Decoding ONDC: 5 ways in which it will pave the way for future

Open Network for Digital Commerce (ONDC) has set India’s biggest digital commerce revolution into motion, and opened up bountiful opportunities for the country’s commercial landscape. With its focus on unbundling offerings, combined with interoperability between platforms, ONDC is all set to bridge the gap between buyers and sellers, while democratising the process of digital commerce.

This allows not only small and medium businesses to move online, but also a larger audience base to take advantage of the services and products from across the country, available on the platform.

A recent online study revealed a positive industry outlook towards ONDC, with 90% of the respondents likely to adopt it. Approximately 73% believe ONDC can level the commerce field for small and medium-sized enterprises. Furthermore, 41% see ONDC driving future digital payment innovation, while 69% emphasise the importance of ONDC's compatibility with existing digital commerce standards.

In a country with over 1.3 billion people, ONDC aims to increase the use of online shopping for 25% of consumer purchases within the next two years. Currently, online shopping accounts for 8% of consumer purchases.

According to Bain & Company, the e-retail sector in India is expected to grow from $150 billion to $170 billion by 2026. It is expected to attract between 300 and 350 million online shoppers. This huge growth presents an opportunity for businesses, but also means that they must rethink how they engage and serve customers online.

ONDC strategically intends to decentralise e-commerce and create an open network. Here are five ways ONDC will pave the way for the future.

1. Traceability and transparency

ONDC isn’t just limited to business transactions. Since it’s based on blockchain, its most appealing factor is traceability. Imagine you purchased a particular skin product. How would you determine its authenticity? How do you verify that the brand you purchased from, has followed all the fair practices? How do you determine if what you get is what was promised by the brand?

ONDC has answers to these questions! Since ONDC is based on the blockchain-shared ledger, you can easily trace answers to these questions. Therefore, ONDC will play a central role in making the whole ‘cradle-to-grave’ information about products and services, readily accessible, which is a stepping stone for a transparent e-commerce landscape.

2. Butterfly effect

A few tech giants have capitalised on digital commerce technology, which has given them an unfair advantage over others. However, ONDC aims to level the playing field by introducing SMEs into the game.

ONDC will make a big difference in the value chain spectrum, by helping local retailers and tech startups. ONDC will also cater to product discovery, sales conversions, delivery marketing and customer engagement, which will help these companies improve their visibility and establish themselves in the market.

Apart from empowering these businesses, it will also leverage advanced technologies, promoting economic growth and fostering entrepreneurship. In addition, it will create a new job pool, which will also help tackle the unemployment challenges that the country faces and, hence, drive market efficiency.

Overall, all these positive impacts can have a cascading effect that will not only promote individuals and businesses to progress, but also transform how the digital commerce ecosystem functions.

3. Better commercials

The digital commerce ecosystem constitutes multiple middlemen, leading to a price hike. Since ONDC leverages technology, it reduces the number of intermediaries and, hence, the costs associated with logistics, distribution and cuts in the form of commissions, would be minimised. This would make the products much more affordable for the customers.

Since a direct route is established between the consumers and sellers, the former can obtain greater control over their purchases. Finally, with lesser intermediaries in the supply chain, the whole ecosystem becomes much more streamlined and transparent. Thus, unfair trade practices such as fraud and counterfeiting, can be prevented.

4. Boon for fintech corporations and banks

India has surpassed the rest of the world, with the e-commerce sector registering over 11% growth rate in digital payments. With the emergence of ONDC, the finance industry players can reap lucratively from the newfound opportunities.

Since ONDC plans on achieving population-scale penetration, it will need to be well supported by UPI, fintechs and banks. Additionally, there will be a larger need for B2B payment gateways to support merchant-to-merchant payments.

With an exponential rise in UPI transactions being projected, there will be a greater need for reconciliation frameworks to reduce audit frequency, inventory management and accounting - all being the services that fintechs offer. By providing credit to the sellers, financial institutions such as banks, can draw synergies from the budding network of ONDC.

5. Democratising industry

If ONDC becomes successful, it could disrupt the duopoly of a select few in the e-commerce domain. It’s not uncommon knowledge that MSMEs have accused established giants of abusing their monopolies through predatory pricing, promotion of their own private brands and indulging in data misappropriation.

ONDC can help small D2C businesses survive and thrive in the market by making the digital technology infrastructure accessible, thereby improving the country's overall economic conditions.

Conclusion

In India, more than 80% of the market is made up of small, unorganised retail businesses. ONDC aims to act as a catalyst to fuel the growth of hyper-local commerce, hybrid commerce and quick commerce. However, as ONDC gains momentum, it must incorporate advanced technologies such as AI, ML and IoT, to stay at the forefront.

(Our guest author Moneka Khurana is the country head at MMA India.)