ONDC: The world’s first government-led initiative to democratize digital commerce

What is ONDC?

Open Network for Digital Commerce (ONDC) is an initiative to connect all the buyers to all the sellers available online, irrespective of the eCommerce application/platform they use.

The Indian government is building the world's first open network for digital commerce - ONDC. This innovative new initiative will provide MSME(Ministry of Micro, Small & Medium Enterprises) businesses with a secure and efficient way to conduct e-commerce transactions. 

Technology enthusiasts/start-ups can use the network to create various eCommerce applications, while sellers, buyers and logistics providers can take advantage of its many features and benefits.

ONDC primarily focuses on democratizing commerce in India. It does this by providing a level playing field for all sellers, regardless of their size or resources. This way, even the smallest of sellers can reach out to a large number of buyers and grow their business.

"Open Network for Digital Commerce (ONDC) is a market-led initiative aimed at enabling interoperability in Digital Commerce.

Based on the principles of Openness, it aims to enable unbundling Digital Commerce, democratising Digital Commerce and unlock value for all parts of Digital Commerce, as well as enable innovation to unlock the next chapter of Digital Commerce."

ONDC LinkedIn

The ONDC initiative aims to provide a level playing field to all stakeholders in the digital commerce ecosystem, by enabling interoperability among different platforms and systems. The initiative also aims to promote competition and innovation in the digital commerce space.

How did it all start

"COVID-19 has fueled the growth of digital commerce across the globe. Though digital commerce in mobility and travel services declined, digital commerce in the retail sector saw a rise in the share of total retail sales, from 16% in 2019 to 19% in 20201. This was a result of a spike in business to-consumer (B2C) sales, particularly evident in online sales of medical supplies, household essentials, and food products. COVID-19 also resulted in increased business-to-business (B2B) digital commerce."

ONDC Strategy Paper

When the Covid pandemic struck India, the government acted swiftly to put a nationwide lockdown in place. This was done to prevent the spread of the virus and to protect the population. However, the lockdown had a major impact on the economy, with most MSME businesses forced to close their doors.

To mitigate the impact of the lockdown, an Idea was set in motion by DPIIT, Government of India to ensure that access to essentials is not impacted in the event of a lockdown by enabling eCommerce for buyers and sellers across the country.

"COVID-19 pandemic exposed the critical shortcomings of the Indian digital commerce ecosystem when most parts of the retail chain were found to be digitally absent."

ONDC Strategy Paper

Government backup

The Indian Government has shown tremendous support for the open network for digital commerce. This is a great initiative that will help boost the economy and bring more opportunities for businesses. The government has provided many benefits and incentives for businesses to get involved in this project. This is a great move that will help the digital economy grow.

“ONDC will promote healthy competition and unlock digital opportunities for MSME’s, small traders and businesses''

Sh. Narendra Modi (Honorable Prime Minister)

"ONDC will democratize digital commerce and move it from Platform-centric model to an open-network model"

Piyush goyal (Honorable Union Minister - Ministry of commerce and industry)

“ONDC will establish India as an e-commerce leader on the global stage”

Sh. Anil Agarwal, IPS (Additional Secretary, DPIIT, Ministry of commerce and industry)

ONDC, in next 5 years

  • With ecommerce gaining popularity, more and more retailers are looking to get on board. In fact, it is estimated that more than 20 lakh retailers will be enabled with ecommerce in the next few years on ONDC network.
  • It is said that there are approximately 25 crore buyers in India.
  • Sell goods and services to more than 75% pin codes in India

Source - Seminar conducted by , Mr Shireesh Joshi (Chief Business Officer of ONDC)

What challenges are ONDC expected to solve?

There are a number of reasons why MSMEs find it difficult to sell online. First, they may not have the necessary resources, such as website development and marketing skills. Second, they may not have the right products or services for the online market. Finally, they may not have the right payment gateway or shipping infrastructure in place. So, currently Sellers do not have many choices to be online

Sellers are platform dependent and have to operate at unfavorable conditions set by the eCommerce Platforms.

Buyers and Sellers cannot discover each other beyond large e-commerce platforms.

The internet has been a boon for businesses and consumers alike. It has made it easier than ever to connect with buyers and sellers around the globe. However, when it comes to ecommerce, the vast majority of transactions still take place on large platforms like Amazon and eBay.

There are a number of reasons why buyers and sellers cannot discover each other beyond these large platforms. First and foremost, the platforms are simply too big and there is too much noise for smaller businesses to be seen. Moreover, these platforms have established reputations and trust among consumers, which makes them more likely to transact on these sites.

There are some smaller, platform-independent ecommerce sites that are trying to change this dynamic. But they face an uphill battle, as they lack the reach and visibility of the big players. Ultimately, until there is a major shift in the way consumers shop online, buyers and sellers will continue to flock to the large ecommerce platforms.

Following the tried and tested UPI model

UPI experience shows it is possible to create new digital systems that enable population scale inclusion

“Even in the past, India has led the world and shown that it can innovate such population-scale initiatives with the power to fundamentally disrupt and democratize markets, be it Unique Identification Authority of India (UIDAI) - Aadhaar, Unified Payment Interface (UPI), or more recently Goods and Services Tax Network (GSTN) and Ayushman Barat Digital Mission (ABDM). As UPI helped to transform the payment system in India, there is a similar need to make digital commerce in goods and services available equitably to all Indian citizens.”

ONDC Strategy Paper

The UPI is a communication technology that enables any sender to send money to any receiver. With UPI, users can use different UPI apps linked with different bank accounts  to exchange money. 

Like UPI, ONDC also created a communication system that will enable any buyer to transact with any seller. With ONDC, Buyers and sellers need not be on the same platform to transact.

Once the Sellers register on the ONDC network, they will be made available on all Buyer side Apps. 

E-Commerce platform broken down in independent modules

The ecommerce platform is divided into three key components: the buyer, the seller, and the logistics. Each component plays a vital role in the success of the platform. Currently, all of these components are controlled by the e-commerce Platform’s. 

Now with ONDC, we can build components to our strength and necessity. ONDC will connect us to other parties to complete the e-commerce solution. ONDC un-bundles the e-commerce components and leverages open protocols to make the components interoperable in nature

The buyer is responsible for finding and selecting the products they wish to purchase. They also need to be able to navigate the platform and checkout process smoothly.

The seller is responsible for listing their products and managing their inventory. They also need to provide excellent customer service and support.

The logistics is responsible for delivering the products to the buyers. They need to be efficient and reliable to ensure a positive customer experience.

And thanks for the interoperability, buyers and sellers will no more be platform independent. 

Without ONDC

With ONDC

No need to look out for customers

With ONDC, once any Seller registers on the Network. They are instantly visible to all Buyers on the ONDC network/all platforms using ONDC

This Shared networking model massively decreases the operation cost for the sellers

Current scope of ONDC - where do we stand

  • ONDC piloting in 29 cities
  • Active domains - Retails, logistics
  • For Seller’s onboarding contact for ONDC - Team@ondc.org
  • Find list of ONDC complaint Seller contact points (Shared on ONDC conference organised by Startup Kerala)

Conclusion

Open network for digital commerce is an open network and an enabler for ecommerce expansion. It is not an application or platform, or a central intermediary. Rather, it is a network with a set of protocols and standards that allow businesses to connect and transact with each other. This makes it possible for businesses of all sizes to participate in the global economy and tap into new markets.

References

Credits

  • All
  • Technology
  • Music
  • Indian Govt. Open networks
  • ONDC
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