- The government of India recently launched the pilot phase of open network for digital commerce (ONDC) in five cities with an aim to democratise the country’s fast growing digital e-commerce space that is currently dominated by the two U.S.-headquartered firms — Amazon and Walmart.
What is ONDC?
- ONDC is a network based on open protocol and will enable local commerce across segments, such as mobility, grocery, food order and delivery, hotel booking and travel, among others, to be discovered and engaged through a single platform.
- The platform aims to create new opportunities, curb digital monopolies and by supporting micro, small and medium enterprises and small traders and help them get on online platforms.
- It is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry.
- It is neither an aggregator application nor a hosting platform, and all existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network.
- The ONDC aims to enable buying of products from all participating e-commerce platforms by consumers through a single platform.
- Currently, a buyer needs to go to Amazon website/app, for example, to buy a product from a seller on Amazon. Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).
- The ONDC model is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments.
- UPI allows people to send or receive money irrespective of the payment platforms they are registered on.
- The open network concept also extends beyond the retail sector, to any digital commerce domains including wholesale, mobility, food delivery, logistics, travel, urban services, etc.
What led to formation of ONDC?
- During the outbreak of the COVID-19 pandemic, the government tried to understand its impact on small sellers and hyperlocal supply chain functioning. Post which, it found that there is a huge disconnect between the scale of online demand and the ability of the local retail ecosystem to participate.
- ONDC has been envisaged as an entity which should be able to work without the need for day-to-day guidance and advisory from the shareholders/members.
- The independence of the management is linked to the financial independence of the entity, and therefore, the entity will be required to get funding independently and have a self-sustaining financial model.
- The government believes that ONDC will put an end to the domination of the e-commerce market by a few large platforms. Amazon and Flipkart, for instance, have been accused of discriminating among sellers on their platforms and promoting certain seller entities in which they hold indirect stakes.
- With an open network like ONDC that connects buyers and sellers across platforms, the government hopes to level the playing field and make platforms redundant.
- It is said that buyers will also be able to access sellers across platforms without having to switch between multiple platforms.
- Over the next five years, the ONDC expects to bring on board 90 crore users and 12 lakh sellers on the network.
- The ONDC will standardise operations like cataloguing, inventory management, order management and order fulfilment, hence making it simpler and easier for small businesses to be discoverable over network and conduct business.
Why in News?
- Union Minister of Commerce and Industry Piyush Goyal chaired a meeting to review the progress of Open Network for Digital Commerce (ONDC).
- ONDC expects the number of network participants to substantially increase to more than 30 in the coming weeks. Building on this, ONDC plans to start beta-testing the network with public users in limited areas.
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