- In 2022, the government of India launched the pilot phase of open network for digital commerce (ONDC) 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.
- 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.
Role in Democratising Digital Commerce
- The ONDC platform aims to create new opportunities, curb digital monopolies and support micro, small and medium enterprises and small traders and help them get on online platforms.
- 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.
- 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.
- ONDC faces its own share of challenges and risks, which must be addressed. One of the pivotal challenges lies in ensuring the adoption and acceptance of ONDC by the various stakeholders within the e-commerce ecosystem.
- Another challenge is to ensure the quality and reliability of the services and products offered on the network. ONDC will have to establish clear standards and guidelines for quality assurance, consumer protection, data privacy, cybersecurity, etc.
- ONDC will also have to ensure effective dispute resolution mechanisms for handling complaints and grievances.
- ONDC will have to ensure the sustainability and scalability of the network to make sure that the network can handle the increasing volume and variety of transactions and data.
Why in News?
- Currently, the network has more than 40,000 sellers spread across over 200 cities. The platform is currently offering more than 27 lakh products on its network.