ONDC: The Next E-Commerce Milestone & its Effect on D2C Businesses in India

The ONDC promotes inclusivity, discoverability, and interoperability, which helps small online merchants grow.
ONDC: The Next E-Commerce Milestone & its Effect on D2C Businesses in India

The government has established an Open Network for Digital Commerce (ONDC) in order to facilitate e-commerce for small firms and break the e-marketplace giants' monopoly. The government's goal of democratizing e-commerce in India gave rise to ONDC. With the help of this new setup, Indian e-commerce will transition from the current platform-centric model to an open network. This means that a large client base can be reached without enrolling on several sites and all online firms will benefit from increased visibility and equitable access to growth prospects.

The internet store allows for direct purchasing of goods up to Rs 50,000, and reverse auctions and bids are used for public procurement. Every online shopper in the nation will have access to ONDC, which has no such restrictions. A committee is said to be set up to tighten protocols and for conflict resolution, in order to ensure the smooth functioning of ONDC.

Small and medium-sized enterprises have been subjected to challenges in adopting digital technology despite the widespread use of mobile devices and internet connections in India, resulting in them relying on aggregators. The government's new ONDC (open network for digital commerce) project, however, seeks to overturn this status quo and give control back to small and independent business owners. Much like independent players like us, who work towards the same goal of empowering the small entrepreneur.

As an open network, all participating e-commerce platforms' goods and services will be shown in search results for all networked apps. It is a network that links retailers, consumers, and logistical and financial service providers. The ONDC promotes inclusivity, discoverability, and interoperability, which helps small online merchants grow. It will provide suppliers and customers the power to end the hegemony of powerful e-commerce platforms.

The largest benefit is that everyone can join ONDC, even the smallest merchants in the most remote locations. It will help small merchants by guaranteeing that they obtain an equal opportunity to interact with large corporations, serve clients online through e-commerce platforms, and defend their enterprises.

There needs to be a paradigm shift from an operator-driven monolithic platform-centric architecture to a facilitator-driven, interoperable decentralized network in order to address the issues listed above.

The established e-commerce businesses will have to cope with legacy issues, but they will also have a considerable edge because of their prior experience in this field. On the other hand, companies in this industry will have a fresh start and be able to propose innovations designed for the Open Network for Digital Commerce of the modern day (ONDC).

The ONDC team will need to be mindful of the checks and balances that need to be put in place to prevent any one player from gaining an unfair advantage in the market and to allow innovation to flourish without having to contend with network effect-based barriers that have currently given a few players a disproportionately high market share.

Small retailers' involvement in ONDC will contribute to its success and aid in the breakup of the monopoly held by large e-commerce aggregators. In five cities, the government has currently begun the ONDC pilot phase. All systems will be operational by August 2022. By the end of 2022, ONDC will begin providing services to 100 cities before going live on a nationwide scale and serving the entire nation cities and expand its use in Shillong, Bangalore, New Delhi, Coimbatore, and Bhopal, where trial projects are already being carried out. According to ONDC's promotional materials, a neutral platform, and procedures will be set up for pricing, categorizing, and matching providers in an open source database. This is positive news since it will help put small businesses across the board, independent retailers, customers in rural areas, and numerous other cohorts of buyers and sellers onto a single open digital marketplace.

Overall, it will support fair trade and provide small, independent business owners more control as they will once again be able to engage with their clients directly and won't be separated from them by an intermediary barrier.

Additionally, with the help of the ONDC platform, they will gain digital empowerment and no longer be at the whim of e-commerce businesses with which they have very little bargaining power.

In India, ONDC is to e-commerce what UPI is to the digital payment industry. Buyers and sellers will be able to deal through an open network and be visible online regardless of the software/platform they employ. According to the ministry, ONDC will alter all industries, from retail goods to food to mobility, by empowering business owners and customers by shattering silos and creating a single network to spur innovation and scalability.

The network brings to the table, the following advantages: -

• The platform may reduce the dominance of powerful e-commerce marketplaces.

• The open network's nature allows for access to a far wider audience.

• One is not constrained by the monopoly's mercies of a single owner.

• It will use a hyperlocal model, putting local small businesses first. If someone wants to sell food online, this is extremely advantageous.

• The authority that controls the buyer and the seller will not be the same.

• Online merchants will have access to their own client information, enabling them to make wise business choices.

• There are no middlemen; sellers deal directly with customers.

• The platform enables vendors to increase the size of their catalogues, have access to cutting-edge logistical options, and provide customers with more choices.

Small businesses will gain from the ONDC because they have frequently been at the mercy of the algorithms and commissions of big e-commerce platforms. But the platform also faces a number of difficulties. For instance, anytime organizations supported by the government are involved in large-scale projects, data privacy campaigners have always been concerned. Concerns have been expressed concerning the ONDC's data sharing policies, particularly with regard to the businesses that will manage the gateways that connect the buyer apps and the seller apps. Ironically, ONDC must persuade large corporations, especially the industry titans of e-commerce, to engage in order to attain genuine size.

Issues that we are hopeful for ONDC to resolve:-

  • The limited ability of new sellers to compete
  • Concentration poses the possibility of overpowering platforms
  • No trust portability for sellers
  • The challenge that merchants with a desire to offer on numerous platforms encounter

Although the Open Network for Digital Commerce (ONDC) is a bold and ground-breaking initiative, issues regarding the operational strategy, open competition, the technical capacity of MSMEs (Micro, Small and Medium Enterprises) to utilize the system, and clarity in assigning responsibility are among the challenges yet to be addressed. If ONDC is successful and transforms India's e-commerce sector from its platform-centric nature to a more platform-agnostic model, it may indeed prove to be a tectonic change.

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