ONDC: HOW IT IS BECOMING THE E-COMMERCE GAME CHANGER

As the popularity of online shopping continues to soar, more entrepreneurs are gravitating towards establishing e-commerce businesses instead of traditional brick-and-mortar stores. The advantages are evident: swift launch, cost savings on real estate, and the ability to reach a broader customer base. However, setting up an e-commerce venture entails mandatory registrations and compliance. This blog delves into the game-changing potential of the Open Network for Digital Commerce (ONDC) and how it simplifies the e-commerce journey for small businesses.

Introducing ONDC

ONDC, or Open Network for Digital Commerce, is a decentralized and interoperable network designed to bring together a diverse range of buyers and sellers in a single digital space. Unlike platforms like Amazon or Flipkart, ONDC functions as a network rather than a standalone platform, enabling enhanced interactions between buyers and sellers. ONDC aims to foster inclusivity in e-commerce by onboarding a multitude of sellers, expanding product offerings, and driving competition to lower commission fees.

Enabling Growth for Small Businesses

• ONDC addresses the current low adoption rate of e-commerce in India, where only 8% of Indians engage in online shopping.

• Small businesses can leverage ONDC to establish a digital presence, irrespective of their geographical location, size, or product offerings.

• By joining ONDC, sellers gain access to a larger customer base, increased sales, higher revenue, and the opportunity to collaborate with various logistic partners.

Simplifying Seller Onboarding

• Sellers are boarded onto the ONDC network through seller apps, facilitated by companies specializing in digitizing commercial activities or offering end-to-end order fulfillment services.

• These seller apps play a crucial role in enabling retailers, consumer packaged goods (CPG) brands and direct-to-consumer (D2C) brands to participate in ONDC.

• Compared to selling on dominant e-commerce platforms, ONDC offers significantly lower referral commissions, currently at 3% as reported.

Advantages for Sellers

• Small-sized merchants benefit from reduced customer acquisition costs and marketing expenses, as buyer apps on the ONDC network already possess a base of regular customers.

• ONDC empowers digitally non-native retailers, manufacturers, and traders to establish an online presence without being limited by their location, size, or product range.

• The cost of participating in the ONDC network is expected to be considerably lower for sellers compared to platforms like Amazon and Flipkart.

Unleashing Innovation and Business Models

• The decentralization and unbundling of the e-commerce industry through ONDC drives innovation across the sector.

• Apart from seller and buyer apps and logistics providers, new business models supporting catalog management, order management, invoicing and reconciliation, warehousing, and inventory management emerge within the ONDC ecosystem.

Addressing Challenges

• ONDC acknowledges the challenges in onboarding merchants, particularly those unfamiliar with digital platforms or e-commerce practices.

• To ensure a smooth experience, best-in-class seller apps, agent-led onboarding processes, hand-holding assistance, and robust grievance redressal mechanisms are implemented.

• Although small-sized sellers may face initial difficulties in order fulfillment, returns, replacements, and refunds, the benefits of wider reach and improved margins are expected to outweigh these challenges.

The Need for ONDC

• Large e-commerce platforms, when operating as monopolies, tend to exert control, exhibit discretionary behavior, and engage in predatory pricing.

• The centralized nature of such platforms hampers the autonomy and flexibility of small and medium-sized sellers.

• ONDC's decentralized, interoperable network aims to counter these issues and provide small businesses with the freedom to participate on their own terms and with reduced barriers.

ONDC also addresses concerns surrounding data ownership and privacy. With the centralized platforms, sellers often have limited control over their data and customer insights. ONDC's decentralized nature ensures that sellers retain ownership of their data, allowing them to make informed decisions and develop personalized marketing strategies.

Furthermore, ONDC promotes healthy competition by providing a level playing field for sellers. Small businesses often struggle to compete with the dominance of established platforms that have significant market share. ONDC's open network encourages competition, driving innovation and diversity in product offerings. This benefits consumers who can access a wider range of products and services at competitive prices.

The integration of various logistics partners within the ONDC ecosystem also streamlines the supply chain for sellers. Small businesses can choose from a range of logistics providers based on their requirements and preferences, ensuring efficient and cost-effective delivery of products to customers.

In addition to its benefits for sellers, ONDC also offers advantages for buyers. The network simplifies the shopping experience by providing a unified platform where buyers can explore products from multiple sellers. This eliminates the need for customers to visit multiple e-commerce platforms to find the best deal. By leveraging ONDC, buyers can access a diverse range of products, compare prices, and make informed purchasing decisions.

ONDC is a government-backed initiative, which adds a layer of trust and credibility to the network. The Indian government's support demonstrates its commitment to fostering a vibrant and inclusive e-commerce ecosystem. By providing a platform that promotes fair competition, data ownership, and consumer protection, ONDC aligns with the government's vision of a digitally empowered nation.

In conclusion, the Open Network for Digital Commerce (ONDC) holds immense potential for revolutionizing the e-commerce landscape in India. By providing a decentralized and interoperable network, ONDC empowers small businesses to establish an online presence, expand their customer base, and compete with established players. The network simplifies seller onboarding, promotes innovation, addresses challenges, and ensures data ownership and privacy. With its focus on inclusivity, transparency, and competition, ONDC offers a promising platform for the growth and success of small e-commerce businesses. As the network continues to evolve and gain traction, it has the potential to reshape the e-commerce industry in India, benefiting both sellers and buyers alike.