Strategies for the social sector

Retail in India is changing faster than ever before. The last two years of the pandemic have accelerated and crystallized the transformations of the last decade. Digital has become the new norm. Big players and new entrants have made their mark in online shopping, food delivery, local travel and more. In this brave new world, where customers expect same-day or even ten-minute delivery, retailers are reimagining their physical stores. For customers, digital building blocks like UPI have gained acceptance and e-commerce has been adopted in small towns.

The growth of the internet and e-commerce sector in India has been further accelerated by the shift in consumer behaviour due to the pandemic. On the back of rising internet penetration and increasing income, India’s consumer digital economy is expected to be a US$800 billion market in 2030, registering a ~10x growth from 2020. Technology is powering this future of digital commerce. Retailers rely on AI to sift through data to personalize customer experience, plan their shelves, streamline inventory, forecast demand and manage their supply chain. The first nine months of 2021 alone saw a 260% increase in the capital invested in small and mid-sized retail technology companies.

While the customers are thronging to online platforms, the ability of large e-commerce companies to use their size, reach and access to customer data to weaponize it and undercut their rivals has come under scrutiny in several countries. Companies like Google and Amazon hold their edge with complete data monopoly and access to user insights. Engaged users increase these platforms’ data monopoly, creating an endless loop where the supremacy of dominant platforms remains unchallenged. Such an economy is monopolized by a handful of players and is antithetical to the free market, which is the foundation of modern, global economics. Several countries with free markets (and some without) are accelerating the overhaul of their anti-monopoly laws to improve online platform governance rules to control monopolistic practices and create more competition in digital commerce.

This is where the Open Network for Digital Commerce (ONDC) has potential to become a game changer. The ONDC is Indian government’s initiative that aims to curb digital monopolies and standardize online commercial interactions. It is a digital building block that could be used by all commercial entities. In the real world, every business can build their own store, design offerings, reach customers, retain customers and build long-term relationships. Similarly, the digital world needs an open and standardized network to enable a thriving commerce – what ONDC aims to enable. Moreover, in an era where legislation seems to be the norm, the ONDC is such an elegant way to curb digital monopolies.

ONDC, could be an essential addition to the digital building blocks available to enterprises. It will unbundle the platform that controls the two-way interaction of a buyer and a seller. On the ONDC, a seller based on open protocols, could potentially interact and be connected to multiple buyers, just as the buyer could also be connected to various sellers, very similar to the already existing UPI service in India, where a person can make payments irrespective of the app the payer and receiver use. This many-to-many relationship would allow for members in the value chain to discover players up and down the stream without having to pay a disproportionate fee to the metaphorical ‘middleman,’ the proprietary platform in this case.
With ONDC, we could see digital goods being unbundled from the value chain and form entirely new value chains. Unlike eCommerce platforms that consolidate and ‘gatekeep’ business online, ONDC intends to enable players to interconnect and create multi-chain setups or ecosystems — a setup that could allow for a more equitable distribution of profits across all participants in a value chain. It also has the potential to create an inclusive network bringing together diverse participants from the remotest parts of India and power economic growth; therefore pushing towards realizing India’s vision of becoming a $5 trillion economy.

Effectively, ONDC could level the playing field for enterprises, as it has the potential to digitize the entire value chain, is expected to promote interoperability and create an open, inclusive and competitive digital commerce marketplace. Open protocols like ONDC will enable the necessary underlying binding framework to nourish the ecosystem for small stores like kiranas to survive and thrive. As dominant retail brands compete for market dominance, other players might not have to create their own massive platforms by diverting valuable resources to survive in the new world where first mover advantage is critical.

As a platform, ONDC can also help small businesses increase discoverability by creating a digital storefront and gain autonomy of choice. Store owners could gain a far more effective and efficient method of executing inventory procurement and can seamlessly integrate their inventory status. With the internetwork operability set by ONDC, the owner can manage books using applications registered with ONDC – just as the universal UPI id works. The open data ledger and privacy protected exchange of data (powered by ONDC’s network policies) can also help small businesses create their own credit scores using the information from transactions.
For large private enterprises, there is now an opportunity to reach the entire country and hinterland by way of a readymade platform at a fraction of the cost and time which otherwise would take several years and millions of dollars to build and promote. For instance, FMCG companies are already creating and strengthening their D2C channel and ONDC could become another way for them to reach their customers directly. Also, crucial business data would be made available through the entire ecosystem instead of being concentrated with one party or marketplace.

Across retail, banking, financial services, insurance, healthcare, logistics, education and more, ONDC could enable an open and democratized way for organizations to conduct their business. Several questions and challenges remain on how such a global first, gargantuan, open system of commerce would function – one that could potentially cater to 1.3 billion Indians as consumers with myriad hues of network participants – from the huge established digital native marketplaces and closed ecosystems to the small kirana.

But the promise and potential of ONDC as a transformative force for the betterment of commerce is compelling and one that no large enterprise can ignore. ONDC promises an era of open ecosystems powered by digital building blocks. The possible digital ubiquity that ONDC can usher in coupled with building blocks like NPCI, Aadhaar and UHI can help private enterprises re-focus on what really matters to their customers – a great product and a memorable customer experience.



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Disclaimer

Views expressed above are the author’s own.



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