ONDC can be a game-changer for India’s small businesses

ONDC, ecommerce
ONDC platform can revolutionise India's e-commerce sector by increasing digital consumption five-fold to $340 billion by 2030.

India’s e-commerce space is undergoing a revolution with the government’s Open Network for Digital Commerce (ONDC) platform. The government is leaving no stone unturned to make the platform a huge success. Recently, ONDC CEO Thampy Koshy said that the platform will continually evaluate the performance and commitment of the platforms that join it. Any partner that does not have their main platform on the network will be removed from ONDC, as the government looks to work only with fully committed platforms. Moreover, any player joining ONDC should ensure that their entire customer base has visibility of the network.

Currently, the ONDC platform undertakes 5,000 to 6,000 retail orders per day and more than 25,000 mobility transactions every day. It underwent a soft launch in five cities – Bengaluru, Delhi NCR, Shillong, Bhopal, and Coimbatore – in April last year, followed by a beta pilot in Bengaluru and some tier-II cities. At present, more than 240 cities and towns are in the alpha stage of trials. The network currently has 46 participants, including 12 buyers, 27 sellers, and seven logistics service providers. Recently, fintech unicorn Razorpay announced its decision to join ONDC. The Bengaluru-based company will launch a payment reconciliation service for network participants such as buyers, sellers, and logistic partners.

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ONDC is pivotal to India’s ecommerce story

ONDC has the potential to transform India’s e-commerce ecosystem. With this platform, the government aims to create a single digital platform that connects manufacturers, wholesalers, retailers, and consumers, enabling seamless transactions and reducing inefficiencies in the supply chain. According to a recent report by American consulting firm McKinsey, the platform has the potential to increase India’s digital consumption by five times to around $340 billion by 2030. Union Commerce Minister Piyush Goyal launched the report.

ONDC aligns with the government’s Digital India mission, which aims to transform the country into a digitally empowered society and knowledge economy. The initiative can be a key driver of digital transformation in the e-commerce sector. The interoperability between different players in the e-commerce ecosystem makes it easier for them to connect and transact with each other. ONDC aims to be an inclusive platform that benefits all players in the e-commerce ecosystem, including small and medium-sized businesses. Currently, only around 6% of all micro, small, and medium enterprises (MSMEs) actively sell on e-commerce platforms, which translates to around five to six million of them.

However, several challenges need to be addressed to make the ONDC initiative successful. The McKinsey report highlights them, including the lack of digital ease for both customers and sellers, low trust factor compared to traditional shopping channels, fears of unsafe online commerce, and unfavourable unit economics on platforms that keep people away from transacting online.

The success of the ONDC initiative depends on the adoption by manufacturers, wholesalers, and retailers. Some players in the ecosystem may be resistant to change or may not see the benefits of the initiative. Private players can play a significant role in increasing awareness about ONDC and earning consumer trust and adoption. As big names continue to associate with the government-backed initiative, more customers are likely to adopt the platform. The government must focus on wooing these private players.

The government must also work towards ensuring the availability of high-speed internet and reliable logistics infrastructure. While significant investments have been made in these areas, more work is required to ensure that these services are available to all parts of the country.

The e-commerce space in India is highly competitive, with several large players already operating in the market. To stand out and attract users, analysts believe that the ONDC initiative will need to differentiate itself and offer unique value propositions. One key aspect is to address the language barrier, as most online platforms are based on the English language, which is a challenge for the majority of users. ONDC is not immune to this problem, and it will need to offer multilingual support to cater to diverse audiences.

The success of the ONDC initiative will depend on the ability of the government and other stakeholders to address these challenges and create an ecosystem that is beneficial for all players in the supply chain. To achieve this, the government must focus on improving the digital infrastructure and logistics services, and promoting awareness and adoption of the ONDC platform. Moreover, the ONDC initiative needs to offer a user-friendly experience that addresses the needs of small and medium-sized businesses, which make up the majority of the e-commerce landscape in India.

If successful, the ONDC initiative could be a game-changer for India’s e-commerce ecosystem, enabling seamless transactions and reducing inefficiencies in the supply chain. Small businesses from across sectors such as grocery, mobility, fashion and lifestyle, hospitality, and others are likely to leverage the reach of ONDC platform, which could lead to a significant increase in India’s digital consumption by 2030. However, it will require the collaboration and effort of all stakeholders to make the initiative a success.