Introduction
The Open Network for Digital Commerce (ONDC) was established by the Indian government in an attempt to end the dominance of US-based companies Amazon.com and Walmart in the fast-growing e-commerce market.
Regardless of its use, the ONDC platform tries to connect and trade with buyers and sellers online.
According to a report released in 2021, two domestic corporations controlled almost half of the country’s e-commerce activities, restricting market access, favoring select vendors, and forcing supplier margins down.
As a result, Open Network for Digital industry works to ensure that all players are on an equal footing.
E-commerce enterprises in India would be forced to adopt the same practices as Android-based mobile devices once the Open Network for Digital industry is implemented and regulated, which is expected to happen in August 2022.
Improving discoverability, interoperability, and inclusiveness would benefit both smaller online stores like SMEs and new entrants.
By dissolving the monopolies of huge firms and internet platforms, it will empower suppliers and customers in industries including retail, food, and mobility.
In this article, we’ll delve deeper into it.
What is ONDC (Open Network for Digital Commerce)?
It is a decentralized blockchain-based marketplace that enables businesses to buy, sell, and trade digital goods and services.
Open Network for Digital Commerce is powered by the ERC20 standard OND token, which allows users to buy, sell, or trade any digital good or service on the platform.
The team has created a suite of tools to help companies get started on the platform, including a merchant portal, payment gateway, and an API.
This is currently in beta, and the team is working on adding new features and functionality to the platform.
The team is composed of experienced entrepreneurs and technologists who are passionate about blockchain technology and its potential to disrupt the e-commerce industry.
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E-commerce and retail in India
Traditional Indian retailers, known as kiranas (mom-and-pop shops), continue to dominate the market, accounting for 90 percent of the country’s retail market.
Due to an increase in online shoppers in India, the online retail sector in the country is expected to reach US$ 350 billion by 2030, up from an anticipated US$ 55 billion in 2021.
India’s e-commerce business is anticipated to develop at a 19.24 percent compound annual growth rate (CAGR) from $ 46.20 billion in 2020 to $ 111.40 billion in 2025, with food and fashion set to be the main drivers of growth.
As a result, dominating the ‘Kirana’ segment, which is run by local people and families, is the key to dominating the Indian retail companies.
Until Covid-19 had a major impact on the retail industry, dominating the Kirana market seemed unachievable.
What are the major objectives of ONDC?
The government expects that would end the e-commerce industry’s monopoly on a few large platforms.
The e-commerce market is currently separated into “silos” that these platforms operate and dominate, according to the research.
Amazon and Flipkart, for example, have been accused of treating sellers unfairly on their platforms and pushing specific seller companies in which they have indirect ownership.
The government believes that an open network, which connects buyers and sellers across platforms, would level the playing field and eliminate the need for platforms.
Buyers would be able to reach merchants across platforms without having to transfer between them, according to reports.
Through the Open Network for Digital industry, companies are able to compete directly with one another without the need for intermediaries.
To summarise, the government’s planned objectives for ONDC are as follows:
1. Putting an end to platform monopolies
2. Democratization and decentralization are two of the most important aspects of decentralization.
3. The value chain is becoming digitized.
4. Operational standardization
5. Accessibility and inclusion for sellers, especially small and medium-sized firms and local businesses
6. Improved logistical efficiency
7. Consumers have more options and control.
8. Ensure data security and privacy.
9. Lowering operating costs
What segments of commerce are covered under ONDC?
It covers all segments of digital commerce, including but not limited to: e-commerce, m-commerce, and d-commerce.
ONDC is an open protocol that facilitates the identification and engagement of local industry for any application that can be connected to a network, in areas such as mobile, shopping, food delivery, hotel booking, and travel.
How ONDC aims to democratize the future of digital commerce
Their aim is to democratize the future of digital industry by making it more accessible and convenient for companies of all sizes to buy, sell, and trade digital goods and services.
What does ONDC want to achieve?
The platform, according to Business Standard, promises to open up new opportunities, remove digital monopolies, and help micro, small, and medium companies, and small merchants gain access to online platforms.
DPIIT of the Ministry of industry and Industry is responsible for the project.
The aim of Flipkart and Amazon to join and integrate with the ONDC will undoubtedly upset their monopoly. In turn, the larger platforms will be able to tap into Open Network for the Digital industry seller side to market things.
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WHAT CHALLENGES DOES ONDC FACE?
