ONDC is the government’s initiative to protect the retail Davids from the rapacious Goliaths, just as NPCI has, to a great extent, broken the nation’s dependency on Visa and MasterCard by promoting UPI and the desi RuPay
Open Network for Digital Commerce (ONDC) Chief Executive T Koshy, while hailing the nascent initiative to end the monopoly of giants like Amazon and Flipkart as ‘UPI moment for e-commerce’, surprisingly also said e-commerce as a sector would become irrelevant.
What he perhaps meant was that ONDC, an open-source digital platform similar to Android on the smartphone front, will just play the catalytic role of a facilitating search engine and thus end the need for one to keep open all the e-commerce portals, make a comparison and then place her order.
If Amazon and Flipkart board the ONDC bandwagon, as they are going to, both will show up when a buyer, through an ONDC-compatible buyer app like Paytm, looks for a product. Indeed, it will also show up other small sellers offering the same product who have defiantly stayed away from Amazon and Flipkart, fearing their domineering tendencies and unwilling to surrender a substantial sliver of the sale proceeds to the e-commerce giants towards fees or commission.
The truth is ONDC is the government’s initiative to protect the Davids (small traders dotting our retail-scape) from the rapacious Goliaths (Amazon, Flipkart, et al), just as the National Payment Corporation of India (NPCI) has to a great extent broken the nation’s dependency on Visa and MasterCard by promoting UPI and the desi RuPay card, thereby saving for the nation the outgo of precious foreign exchange by way of transaction fees merchants have pay to them. If card processing is not a rocket science, so isn’t aggregating.
Suspicion about bigger players
The government has always had a sneaking suspicion that the big e-commerce firms are not content playing the role of the docile facilitator as they are supposed to under the marketplace model, but are dictating the price, discount, etc., subtly as well as openly by promoting some brands to the exclusion of others — practices that are part of the proscribed inventory model — and also by charging extortionate commission or service charges from small traders and delaying their payments unconscionably.
It has made several amendments to the legal ecosystem for foreign e-commerce firms, chiefly prohibiting related parties from selling on their platforms, prohibiting exclusive sales, etc. But, like they say, for each peremptory law, there are escape routes. In short, the government seems to have thrown in the towel after finding them incorrigible — a leopard doesn’t change its spots. And, in sheer frustration, it seems to be subtly egging small traders to jump ship and join ONDC.
So, ONDC, far from making e-commerce irrelevant, has the laudable aim and potential of being the facilitator for fair e-commerce practices. It is like a fund-of-funds, making giants like Amazon a cog in the wheel and bringing them on their knees — they will face the mortification of competing with small traders whom they were dominating till recently and who willy-nilly suffered for want of a more equitable online forum to hawk their wares.
It can also be likened to Policybazaar, the insurance aggregator. You don’t have to log into all insurance websites to get the best rates. Policybazaar does it for you.
Now, ONDC is going to do it for you for shopping from the comfort of your home. The small traders don’t have to worry about their woeful deficiencies in logistics for quick delivery and payment gateways. ONDC ensures that they get the best on these scores. The ONDC platform has onboarded the big boys in e-commerce logistics.
Founded in April 2022, ONDC is basically a network of a number of small and large-scale e-commerce players with the aim of breaking the dominance of firms like Amazon and Flipkart in India. Reliance Retail, too, is set to join the seller bandwagon. Lest they are left out of the sweepstakes, sellers big or small must be borne on the registry of ONDC.
Currently, more than 60 per cent of India’s e-commerce market is controlled by Amazon and Flipkart, which will change if the ONDC experiment becomes successful. A pilot programme is already underway to include kiranas and small and medium businesses in Bengaluru and four other cities.
An open aggregator network
This open network will allow local commerce across important segments like grocery, food delivery, hotel booking, travel bookings and more, to be discovered and engaged by any network-enabled app. One understands ride apps like Ola and Uber too may have to throw their weight behind ONDC eventually.
That banks are ONDC’s major investors, with Kotak Mahindra, HDFC, SBI and Axis Bank picking up 7.84 per cent stake each, shows that they, along with other banks, would launch buyer apps compatible with ONDC to get a sliver of the promising business. Paytm was the first to launch an ONDC platform for shoppers, followed by IDFC First Bank. PhonePe will be launching a consumer-facing app as a part of the ONDC network shortly. Mobile service providers too can be expected to throw their hats in the ring.
So, unbundled interoperability is what ONDC is all about — a software to cherry-pick your seller without too much effort. It also would have an online dispute resolution mechanism in place and rating of sellers with fake and spurious goods sellers facing blacklisting. E-commerce will not become irrelevant but fairer for everyone having a skin in the game, though the moot question is how long the party would last.
Common sense tells us packing and delivery charges are much more vis-à-vis the brick-and-mortar stores. Besides, with delivery boys crisscrossing the roads dangerously on their motorbikes, traffic regulations have become that much more difficult. But ONDC can be counted upon to deliver and break the stranglehold of biggies.
(The writer is a CA by qualification, and writes on business, consumer issues and fiscal laws)pen Network for Digital Commerce (ONDC) Chief Executive T Koshy, while hailing the nascent initiative to end the monopoly of giants like Amazon and Flipkart as ‘UPI moment for e-commerce’, surprisingly also said e-commerce as a sector would become irrelevant.