Open Network for Digital Commerce (ONDC) is an alternative e-commerce platform promoting open networks for exchange of goods and services. It is expected to make e-commerce more inclusive and accessible by allowing consumers to discover any seller, product or service by using any compatible application or platform.
Based on open-sourced methodology independent of any specific platform, ONDC will use open protocols for all aspects in the entire chain of activities in exchange of goods and services, similar to hypertext transfer protocol for information exchange over internet, simple mail transfer protocol for exchange of emails and unified payments interface (UPI) for payments. These open protocols would be used for establishing public digital infrastructure in the form of open registries and open network gateways to enable exchange of information between providers and consumers. Providers and consumers would be able to use any compatible application of their choice for exchange of information and carrying out transactions over ONDC.
It aims to democratize e-commerce in India and offer alternatives to proprietary e-commerce sites across segments, such as mobility, grocery, food order and delivery, hotel booking and travel, among others, to be discovered and engaged by any network-enabled application. It was incorporated as a private non-profit (Sec-8) company in December 2021. The platform will also be compliant with the Information Technology Act, 2000 and designed for compliance with the emerging Personal Data Protection Bill in order to work with its participants to publish anonymised aggregate metrics on network performance without compromising on confidentiality and privacy.
ONDC framework enables sellers and buyers to be digitally visible and transact through an open network regardless of what platform or application they use, instead of being governed by specific platform centric policies. For instance, even if a seller X is registered on platform A, while the consumer is registered on platform B, the consumer can directly purchase products of seller X without registering on platform A from the ONDC network. This will provide multiple options to small businesses to be discoverable over network and conduct business. It is also expected to digitise the entire value chain and establishing public digital infrastructure in the form of open registries and open network gateways to enable exchange of information between providers and consumers.
These protocols would also standardise operations like cataloguing, inventory management, order management and order fulfilment and usher efficiencies in logistics. All e-commerce companies in India will have to operate using the same processes, akin to android-based mobile devices, irrespective of the brand. This would provide a boost to smaller online retailers as well as new entrants by ushering in discoverability, interoperability, and inclusivity. Merchants will also be able to save their data to build credit history and reach consumers. As a result, it will support and empower different suppliers break the monopoly of behemoths like Amazon and Flipkart. Online retail currently accounts for about six percent of India’s overall retail market, and traditional retailers do not wish to be locked out or priced out. This will create new opportunities for micro, small and medium enterprises and small traders by facilitating easy adoption of digital means by those currently not on digital commerce networks.
ONDC is expected to make e-commerce more inclusive and accessible for consumers as well. Consumers can potentially discover any seller, product or service by using any compatible application or platform, thus increasing freedom of choice for consumers. It will enable the consumers to match demand with the nearest available supply. This would also give consumers the liberty to choose their preferred local businesses.
Presently in its pilot stage, ONDC was soft-launched into five cities in India – Delhi National Capital Region, Bhopal, Bengaluru, Shillong, and Coimbatore, on 29th April 2022. The network aims to increase its presence in about 100 cities by August and also open it to a wider public in the current five cities. The government has also set up a nine-member advisory council, including Nandan Nilekani from Infosys and National Health Authority CEO R S Sharma, on measures needed to design and accelerate the adoption of ONDC. Various public and private sector banks have already acquired stakes in ONDC. Twenty government and private organizations have confirmed investments worth INR 2.55 billion ($ 33.34 million). 24 companies, such as Flipkart’s logistics arm Ekart, Reliance-backed hyperlocal quick commerce firm Dunzo, and digital payments firm PhonePe, are reported to be in the process of integrating with ONDC. Around 80 firms, ranging from software and app creators, to logistic partners and payment gateways, are working to integrate these market players with the ONDC platform. Recently, Google has also been in discussions with the government of India to integrate its shopping services with ONDC.
ONDC once mandated, is expected to change the course of e-commerce in India, by standardizing operations, promoting inclusion of local suppliers, driving efficiencies in logistics and enhancing value for consumers.
This is co-authored by Cherishi Maheshwari and Bhavya Tyagi.
