Open Network for Digital Commerce (ONDC)

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Recently, the government of India announced the launch of the pilot phase of open network for digital commerce (ONDC) in five cities.

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• The aim of this drive is 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. 
  • After UPI, ONDC is the new game changing idea to democratise commerce. 

Open Network For Digital Commerce (ONDC)

• It is a not-for-profit organisation that will offer a network to enable local digital commerce stores across industries to be discovered and engaged by any network-enabled applications. 
• 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.
• Aim: 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, 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).
• ONDC Model: 
  • It 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.
• Why was it needed?
  • The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industries, conducted an outreach during the outbreak of the COVID-19 pandemic 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. 
  • Following this, consultations were held with multiple ministries and industry experts and ONDC was envisioned to revolutionise digital commerce in India.

Image Courtesy: ToI 

• New Feature: 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. 
• Financially Independent: 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.
• Present Status: 
  • It is in its pilot stage in five cities: Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore, with a target of onboarding around 150 retailers.
  • The government has also constituted an advisory council to analyse the potential of ONDC as a concept and to advise the government on measures needed to accelerate its adoption. 
  • Over the next five years, the ONDC expects to bring on board 90 crore users and 12 lakh sellers on the network, enabling 730 crore additional purchases and an additional gross merchandising value (GMV) of ?3.75 crore. 
  • The GMV for the digital commerce retail market in India was ?2.85 lakh crore ($38 billion) in 2020, which is only 4.3% of the total retail GMV in India.

Significance

• The ONDC will standardise operations like cataloguing, inventory management, order management and order fulfilment.
• It will be made simpler and easier for small businesses to be discoverable over network and conduct business.
• It will open the world of choice to everyone utilising it. 
• Confidentiality: ONDC will work with its participants to publish anonymised aggregate metrics on network performance without compromising on confidentiality and privacy.
• Transparency: The proposed platform aims to create a level playing field for e-commerce behemoths such as Amazon, Flipkart, and offline traders who have been crying foul at the unfair trade practices of these e-tailers. 
• The platform will also be compliant with the Information Technology Act, 2000 and designed for compliance with the emerging Personal Data Protection Bill.

Way Ahead

• A potential issue that needs to be resolved is getting enough e-commerce platforms to sign up, along with issues related to customer service and payment integration.
• The nine-member advisory council formed should work on measures needed to design and accelerate the adoption of ONDC.

Source: TH