http) for information exchange over internet, and in the payments space, equivalent to the unified payments interface (UPI). The ONDC protocols aim to standardise digital commerce operations including product cataloguing, inventory management, order management and order fulfilment.

The current digital commerce model is the world of platform-centricity, where the buyer and seller have to be on the same app or platform to finally transact and cannot even “interact digitally” otherwise. Hence the ONDC would essentially allow businesses of all sizes, including small and medium enterprises, to use any ONDC-compatible-application, and not be tied-down-to specific platforms. The ONDC aims include:

• ending monopolies of the platforms
• decentralisation
• digitisation of the value chain
• standardisation of operations
• inclusivity and access for sellers, especially small and medium enterprises as well as local businesses
• increased efficiency in logistics
• more choices and independence for consumers
• ensured data privacy and confidentiality
• decreased cost of operation

The ONDC is expected to make ecommerce more accessible for the consumers. They can search for any seller, product or service by using any compatible application or platform. The ONDC will display products and services from all participating ecommerce platforms in its search results across all the apps on its network. Assuming Amazon and Flipkart, both competitors, use their platforms with ONDC, a consumer searching for a product on Amazon would also see results from Flipkart.

*Market making

The government estimates India's ecommerce market to be more than $55 billion in gross merchandise value (GMV) in 2021. It estimates that it would grow to over $350 billion by 2030 with the potential consumption of goods and services of over 1.4 billion of our population. The current ecommerce penetration is around eight per cent. The ONDC aims to increase this consumer footprint to over 25 per cent in the next two years, and to have 900 million buyers and 1.2 million sellers within the next five years. Currently two major platforms, Amazon and Flipkart (owned by Walmart) account for 60 per cent share of the Indian ecommerce market.

*Challenges to solve

The ambitious project is bound to change the face of ecommerce in the country. There are a few questions that it is expected to solve for, in the time ahead.

• The ONDC aims to bring millions of small businesses onto the digital platform. That would mean equipping them with technological expertise and building trust. How?
• Smaller businesses with low volumes don’t have the ability to match discounts and predatory pricing used by larger players. How can the pricing gap be solved?
• Smaller entities may not have the packaging ability ‒ be it physical product packaging, designing for their products or putting together a snazzy pitch for their services. Else in comparison, they will lose out to well- packaged products. How to solve for this?
• Questions have been raised about how data sharing under ONDC would be done and consumer data protection would be assured, especially when it is about entities that would operate the gateways connecting the buyer and seller apps. Who guarantees data privacy and safety?
• For any consumer issues of any transaction, who bears the liability?
• Ardent ecommerce specialists do opine that each business in the digital commerce world has its own unique supply chain processes and process efficiencies. And that any ONDC standardisation might not suit such business efficiencies, which could force the businesses to think of alternatives.
• The trust-deficit is visible, with no digital platform or ecommerce major invited to join the advisory committee that helped move this project so far, even though the biggest critic of platforms, the Confederation of All India Traders (CAIT) and the Retailers Association of India, are members. Does this mean that brick-n-mortar retailers would get a level playing field in the newer order being drafted in the Indian ecommerce space?
• Does this mean that the attempt to democratise a sector is an overt bias against these large entities that have believed in the long-term India story and invested billions of dollars in it and also created thousands of newer jobs. And importantly, will it be seen as conflicting with the government’s own initiative to promote the digital startup space and global investments around such ideas?

*Journey ahead

If the ONDC is able to shift India to a platform-agnostic digital commerce model, it will have democratised ecommerce as well. With the strong political and firm policy backing it has, it is a matter of time. Even so, some questions remain.

• Can it realistically help smaller sellers and buyers benefit from dynamic pricing and rationalisation of delivery costs? And how soon?
• Can it break the monopolies and high platform fees of the dominant players?
• Can it bring long-term sustainable stability of a technology framework, considering that the government is putting its might and open-statement to break (perceived or potential) monopolies or duopolies or simple market-might of larger platforms to ground-zero even as it fits the concept of theAtmanirbhartaideology well.
• Since the protocol used is from a non-profit (Beckn Foundation) owned by individuals, the worries about institutional stability will need to be addressed.
• Can it bring transparency and fairness, and a critically-acclaimed mechanism to address consumer grievances to ecommerce stakeholders?
• Will ONDC make it a level-playing field for everyone ‒ something that the governance of regulating markets requires?

Can ONDC be the next biggest digital change-agent to make an inclusive nation? It surely has all the right ingredients. It has the intent, and the content. It importantly has the right context.

Srinath Sridharan

Columnist Strategic counsel for over 27 years, with leading corporates across diverse sectors. Independent Director across multiple sectors. Advises organisations on the intersection of finance, digital, consumption economy, GEMZ (Gig Economy, Millennials, gen Z) & ESG. Coaches & mentors senior leaders. Active engagement across industry-growth policy conversations & public policy issues. Visiting faculty at various management schools and with regulatory learning centres. Prolific media columnist across topics he works with. He is also the Editor and co-author of ‘Time for Bharat’ (book on public governance). Visiting Fellow at the Observer Research Foundation. Posts all published work at https://srinath.blog