News & Analysis

Can ONDC Level the eCommerce Playing Field?

India has already showcased its technological prowess by creating a protocol that allows for interoperability among payment platforms, now it's doing the same with eCommerce

In early 2000, when start-ups discussed selling stuff online, customers found it to be the joke of the millennium, for none believed that the Indian mindset would accept products that they cannot touch and feel? Two decades on, eCommerce has spread its wings across the country and in multiple formats – from the big multinationals to the smallest of entrepreneurs. 

Today, we are used to a different app for different types of product or service. And there’s already talk of super apps – in fact Tata’s launched the Neu to compete with Reliance’s Jio Marketplace. However, none of these bring a customer-first approach as neither can you hope to find all smartphones on Amazon nor would all the best clothing brands be on AJio. 


The Super App Model

Super apps are an idea whose time has come, as China and Indonesia would tell you. However, the federal government in India has sought to buck this trend. In fact, they turned the concept on its head by creating a single protocol for all digital commerce where customers can browse across apps and acquire what they were looking for. 

Why so? Because global experience has taught us that super apps tend to be super monopolistic in multiple ways. They could kill off competition by seeking a cut in the margins and also turn sellers themselves, something that Amazon in India has been accused of by the Confederation of All India Traders, a body comprising Indian traders. Suffice to say, they almost always decide the pricing of products and the number of sellers. 


The Hyperlocal Model

This is what the Ministry of Commerce had in mind when they got the Beckn Foundation to develop the protocol whereby eCommerce companies and small businesses can coexist and leave the choice to the end consumer of what they want to buy and from where. In other words, you break the silos that separate eCommerce platforms via interoperability. 

In other words, all kinds of mobile apps would be talking to all other kinds of apps through a single pipeline. This means the customer can place an order for anything and a seller can pick it up with a delivery agent completing the fulfillment after the payment app confirms receipt of funds that needs to be paid. 


Enter the ONDC

The Foundation, backed by Nandan Nilekani, who helmed India’s largest data collection drive for Aadhar and was also part of the Unified Payment Interface (UPI), set about creating the said protocol that could democratize eCommerce and serve as part of yet another “Made-in-India- for-the-World initiative. 

The Open Network for Digital Commerce (ONDC) will allow retailers to get online and compete with larger players – in other words even your hyperlocal grocery store can get online as could those offering highly niche products such as antiquities or art work. In other words, create a digital standard for eCommerce where any seller can connect with any buyer anywhere. 

On its part, the government is facilitating the move with Commerce and Industry Minister Piyush Goyal waxing eloquent at every opportunity to push the envelope. In fact, the powers that be have invited all the big guns including Amazon and Google to join the protocol. Already, PayTM is on board as the preferred transaction partner and it is expected to create an ONDC storefront within the app soon. 


What’s next on the Radar?

ONDC has started pilots for delivering food and grocery across select centers. They plan to touch 100 districts within a predefined time frame with CEO T. Koshy doing roadshows in tandem with state governments to spread the message. 

Into this mix, companies such as eSamudaay have dovetailed their offering of a platform that can do all the backend transactions and be customized into a localized app that could be managed by a digital entrepreneur. However, the app could potentially be able to connect across the country and even abroad. 

What makes the entire idea unusual is that a government has come up with the idea of creating a protocol to bring all sellers under one roof, as against the traditional free market system where big money and big tech rule the roost. If this idea gets wings such as the ones UPI received, it could become another game changer for eCommerce across the world. Reports suggest that the government plans to link 30 million sellers and 10 million merchants via ONDC and expand to over 100 cities by October. 


Is it easier said than done?

For starters, government programs do not necessarily generate interest amongst the masses and traders, in spite of being the constituency of India’s ruling BJP, haven’t welcomed ONDC with open arms. There are questions around charges for using the platform, though now it appears that a 1-2% transaction fee could come the customer’s way. 

Then there is a question of multiple apps that a local business owner would require. There’s the seller app, the buyer app and possibly also a delivery agent app – all connected to a payment app that is built on top of the network. This could take some convincing from the powers that be as a large chunk of India’s small entrepreneur population isn’t exactly computer literate. 

The biggest challenge for the government could be right now. Once the testing phase is over, ONDC and its allies would have to work overtime to get both buyers and sellers on board. An experiment done by eSamudaay in Udupi showed that retailers can themselves lure their customers on to the digital app, but enrolling merchants could continue to be a vexing issue. 


Some built in safeguards

Government officials indicated that there are 80 companies currently working with ONDC with each of them being at various stages of integration. As the number of sellers increases, the government also plans to build in some safeguards to guard against monopolistic practices. 

An important component could be the ability of the protocol to fetch results from seller apps and display it to consumers. ONDC is also said to be creating a framework for gateway audits to ensure that they do not favor one seller over another. 


In Conclusion

We believe that the ONDC is a first of its kind experiment that has the potential to change the way the world transactions business digitally. Just as UPI made digital payments easier for the customer and brought compulsory savings into socially underprivileged homes through the Jan Dhan bank account, this protocol can potentially turn every other Indian into an entrepreneur, selling products or services starting in the local community and aiming for the world. 

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