According to CAIT, an association that represents 80 million Indian traders, the Open Network for Digital Commerce wants to tap millions of small firms that frequently lack technological knowledge.
As a result, the government will undertake a large awareness campaign to bring them on board with this new program.
Smaller firms with low volumes may also lack the resources to compete with Amazon and Flipkart in terms of discounts.
Currently, the team is developing solutions to mitigate these challenges.
Certain ground-level hurdles will have to be overcome by Open Network for Digital industry.
Are the goods offered by the merchant, for example, genuine or counterfeit?
What was the buyer’s experience with delivery?
Is it true that the buyer received the exact thing that he ordered?
Amazon, Flipkart, and other platforms spend millions of dollars to keep track of these.
The officials are still trying to figure out what’s wrong and how to solve it.
In the next months, the government’s technocrats will be tested in their capacity to provide a smooth alternative to e-commerce platforms.
It’s also unclear whether and how the government’s open network would include products from a variety of vendors.
In general, e-commerce platforms are compelled by competition to prominently display things that are most likely to stimulate the interest of buyers.
Vendors’ ability to fulfill client orders has a significant impact on their onboarding and merchant listing.
Platforms may invest money to establish their own onboarding and listing procedures.
If the government’s open network policies prevent media from profiting from such investments, they may go out of business.
This will have an effect on service quality in the long run.
Can ONDC overcome UPI’s challenges?
Yes, Open Network for Digital industry can overcome UPI’s challenges by making it more accessible and convenient for companies to buy, sell, and trade digital goods and services.
What is the significance of India’s open network for digital commerce?
The significance of India’s open network for digital industry is that it allows businesses to directly compete with each other without the need for intermediaries.
This is a major boon for small companies in particular, as they can now bypass the traditional e-commerce platforms that often favor larger businesses.
What are the potential benefits of ONDC for sellers?
- Getting your product in front of a large number of people
- Having improved cost and product discoverability
- An online company can be done with a small investment and at a low cost.
- For delivery partners, there are more and better possibilities.
What are the potential benefits of ONDC for buyers?
- Numerous dealers are available, so you can find the best deal.
- A wonderful tool for company digitization.
- Any product can be purchased using this central platform.
Benefits of ONDC for a technology platform
- Access to the growth of digital commerce through buyer and seller side applications, providing new chances for start-ups to promote innovation in various portions of the network.
- A shorter time-to-market and time-to-scale has been achieved.
- Concentrate on specialist features while allowing other partners to concentrate on other aspects.
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How it will take on Amazon and Flipkart?
It will take on Amazon and Flipkart by making it more accessible and convenient for businesses to buy, sell, and trade digital goods and services.
Small and medium-sized businesses alike will have the ability to skip the traditional e-commerce platforms that favor large companies.
The government-backed platform will level the playing field for e-commerce behemoths such as Amazon and Flipkart, as well as tiny offline traders operating Kirana stores, which are the backbone of India’s retail industry.
The business practices of Amazon and Flipkart have long been subject to complaints from small companies owners.
Their proven technology has allowed Amazon and Flipkart to gain a significant share of the online retail market.
If the government succeeds, millions of small businesses will go online.
What are the Features of ONDC?
1. The features of Open Network for Digital industry include a decentralized marketplace, powered by the ERC20 standard OND token, a merchant portal, a payment gateway, and an API. Through its proposed platform, the government hopes to level the playing field between e-commerce giants like Amazon and Flipkart and offline retailers.
Online retailers are accused of engaging in unethical business practices. The platform will also comply with the Information Technology Act of 2000 as well as the upcoming Personal Data Protection Bill.
2. It is an e-commerce UPI that intends to democratize digital or electronic commerce by moving it away from a platform-centric model and toward an open network architecture.
Merchants will be able to use Open Network for Digital industry to save their data in order to build credit histories and approach customers.
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3. They plan to use this system to make suppliers and buyers digitally visible and trade across an open network, regardless of the platform or application they employ.
It will also empower merchants and customers by breaking down silos to create a unified network that will promote innovation and scalability, affecting industries as diverse as retail, food, and mobility.
Small companies can now use compliant apps, offering them more options for becoming discoverable on the internet and conducting business.
It would also assist the widespread adoption of digital technology, according to the minister.
4. The new framework aims to encourage open networks based on open-source approaches, as well as open network protocols that are platform agnostic.
