ONDC - How Does it Work and What is its Impact on Startups?

 Up until now, India has been following a platform-centric model for digital commerce. This means the availability of several different online platforms for sellers to sell their products and buyers to purchase them after registering on these platforms. This also means that the buyers and sellers have to access the same platform for a deal to happen. 

The goal of ONDC is to take eCommerce from the platform-centric model to an open network model, making digital commerce accessible to all types of sellers and buyers. ONDC also aims to bring buyers and sellers from different platforms together, eliminating the need for buyers and sellers to register on each other’s platforms. This is to say that buyers and sellers have to just link their platforms to the ONDC network to connect with one another. 

The concept of ONDC is similar to that of the UPI used for financial transactions. The UPI unites the banking partners and the merchants as well as users through a unified platform and is linked via a mobile number. ONDC aims to extend the concept to digital commerce and link buyers, sellers, logistics aggregators, payment gateways, etc., on one platform. This makes buying and selling much easier for all those who are part of the ecosystem. 

In short, the ONDC network enables buyers to connect with sellers and make transactions irrespective of the applications they are making use of to buy or sell products. 

The concept of "open source" indicates that the code deployed for enabling a process is freely available for everyone’s use, modification, and redistribution. For instance, the iOS operating system is a closed source, meaning it cannot be legally used or modified. On the other hand, the Android OS is open source. Smartphone manufacturers like Samsung, Nokia, Xiaomi, etc., can modify the OS for their hardware. 

ONDC aims to create an open network and employ open specifications as well as network protocols, remaining independent of any specific platform and digitizing the operation of the entire value chain, standardizing operations, fostering the inclusion of suppliers, improving logistics efficiency, and augmenting value for consumers. 

At present, merchants and retailers wishing to take their business online have to either create a website of their own or use an aggregator’s platform (online marketplace). The first option calls for technical support and is a cost-intensive process. The second option may appear to be very convenient, but it has its own problems. 

Top aggregators such as Amazon and Flipkart, both US-based companies, take away a major share of sellers’ profits for displaying and selling merchants’ and retailers’ products on their platforms. Besides, these marketplaces are known to collect sellers’ data and introduce their products so that they can stay ahead of the curve. 

Another major concern related to eCommerce is that small retailers, merchants, and MSMEs lag behind because of limited penetration in small villages and towns. As a result, small businessmen fail to reap the benefits of the opportunities offered by booming digital commerce. 

The ONDC network has been created to counter these problems and make e-commerce accessible to even small merchants and retailers. The platform enhances three major aspects that buyers and sellers yearn for: discoverability, transparency, and interoperability. 

The aim of the initiative is to curb digital monopolies and create new opportunities by giving support to microenterprises, SMEs, and small traders. The idea was conceived by the Department for Promotion of Industry and Internal Trade under the Commerce and Industry Ministry. 

Big eCommerce players like Amazon and Flipkart have evinced an interest in supporting the program. Though this will put an end to their monopoly, they will be able to tap into the seller side of the network and supply goods. Besides enabling connection with new users, the ONDC network will provide platforms with access to sizable business-to-business verticals. 

The ONDC’s pilot program is operational in five cities across India: Bengaluru, Coimbatore, New Delhi, Bhopal, and Shillong. In the current beta-testing phase, there are only five sellers and a limited number of buyers. The network is expected to be available in about 100 cities by the end of this year and will extend to a wider public in the cities where it is currently functional. 

What is the Significance of India’s Open Network for Digital Commerce? 

ONDC aims to digitize the complete value chain by standardizing operations, fostering the inclusion of suppliers, enhancing logistics efficiency, and augmenting value for consumers. Once the ONDC platform becomes fully operational, all eCommerce companies in India will have to follow the same processes, just like Android mobile devices, regardless of the brand.

 In addition to providing a boost to small-time online retailers and new entrants, this helps to improve discoverability, inclusivity, and interoperability. It will also empower both suppliers and consumers, break the monopoly of eCommerce giants, and drive innovation and transform businesses in various sectors like food, retail, and mobility. 

Furthermore, businesses will benefit from transparency in deals, lightweight investment, and lower business acquisition costs. In addition, the ONDC network will contribute substantially to significantly reducing the time-to-market and time-to-scale. 

Large eCommerce firms have filed protests because of their heavy investments in R&D and the deployment of technology and processes. However, the Indian government is likely to consider the country’s eCommerce market value, estimated to touch US$200 billion by 2027 as per Statista, to ensure the engagement and participation of all types of businesses. 

Amazon and Flipkart have captured 80 percent of the Indian eCommerce market by offering aggressive discounts and promoting preferred sellers. Indian retail giants like Reliance and Tata have also launched retail platforms, shopping apps, and super apps. Besides, the share of online retail is just six percent of the total retail market. But the scenario is changing fast. With about 800 million smartphone users, no global retailer can easily dismiss India. In terms of market size, China is the only competitor to India. 

The launch of the ONDC network creates opportunities for startups to connect directly with customers around the globe. It is also believed that the open network will be a game changer as far as the online retail sector is concerned. 

Many start-ups are now looking to enter the IPO market to kick-start their growth. They include FirstCry, PharmEasy, and OYO, among others. To be profitable, companies must choose their business model, ensuring that it supports their future growth. The key is sustainable growth, and a lack of funds should not deter start-ups from achieving growth. The business is not getting funding, but how you serve your customers.

Zartek Technologies -  Mobile App Development Company in India

As one of the leading mobile application development companies in India, we have the experience and experience to create affordable solutions for businesses of all sizes. At Zartek, we have a team of professional developers who are capable of designing the right eCommerce solutions that help our clients to tap into the opportunities offered by the ONDC network.