Six Months After It Became Fully Operational, A Reality Check On ONDC, The World’s First Interoperable E-Commerce Platform

Six Months After It Became Fully Operational, A Reality Check On ONDC, The World’s First Interoperable E-Commerce Platform

by Anand Parthasarathy - Mar 12, 2023 10:54 AM +05:30 IST
Six Months After It Became Fully Operational, A Reality Check On ONDC, The World’s First Interoperable E-Commerce PlatformONDC aims to link buyers to sellers across apps and platforms. (Image Credit: ONDC, MyStore).
  • The first ONDC transaction took place in Bengaluru in April 2022, but it was fully operational only in September

    The platform is live in over 85 cities and buyers can choose any one of the 8 apps today

    Fashion-focussed Meesho has fully integrated its app with ONDC; Amazon has taken steps to sync its logistics

    ‘2023 will see ONDC’s first wave of innovation’ predicts its CEO

Last week, Kudumbashree, Kerala’s acclaimed self-help group for women, announced that it had joined the Open Network for Digital Commerce (ONDC).

The ONDC is the world’s first decentralized and interoperable e-commerce platform, bringing together multiple buyer apps and seller apps. 

Honey from the Idukki hills, mango pickles and organic pepper, coconut oil for hair care and cooking — suddenly  products which had no retail outlets outside Kerala were available for delivery India-wide through buyer apps linked to the new platform.  

ONDC is a non-profit entity created by the Indian government in December 2021 to address the domination of the online commerce business by a few players, enabling small players from neighbourhood kirana (grocery) shops to rural cooperatives to micro and small industries to find new — hopefully all-India — markets for their products and services.

In a global environment — replicated in India — platforms like Amazon and Flipkart have a near monopoly, with 60 per cent of all e-commerce business and between them, some 15 lakh sellers on board.

The result? The platform is bigger than the partners — and buyers have their choice limited to what each platform wants to push. 

What if one could search for a product across multiple competing online seller sites and find the best deal? 

That already happens with travel sites, where aggregators crawl across a number of airline ticketing or hotel booking sites and highlight the best offers. 

e-Commerce today and tomorrow: In the current scenario (top), a buyer can't locate a seller who is not on an online platform.  
ONDC (bottom) will link  all buyers to all sellers. (Graphic: ONDC).
e-Commerce today and tomorrow: In the current scenario (top), a buyer can't locate a seller who is not on an online platform. ONDC (bottom) will link all buyers to all sellers. (Graphic: ONDC).

ONDC aims to do just that — and more.   

With all their dominance, the e-commerce players in India still penetrate just 5-7 per cent of all retail commerce in India according to a November 2022 report from the India Brand Equity Foundation (IBEF), a trust established by the Union Ministry of Commerce and Industry. 

There remains a vast untapped and unserviced sector of commerce and IBEF suggests that the Indian e-commerce market that was worth $75 billion last year, could be $111 billion next year and $200 billion by 2026.

With multiple banks providing seed money, ONDC had a low-key pilot in end-April 2022, in a few cities including Bengaluru, Bhopal, Coimbatore, New Delhi and Shillong, with the first transaction taking place in the Karnataka capital. 

It was aimed equally at buyers and sellers and it worked like this:

  • Buyers had a choice of a small number of participating apps. As of this month they are: Craftsvilla, IDFC, Kotak, Meesho, Mystore, Paytm, Phonepe, Spicemoney. Once you revealed your location, the app told you what ONDC sellers were around you. You could also search for a specific product

  • Sellers could register themselves on a few sites like SellerApp or MyStore and they are guided through processes like Catalogue Management, Inventory, Order Management and Settlement

  • Logistics players like Delhivery, ShipRocket and Dunzo are already on the ONDC platform so that sellers who don’t have a delivery network of their own can sign up with one of these

Since September 2022 when ONDC was fully operational, a number of technology players have joined and offer their expertise especially to potential MSME sellers.

They include Magicpin which links shopping to buyer savings for local retailers; Zoho which offers its e-commerce platform to help businesses create online stores and DBS Bank which in partnership with e-Samudaay, a Software as a Service (SaaS) player, helps MSMEs get onboard ONDC.

The ONDC ecosystem today. (Image Credit-Antler).
The ONDC ecosystem today. (Image Credit-Antler).

The fashion-focussed online seller Meesho has fully integrated its app with ONDC and others can be expected to follow suit — which is the whole reason for creating the ‘open’ platform. 

MyStore is today the only ONDC app that serves both buyer and seller.

But what about the elephant in the room, Amazon? In February it announced that it would integrate its logistics network (from pickup to delivery), as well as, its SmartCommerce services for small businesses, to build and scale their business across digital mediums. 

This was a beginning: “We continue to explore other potential opportunities for stronger integration between the two in future… We remain committed to be being a catalyst for India’s digitization efforts throughout the economy”, said the company in its release.

ONDC is positioned to reduce the domination of Amazon and other e-commerce giants so it is difficult to see it embracing the new platform in any practical way — but it makes sense for it to be seen to cooperate with  any government-supported initiative.

Six months after its full-function launch, how has ONDC fared? Dozens of cooperatives like Kudumbashree have carved out a whole new national market. 

But while no one disputes the compelling proposition it offers, ONDC is yet to make a big impact on buyers or sellers.

The broad spectrum addressed may have dulled the focus: Is it the intention to attract the neighbourhood kirana shop — or extend the reach of small sellers to a nation-wide market?

When you install one of the buyer apps — search for ONDC in Google Play and a few pop up — and have localised it for where you live, it is good at telling you of the shops and services around you, but less consistent in   finding a specific product you want.

That is a problem that will only go away with scale — and enquiries in some of the cities where ONDC has been around, shows useful searches are patchy.

The bigger challenge is this: Will ONDC be attractive enough to wean users away from the Amazons and Flipkarts for products and from Swiggy and Zomato for food items? The catalogue needs to be bigger.  

And for this government bears some responsibility. Regular Hosannas in praise of the concept and ONDC’s potential to democratise e-commerce and loosen the grip of a few players will only go so far.

There has been little by way of sustained campaigns to increase public awareness even in cities where ONDC has claimed to have gone through alpha and beta launches — so lay persons can be excused for saying “ONDC — woh kya hai?” even a year after formal launch.

And for a government which has come up with any number of memorable names and acronyms in Hindi or Sanskrit for its schemes, it is surprising  that it has not yet coined a popular name with good recall, for what is  undeniably a worthy idea that experts already compare to the Universal Payment Interface (UPI) and digital payment apps for their potential reach and impact.

"In 2023, I foresee the first wave of innovation emerging out of ONDC, especially in technology and business,” says ONDC CEO T Koshy, in a recent survey in BusinessWorld.

Many experts agree:

Says Susmit Patodia, Capital Director with Antler India, the global investor, in a blog on ONDC last week: “As it evolves, ONDC will face many challenges such as creating a critical mass of adoption, scam prevention, and implementing a reliable dispute resolution mechanism. However, as a technology protocol and innovation, the success of ONDC might redefine the global nature of commerce itself.”

Focussed marketing and awareness, might see ONDC reach a tipping point sometime in 2023 or 2024, that will make it as ubiquitous as UPI — and yet another Indian innovation whose impact will be felt beyond its shores.

Right now, it is a very promising work-in-progress.

Anand Parthasarathy is managing director at Online India Tech Pvt Ltd and a veteran IT journalist who has written about the Indian technology landscape for more than 15 years for The Hindu.

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