5. The backend of the Open Network for Digital Commerce is built on the Beck Platform, a decentralized digital commerce platform that is open and interoperable.
Beck Gateways provides anonymized aggregated data generated by the network.
6. Processes will be standardized, the entire value chain will be digitized, logistical efficiencies will be improved, supplier involvement will be encouraged, and customer value will be increased.
7. According to the Government of India’s announcement, ONDC would follow all essential processes to safeguard the network’s security and privacy.
Participants should not be compelled to submit transaction-level data.
Indeed will collaborate with its members to exchange anonymous aggregate network performance statistics while maintaining privacy and confidentiality.
8. The program is now in its pilot phase.
The government has organized a nine-member advisory committee to design and speed the implementation, which includes Nandan Nilekani of Infosys and R S Sharma, CEO of the National Health Authority.
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How does ONDC aim to boost competition?
Their aim is to boost competition by allowing companies to directly compete with each other without the need for intermediaries.
This will allow companies of all sizes to bypass the traditional e-commerce platforms that often favor larger businesses.
Existing platforms, according to the government, work in silos and are tightly managed, excluding many small companies.
Open Network for Digital industry is expected to increase competitiveness and encourage start-up innovation.
It also intends to attract logistics companies and others who can work with vendors to deliver goods to customers.
With apps in Indian languages, the focus would be on small merchants and rural consumers.
Officials from the ONDC compare the network to a mall with 1,000 gates rather than just two, restricting the potential for selected sellers to receive preferential treatment – a typical charge leveled at major e-commerce companies.
It will allow users to rate service providers, with these ratings relevant and visible across the network.
What does open source mean?
Open source refers to software that is free and available for anyone to use or modify.
Making a process or software “open source” means that the technology or code utilized in the process is free to use, redistribute, and modify.
Because Android is an open-source operating system, handset manufacturers like Nokia, Xiaomi, Samsung, and others can tweak it to fit their needs.
IOS is closed-source, which means it can’t be upgraded or used legally.
The mission is to build open networks that are based on open-source methods, use open standards and network protocols, and are platform agnostic.
What is the need for ONDC?
The need for Open Network for Digital Commerce arises from the fact that the current e-commerce landscape is dominated by a few large players, such as Amazon and Flipkart.
This has created a situation where small businesses often find it difficult to compete.
It aims to level the playing field by making it easier for businesses of all sizes to buy, sell, and trade digital goods and services.
Implementation strategy of ONDC:
The strategy document also goes into detail on the implementation approach, both short- and long-term.
In the short term, the planned implementation strategy is to provide user-friendly tools for quick integration.
Technical solutions such as adapter interfaces and other building blocks are being developed to help network participants onboard faster and more efficiently.
In order to make this a market-led community endeavor, It will also work on ecosystem expansion.
Simultaneously, as part of ONDC’s long-term implementation strategy, the organization aims to gradually increase its roles in development, network discipline, and service delivery.
Furthermore, the uses and benefits can be applied to a variety of sectors, disciplines, socioeconomic strata, and geographic locations.
Can the buyers and sellers use different applications?
Yes, the buyers and sellers can use different applications.
However, they will need to connect to the network in order to buy, sell, or trade digital goods and services.
To complete a transaction, buyers and sellers do not need to use the same platform or mobile app.
They can use a variety of applications while still conducting business.
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Will the ONDC platform become successful?
The success of the platform depends on its adoption by companies and users.
If more businesses and users start using it, then it is more likely to become successful.
How big is India’s e-commerce market?
India’s e-commerce market is estimated to be worth $32 billion.
Why ONDC push could boost small retailers online?
The ONDC push could boost small retailers online because it would make it easier for them to buy, sell, and trade digital goods and services.
Open Network for Digital industry is to digital payments what UPI is to e-commerce in India.
It will let buyers and sellers be digitally visible and trade across an open network, independent of the platform or application they use.
The team is working to democratize e-commerce so that millions of small mom-and-pop stores across the country, as well as small retailers, do not perish as they have in the West, but have an equal opportunity to engage using digital technologies to protect and grow their businesses, as well as serve their customers with modern delivery methods.
Who is behind this project?
It was nurtured by the Quality Council of India’s Department for Promotion of Industry and Internal Trade (DPIIT).
Working Principle of ONDC?
The working principle is based on the fact that companies can directly compete with each other without the need for intermediaries.
Will be able to launch a beta version of ONDC in a few months?
