Open Network for Digital Commerce

Source: By Soumyarendra Barik: The Indian Express

US firm Microsoft has become the first big tech company to join the Open Network for Digital Commerce (ONDC), a government-backed project which is aimed at enabling small merchants and mom-and-pop stores in parts of the country to access processes and technologies that are typically deployed by large e-commerce platforms such as Amazon and Flipkart.

The software giant intends to introduce social e-commerce — group buying experience — in the Indian market, which would include a shopping app for Indian consumers along with their social circle, harnessing the ONDC network to discover the best pricing among retailers and sellers.

First, what is Open Network for Digital Commerce (ONDC)?

It is an initiative aimed at promoting open networks for all aspects of exchange of goods and services over digital or electronic networks. ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform. It is being developed as a counter to the current duopoly in the Indian e-commerce market which is largely dictated by Amazon and Walmart-owned Flipkart.

In May this year, the Department for Promotion of Industry and Internal Trade (DPIIT) went live with a test run of ONDC in cities like Delhi-NCR, Bengaluru, Coimbatore, Bhopal, and Shillong where it plans to onboard 150 sellers.

What does Microsoft joining ONDC mean, and who else is on board?

Microsoft getting on board the ONDC wagon means the project gets its first international marquee name ahead of its Bengaluru launch.

A number of participants currently live on the ONDC network, offering a number of services in the e-commerce supply chain such as buying, selling and offering logistics services. Among those that are live are Paytm, which has joined the platform as a buyer, and Reliance-backed Dunzo, which is offering logistics services for hyperlocal deliveries.

Companies like Kotak, PhonePe, Zoho and Snapdeal are in the “advanced stage of development”, according to the ONDC website. Axis Bank, HDFC Bank and Airtel have already initiated integration with the network. According to some media reports, e-commerce giants Flipkart and Amazon are also considering joining the network.

How does ONDC work?

The ONDC platform lies in the middle of the interfaces hosting the buyers and the sellers. So far, the buyer side interface is being hosted by Paytm, whereas the seller side interface is being hosted by other players like GoFrugal, etc.

When a buyer searches for an item on the Paytm app, from where ONDC has gone live, the app will connect to the ONDC platform, which will connect it to seller side interfaces that will list all the companies from where you can buy the particular item.

On ONDC, there will be several other backend partners such as logistics service providers, enterprise resource planners, e-commerce store hosting service providers, etc.

What are the challenges ONDC aims to address?

An ONDC strategy paper published earlier this year has flagged the rising dominance of global players in India’s e-commerce ecosystem, pointing out that the large quantum of investment required to build competitors to the integrated solutions offered by the big players has become an entry barrier for digital marketplaces.

It also flagged the inability of marketplace sellers to move out of the platform ecosystem, given that the value created by these small players is stored with the larger platforms. With this in mind, ONDC aims to transform the marketplace ecosystem from an operator-driven platform-centric model to a facilitator-driven interoperable decentralised network.

What does it mean for online buyers?

ONDC is being seen as the UPI-moment for the e-commerce market, and its whole claimed value proposition lies as “democratising” digital commerce, taking it away from the clutches of a handful of deep-pocketed companies, as is the case currently – a number of sellers can offer their goods and services on the network which could be accessed from different platforms, with the delivery and payments infrastructure being handled by different companies.

In theory, ONDC may enable more sellers to be digitally visible, which means that for online buyers, it could present increased options at a number of different price points.

One of the biggest criticisms of e-commerce giants globally has been that they have amassed critical data about users’ buying patterns, which gives them an idea about what products are in demand at any given point in time. There have been accusations made against companies like Amazon, in India and elsewhere, that it uses this data to launch similar products through an entity that it indirectly controls, usually at a price point regular sellers cannot match.