Economics
Context: The government of India announced the launch of the pilot phase of open network for digital commerce (ONDC) with an aim to “democratize” the country’s fast-growing digital e-commerce space that is currently dominated by the two U.S.-headquartered firms — Amazon and Walmart.
What is ONDC?
A not-for-profit organisation that will offer a network to enable local digital commerce stores across industries to be discovered and engaged by any network-enabled applications.
- Neither an aggregator application nor a hosting platform
- All existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network.
Aim: To enable buying of products from all participating e-commerce platforms by consumers through a single platform.
- Currently, a buyer needs to go to Amazon, to buy a product from a seller on Amazon.
- Under ONDC, a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).
- The ONDC model is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments.
- UPI allows people to send or receive money irrespective of the payment platforms they are registered on.
What led to formation of ONDC?: An outreach conducted by The Department for Promotion of Industry and Internal Trade (DPIIT), under Ministry of Commerce and Industries, found that there is a huge disconnect between the scale of online demand and the ability of the local retail ecosystem (small sellers and hyperlocal supply chain) to participate. ONDC will be required to get funding independently and have a self-sustaining financial model.
Benefits of ONDC: Standardise operations like cataloguing, inventory management, order management and order fulfillment, hence making it simpler and easier for small businesses to be discoverable over network and conduct business.
Challenges: Such as getting enough number of e-commerce platforms to sign up, along with issues related to customer service and payment integration.
What is the current status?
- Pilot Stage: Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore — with a target of onboarding around 150 retailers.
- Advisory Council: To analyse the potential of ONDC as a concept and to advise the government on measures needed to accelerate its adoption.
- Future Expectation: Over the next five years, the ONDC expects to bring on board 90 crore users and 12 lakh sellers on the network, enabling 730 crore additional purchases and an additional gross merchandising value (GMV) of ₹3.75 crore. The GMV for the digital commerce retail market in India was ₹2.85 lakh crore ($38 billion) in 2020, which is only 4.3% of the total retail GMV in India.
Source: The Hindu
