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  • Raghav Sand

What is ONDC?

The Open Network for Digital Commerce (ONDC) is a revolutionary initiative by the Government of India. It has been set up as a not-for-profit (Section 8) company. The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, is overseeing the adoption and expansion of ONDC.


Buying and selling products and services on the internet is not new for the urban customer. The share of e-commerce is less than 10% of the overall retail ecosystem of India. Under the current e-commerce system, both the buyer and seller must be listed on the same platform. Consumers have to juggle between apps to get the best possible deal and sellers must stay confined to one platform due to contractual agreements.


Need for ONDC


To make the retail ecosystem more viable for all the participants, a need for an interportable e-commerce network arose. The adoption of technology and digital tools by sellers and buyers accelerated due to the Covid-19 pandemic. Now that everyone has seen the benefits of tech-enabled solutions firsthand, there's no turning back the clock. The penetration and adoption of technology in e-commerce is in the early stages. Lack of freedom to choose and compulsion to transact in silos was a major reason for the introduction of ONDC. For sellers that cannot afford to have their own e-commerce setup due to financial and operational constraints, were missing out on a lucrative opportunity. It is a well-known fact that the rural population is not getting the benefits of the e-commerce value chain.


The UPI of E-commerce


The Unified Payments Interface (UPI) has been a game-changer for India’s economy in general and the financial sector in particular. UPI enabled 2,348 transactions per second in 2022. This is a staggering number, and it is also a stamp of approval on the technical capabilities of India.


If you have ever made or received a payment through UPI, you must have noticed that there could be as many as four entities involved in a transaction. For example, someone who has an account with the HDFC Bank, can send money through Paytm mobile application, to a person or entity who may have an account with the State Bank of India, and may be using the PhonePe application. This seamless procedure is made possible because UPI has the scale, interoperability, and is unbundled.


Similarly, with the adoption of ONDC, a consumer can buy groceries from a local shop listed on a different seller application than the one they are accustomed to using. When a consumer is able to buy electronic goods from their local retailer, it allows the traditional brick-and-mortar shops to participate in the e-commerce value chain.


With ONDC, sellers and buyers need to register themselves once with any one of the participating applications and this will enable them to transact across all the platforms on the ONDC network i.e. one registration gives universal access. Both consumers and sellers can move across the seller applications based on where they feel is best suited for them. Sellers will make a move between applications without losing their ratings and reputation scores.


ONDC will enable consumers to search, update cart, and checkout with minimum clicks. On the other hand, a seller can upload catalogue, update inventory, accept orders, and manage returns/cancellations..


ONDC Ticks All Boxes


ONDC as the name suggests is a network. It is neither an application nor a platform. ONDC is built to bridge the digital divide and make e-commerce much more inclusive and productive. It is India’s opportunity to take the digital revolution to its logical conclusion. By giving consumers and sellers more choice ONDC can help to check anti-competitive and rent seeking practices by large e-commerce players. When sellers get access to analytical tools and actionable insights on the ONDC, they can manage inventory and working capital in a better manner. The government has set a goal to reduce logistics costs and at the same time reduce the carbon footprint. When sellers and buyers engage in hyper-local commerce through ONDC, it will solve multiple problems at the same time.


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