The Indian government is all set to launch an open network for digital commerce to take on the Indian arms of Amazon and Walmart that dominate the $73 billion domestic e-commerce market. The ONDC platform will allow buyers and sellers to transact with each other online irrespective of the applications used by them.
The platform will launch its operations in five cities initially and will later expand to 100 cities by August, bringing on board 10 million merchants and 30 million sellers. Venture capital firms and top banks have committed to pump in funds to develop the platform. And leading the effort is Nandan Nilekani, co-founder of Infosys and chairman of the Unique Identification Authority of India, which developed Aadhar, the world’s largest biometric identification system.
India’s retail market is worth at least $1 trillion, but it is highly fragmented. E-commerce is just a small fraction of this fast-growing market. Amazon and Flipkart together have invested $24 billion to capture the market. The multinational players that together control half of India’s e-commerce trade are accused of using their duopoly position to squeeze supplier margins and of giving preferential treatment to some sellers. The e-commerce market is expected to touch $188 billion by 2025.
ONDC to challenge dominance of Amazon, Flipkart
ONDC will look to create a level playing field for millions of merchants and small retailers who are losing ground to Amazon and Flipkart. The dominant players Amazon and Flipkart are accused of using predatory pricing to put small traders out of business. The Competition Commission of India, India’s antitrust watchdog had conducted a series of raids on the premises of sellers of Amazon and Flipkart amid charges of breaches of the competition laws of the country.
The ONDC network is being developed by the commerce ministry and will support segments such as grocery, food delivery, hotel booking and air travel. The platform will back micro, small and medium enterprises as well as small traders.
The government looks to repeat the success of UPI that brought the country’s lenders on a unified platform and created a system for person-to-merchant payments. However, developing technology to bring a wide range of players from Kirana stores and FMCG manufacturers to local restaurants is a huge challenge. The quality of the network is key to weaning away consumers from world-class platforms to the ONDC platform.
Apart from Nilekani, the advisory council of ONDC has RS Sharma, Adil Zainulbhai, Anjali Bansal, Arvind Gupta, Dilip Asbe, Suresh Sethi, Praveen Khandelwal, and Kumar Rajagopalan as members.