ONDC : The next UPI moment ?

-Penned by Rajdeep Sil

In the situation of the reader looking to buy any product online, at the first instant he/she is more likely to open up Amazon or Flipkart to search for the product. Similarly, from the seller’s perspective, he/she is more likely to list his products on Amazon or Flipkart in the hope of getting greater number of customers. This clearly depicts the over-reliance on Amazon & Flipkart, which is definitely not a healthy sign.

Introduction

Amazon & Flipkart have created their duopoly in the e-commerce segment. As a result, two of the important stakeholders, buyers & sellers, both are affected. Since a buyer is more likely to visit these 2 platforms for their purchases, there is a significant chance that they might overlook a seller who was selling the same product at a cheaper price. Similarly,  from the seller’s perspective, he might not get the preferential listing that he wants at these platforms, just because these platforms don’t earn from this seller in advertisement incomes. This condition can very well be seen as abuse of aggregator superpower. Currently, the entire model is a platform-centric model and the requirement is to move towards a network-centric model.

Genesis of ONDC (Open Network for Digital Commerce)

With an aim to digitise the value chain, standardise operations, promote inclusion of suppliers and enhance value for consumers, the Government of India has launched an initiative — Open Network for Digital Commerce (ONDC). ONDC is being projected as an initiative to promote open networks for all aspects of the exchange of goods and services over digital networks.

Touted to be an alternative to the e-commerce landscape, ONDC which is a non-profit company seeks to provide equal opportunities to small retailers to enjoy the benefits of the digital world and permit them to trade on a common platform.

Problems ONDC trying to address

1. Provide upliftment to the hyperlocal stores & lesser known sellers :

In India, around 1.2 crore Kirana stores, which are hyperlocal neighbourhood provision stores, account for 80% of the retail sector, but most of these stores are digitally excluded. As a result, they often fail to realise their full potential.

2. Curb the rising dominance of foreign e-commerce:

The current major players of e-commerce: Amazon & Flipkart have started to impose their will on the consumers in terms of who they buy from. For example, Amazon has a special tie-up with Cloudtail, which is recognised as a preferred seller on Amazon & accounts for nearly 35% of the entire sales on Amazon. This preferential bias towards Cloudtail has resulted in other sellers being displayed lower down the order, and thus loosing out on a competitive edge due to abuse of power by Amazon.

3. Ease the complications to be present in different platforms : Currently, if any seller wants to be present in more than one platform, then they have to maintain separate infrastructure and processes because each platform will have its own policies and processes. This adds to the cost of sellers and limits participation. For example, if a restaurant wants to be listed in both Zomato & Swiggy, they would have to adhere to the different guidelines of both of these platforms simultaneously. Further, the buyer and seller need to be on the same platform to discover each other. Such inefficiencies lead to limiting the choice & discoverability within the fragmented collection of platforms

Fundamental principles of ONDC

In the current situation, sellers have caught themselves between a rock & a hard place. On one hand, it is difficult for the sellers to live without these platforms due to their reach, while on the other hand the increasing commissions & ad-costs to stay at these platforms are making it difficult for them to sustain. This is the conundrum that ONDC is looking to solve by providing sellers with an open platform & network, as opposed to walled gardens, through which they can easily reach out to consumers without paying an arm and a leg.

ONDC achieves this purpose through these 3 fundamental parameters:

1. Discoverability : Providing the sellers with easy & fair discoverability on the platform without any ingroup bias towards certain sellers.

2. Interoperability : This is one of the most unique feature of ONDC, where the sellers can complement each other to deliver the final service. For example, if Zomato currently does not have any of its own delivery valet near a restaurant, then the user can instruct a delivery person from Dunzo to pick up its order from the restaurant even though if the order was placed from Zomato. This would give more convenience to both the users & sellers for their services to be found & utilised.

3. Transparency : By ensuring that all the services are listed & there is clear visibility, so that price comparison can happen with ample choice for the consumers.

Author’s take on ONDC

While the purpose & the intention of the government is admirable, to save the small & mid-sized stores from the giants Amazon & Flipkat, however the implementation of this ambitious project seems a herculean task with its own loopholes. Here are certain pressing issues which ONDC hasn’t addressed so far:

1. There is no doubt that companies like Amazon, Flipkart, Zomato etc will be present on the ONDC platform as well. In such a situation, they can still use their cash burning power lower the prices & continue to appear more lucrative to the consumers, thus successfully defeating the purpose of greater opportunities to the small & mid-sized sellers. 2. While ONDC talks about greater visibility to the small & mid-sized sellers, there is a technical issue that needs to be addressed for the same. It is to be noted that the order in which various sellers would be displayed would be on the basis of better rankings, reviews etc, in such a situation, if the small sized sellers are not able to garner much attention in the beginning itself, it is more likely that they will be pushed significantly below in the ordering thus reducing their visibility.

While ONDC is an idea whose time has come, it is not the silver bullet that the media is portraying it to be. Ultimately, the consumer is the king. They do not care about the platform’s seller-friendliness. All they care about is convenience and experience.

Keeping the above points in mind, whether or not, ONDC can garner much support and become successful, only time will tell.

References

Apoorva | Jeevan | Priyank | Rajdeep | Sakshi | Shelly | Varnika

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