India is one of the fastest-growing e-commerce markets in the world. The market is also dominated by a few global giants, which account for more than 60% of online sales. This poses a challenge for millions of small and medium enterprises (SMEs) and micro-entrepreneurs who often lack the technological expertise, resources, and visibility to compete effectively in the digital space.
To address this challenge, the Indian government launched its Open Network for Digital Commerce (ONDC) in April 2022 as a non-profit company that aims to create a shared network of e-commerce platforms that will enable the display of products and services from all participating sellers in search results across all apps on the network.
The main objectives of ONDC are to increase e-commerce penetration in India from nearly 8% to 25% of consumer purchases in the next 2 years, to sign up 900 million buyers and 1.2 million sellers on the network within the next five years, and to achieve a gross merchandise value of $48 billion. The focus of ONDC is on small merchants and rural consumers, with apps in Indian languages and support for various payment methods.
How ONDC will work:
ONDC works by connecting buyers and sellers through a common platform. Buyers will be able to search for products and services on the platform, and sellers will be able to list their products and services for sale. ONDC will also provide logistics and payment services to buyers and sellers.
Benefits of ONDC:
ONDC is expected to bring several benefits to the Indian e-commerce market. These benefits include:
- Increased competition: ONDC will create a more competitive e-commerce market, which will benefit consumers by giving them more choices and lower prices.
- More opportunities for small businesses: ONDC will give small businesses a fair chance to compete with large retailers. This is because ONDC will be open to all businesses, regardless of size.
- Boost to the economy: ONDC is expected to create jobs and boost the Indian economy; it will create new businesses and help existing businesses grow.
ONDC has already expanded into 236 cities across India and has onboarded 36,000 sellers on its network as of May 2023. It has also launched domains for various categories such as food and beverage, grocery, fashion and footwear, home and kitchen, electronics, beauty and personal care, mobility, financial services, and services. ONDC claims that it has helped to increase sales and visibility for small businesses and has reduced costs and dependencies for buyers.
ONDC is seen as a game-changer for Indian e-commerce as it promises to democratize the sector and level the playing field for SMEs and micro-entrepreneurs. It also hopes to end predatory pricing, especially in high-margin, high-value products. However, ONDC also faces some challenges such as convincing existing platforms to join the network voluntarily, ensuring data security and privacy, creating awareness and trust among users, and scaling up its operations and infrastructure.