Why Indian Govt.’s attempt to democratize digital commerce space can be a success?

The Indian government’s idea to democratize e-commerce and support MSMEs & small traders to get on online platforms can be a gamechanger, thus breaking the monopoly of humongous e-commerce platforms -

ONDC (Open Network for Digital Commerce) is an ambitious project by the DPIIT (Department for the Promotion of Industry and Internal Trade) of the Government of India for democratizing E-commerce and making it an open network from platform-centric models. ONDC is the government’s way to level the playing field and expand the e-commerce market for sellers and consumers. ONDC is to India's e-commerce what UPI is to digital payments.

“So, if you are a small retailer, then ONDC will help you gain more visibility, give an easy onboarding, and provide chances to expand your business,” says Sheik Mohideen, Senior Vice President – SMB and Partnerships, Worldline India. “Currently, online marketplaces are closed and platform-centric wherein buyers and sellers need to be on the same platform to carry out a transaction. ONDC on the other hand, is a network-centric model (much like the UPI payment processing system) where so long as both buyers and sellers are connected to this open network, they can transact irrespective of the platforms/applications they use.”

The most significant advantage is that ONDC allows anyone to participate, including the smallest sellers in the most remote areas. The benefit for small merchants is that they can increase their revenue and profitability as they will pay much lower revenue share compared to the existing revenue share with marketplaces. Once a retailer lists its products or services using the ONDC’s open protocol, the business can be discovered by consumers on e-commerce platforms that follow the same protocol.

“ONDC is aimed at enabling MSMEs engage in the larger economy, promoting financial inclusion and growth for these frequently underappreciated companies. Additionally, since they would avoid paying the high aggregator commission costs, there would be a reduction in the cost of doing business,” reiterates Sanjeev Kumar, Co-Founder & CEO, Spice Money. 

“When looking for a product, a customer can view the seller's location and choose to purchase from a local store that can deliver more quickly than an online retailer. This might encourage hyperlocal consumer-to-seller delivery. Overall, it will support fair trade and provide small, independent business owners more control through direct engagement with their customers,” he further added.

With ONDC, the government also hopes to bring in logistics firms and others who can collaborate with sellers to deliver products to customers. The focus would be on small businesses and rural consumers, with apps in Indian languages. The government has launched the pilot of ONDC in two states and plans to launch the new system across India by the end of this year.

“ONDC is not just a game changer, but it has invented a new game that everyone can compete with the quality of product and service democratically. From a platform-centric e-commerce model where most of the decisions and policies are governed by the marketplace, ONDC takes a paradigm shift with this seller-centric network approach by making the seller the key decision maker of policies based on their convenience and service guarantee. It creates a sustainable platform where products/services can be discovered and engaged through any 'network-enabled' vendor,” says Kumar Vembu, Founder & CEO, GoFrugal Technologies.

One of the major gaps for Gofrugal’s customers was in creating maximum visibility with the consumers for the products/services they offer. Also, when they depend on an e-commerce platform that gives such visibility, the economics of selling is not viable for a trader to scale and sell profitably. ONDC solved these two major challenges of providing maximum visibility to the consumer base and giving maximum control on commercial and service policy decisions to the sellers.

Speaking on the experience with ONDC, Pradeep from Aruna supermarket, one of the early adopters of ONDC in Tirunelveli, shared, "Improving my store's visibility with consumers was tough with the current corporate retail establishments. With ONDC, I have opened a new store in every smartphone of my town".

Santhosh, whose Home stock supermarket on-boarded as an ONDC seller in Coimbatore, shared, "Small business owners lack the financial support or time or energy to go online on their own, market their store against the growing competition."

On the other hand, being fatigued with rising online competition, Balaji Sastha from Koyambed market, Ramanathapuram shares, "ONDC gives lower tier city sellers the power to override brands with huge online selling investment capacity, with quality of service as key. With our offline commerce completely digitized in terms of catalog, inventory control, price management, purchase automation, and accounting, getting into ONDC will help us deliver the best customer experience across channels".

And so…

The current market penetration of ecommerce, in terms of the overall economy, stands at 8%. But with the ONDC project, it aims to raise eCommerce penetration to 25% in the next 2 years. With almost 70% of the country’s population residing in rural regions that contribute nearly 50% of the GDP of the country, the lion’s share in this projected growth of ecommerce will be from this sector.

“ONDC also hopes to sign up 90 crore buyers and 12 lakhs sellers on the shared network within the next five years, while achieving a gross merchandise value of 3.75 lakh crore,” says Sheik Mohideen.