Yes, the team plans to launch the beta version of Open Network for Digital Commerce in a few months.
How this will work for cross-border transactions?
This will work for cross-border transactions by allowing businesses to directly connect with each other and trade digital goods and services.
It will help small retailers bring modern delivery options to their customers.
Yes, It will help small retailers bring modern delivery options to their customers.
The Open Network for Digital industry would ensure that small companies have an equal opportunity to interact with large corporations, secure their operations, and provide modern delivery systems to their customers.
How will it curb digital monopolies?
The project intends to expand opportunities and reduce digital monopolies by assisting micro, small, and medium businesses, as well as small merchants, in getting their businesses online.
The Department for Promotion of Industry and Internal Tarde, which is part of the Ministry of Commerce and Industry, is leading the charge.
Govt to launch open network for digital commerce in five cities.
The government plans to launch the open network for digital commerce in five cities—Mumbai, Delhi, Bengaluru, Hyderabad, and Pune.
Who are key stakeholders to the ONDC?
Some of the key stakeholders of the Open Network for Digital industry are small companies, entrepreneurs, and startups.
Twenty government and corporate entities have confirmed commitments totaling US$33.34 million (INR 2.55 billion).
Kotak Mahindra, Axis Bank, State Bank of India (SBI), HDFC, and Punjab National Bank are among the public and private sector banks that have purchased (PNB).
By investing INR 100 million (US$1.3 million) in 10,00,000 equity shares with a face value of INR 100 each, HDFC, SBI, Axis Bank, and Kotak Mahindra each obtained a 7.84 percent interest.
PNB earlier stated that it intends to buy a 9.5 percent interest in November 2021.
Around 80 businesses are attempting to connect the platform to market participants.
These companies, according to The Economic Times, create business software and apps for sellers, buyers, logistics platforms, and payment gateways.
Meanwhile, according to recent reports, 24 companies, including Ekart Logistics, Dunzo, and PhonePe, one of Flipkart’s logistics companies, are now integrating with this.
Meanwhile, Alibaba and Ant Group have exited Paytm Mall’s parent firm, Paytm E-commerce Private Limited (PEPL), due to the company’s shift in focus from traditional physical product e-commerce to ONDC and export.
Google is also talking to Open Network for the Digital industry about how to connect its services to the network.
How to register on ONDC?
If you want to join this network, you must provide information such as your name, phone number, email address, company/organization name, business sector, and job title.
Businesses can register by filling out a simple form.
Guidelines to register on ONDC online portal?
The guidelines to register on the online portal are as follows:
1. They must have a valid GST number;
2. They must have a registered business address;
3. They must have a bank account; and
4. They must provide other relevant information, such as contact details and website URLs.
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How will businesses be able to connect with each other on ONDC?
They will be able to connect with each other by using the platform’s built-in messaging system.
How will businesses be able to sell products on ONDC?
Companies will be able to sell products on Open Network for Digital Commerce by creating listings. Each listing will include information about the product, such as the price, description, and delivery options.
ONDC Announces a Hackathon to Promote Open Networks Innovation
The team has announced a hackathon to push innovation in open networks.
What is the purpose of the Hackathon?
The ONDC Hackathon aims to encourage developers to build applications that can be used on the platform.
What are the prizes for the Hackathon?
The prizes for the Hackathon include cash prizes, mentorship opportunities, and free tickets to the Conference.
Who is eligible to participate in the Hackathon?
Anyone who is interested in developing applications for the platform is eligible to participate in the hackathon.
How to register for the Hackathon?
Interested participants can register for the hackathon by filling out a form on the ONDC website.
Conclusion
The retail and e-commerce market in India will grow to be a massive industry as the country’s client base grows rapidly.
In the following years, it is predicted to expand to a $200 billion business. However, the government has numerous challenges.
Large corporations’ brand value may have an impact on local retail sales.
Small Companies would be devastated when startups like Zomato and Swiggy obtain additional investment to develop their business processes.
This platform may also have a significant impact on these loss-making firms that have received capital and created expansion plans.
The government should devise strategies to address these issues.
Small-medium players, on the other hand, appear to have a bright future.
More cultural variety will result in more lifestyle and habit modifications.
As a result, people will spend more money on products that reflect their culture and identity.
Apparels are extremely important in the retail industry. Fashion is representative of a person’s identity.
More consumption is unavoidable as the Indian economy develops. The retail e-commerce industry will increase as a result of this.