With a nationwide rollout of the Open Network for Digital Commerce (ONDC) expected by the first quarter of 2023, about 300 million customers are expected to transact via ONDC in five years, a recent report ‘Decoding ONDC’ by Publicis Groupe said. What UPI did to digital payments, ONDC is expected to do to India’s e-commerce penetration.
“We needed UPI to challenge the duopoly in digital payments. Today, too, there are 2-3 players in the e-commerce space. Have we been able to reach the full potential that India has in e-commerce in terms of reaching the last mile, the last consumer or the last retailer? No. We need a democratic a more open platform. That’s why ONDC. But it is much more complex than UPI to execute,” Arvind Gupta, ONDC Board Member, Co-Founder & Head, Digital India Foundation (DIF) told Business Today. Indian govt’s digital initiatives like UPI have seen more than $100 billion transactions.
In April 2022, ONDC launched a pilot in 20 cities and in next five months, it started with categories like groceries, food and beverages for the beta test in Bengaluru. More categories like home and kitchen, agriculture, fashion, apparel, footwear and accessories are expected to be added next month. “ONDC is not a platform. It doesn’t compete with Flipkart, Meesho, Amazon, etc. We are an enabling ecosystem which is a technology play that helps, platforms, aggregators, retailers, etc. The traditional e-commerce model is that the buyer and seller is on the same platform, in ONDC, one doesn’t need to be in the same platform,” Gupta adds. “One is not a prisoner of any platform.”
According to the report the ONDC architecture is designed to uphold these key tenets like facilitating a decentralised and interoperable ecosystem that encourages widespread participation from all players, big and small, in the retail space, promoting autonomy to enable free movement of value through the supply chain, enable platform-agnostic discoverability, adoption of an ecosystem approach rather than a “system” approach and an open digital technology infrastructure as a catalyst to distribute the ability to solve.
India was estimated to have 63 million Micro, Small and Medium Enterprises (MSMEs). “Each of these MSMEs has the potential to flourish with innovative sales and marketing efforts but are not part of the digital revolution. Even on the consumer side, only a small portion (~20 per cent) of the internet users in India are online shoppers,” the report said. Key challenges for India’s e-commerce industry include relatively low digital adoption, and the fact that a large portion of the retail sector is not digitally enabled. Also, digital commerce is further limited in smaller towns and rural areas, or ‘Bharat’, the report says.
“The fact is that e commerce hasn’t become that big in the Indian context. Globally, it has been center stage for us for quite some time. On one hand we’re saying it’s a vibrant space, we have 30 plus unicorns doing well in that space and the number of transactions and players are increasing, it is still less than 8 per cent of the overall retail sales that happen in the market. Large part of it is also because MSMEs have not adopted it well,” Anupriya Acharya CEO, Publicis Groupe, South Asia said.
There’s a 7.8 per cent penetration of digital retail sales in India as compared to 46.3 per cent in China and 36.3 per cent in the UK. She adds that if the situation stays as it is, it will not become a mainstream conversation. “It continues to stay as some sort of a specialist function. With ONDC set to disrupt this space, we expect 75 per cent of pin codes to see a benefit of this. It becomes extremely important for marketers,” Acharya said.
Despite its attractive value proposition, ONDC has some associated inherent risks, the report says. Access and ownership of data, evolving roles and responsibilities, and customer service are some of the risks identified in the report.
“We’re not in the business of making money; we’re in the business of creating an environment.
Consumers will get choice and hyper-local options. The whole technology works on the system of discovery in terms of price and distance across the whole network. This will not just be an urban phenomenon, it will expand everywhere,” Gupta said.
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