A Paradigm Shift in Indian E-commerce

India’s e-commerce is growing, but has a concentrated market with a few big players. This oligopoly has high entry barriers for small and medium enterprises (SMEs), local businesses and consumers looking for choices. To address these market distortions, the Government of India has launched the Open Network for Digital Commerce (ONDC). This will democratise the digital commerce ecosystem, similar to what UPI did for digital payments.

Understanding ONDC: India’s Open Network for Digital Commerce

ONDC is a government-backed open digital public infrastructure that enables seamless interoperability between buyers and sellers across platforms and breaks vendor lock-in. Conceptually, ONDC is a common software protocol layer that gives universal visibility to any seller to any buyer, regardless of the app used. This is similar to UPI, which enables frictionless transactions between different bank accounts. Unlike proprietary marketplace models, ONDC is a public utility and not controlled by any single commercial entity. This will bring in more transparency, competition and inclusivity in the digital commerce landscape.

Rationale for ONDC Implementation

The reason for ONDC implementation is because of the highly centralised nature of the digital commerce space in India. As per a 2020 report by the Competition Commission of India (CCI), dominant platforms control both access to the marketplace and seller visibility and prioritise their private label brands and charge huge commission fees ranging from 25% to 35%. This creates an unfair competitive environment for small businesses, artisans and local vendors.

ONDC is trying to break this monopoly by enabling even the smallest of vendors like local tea stalls or kirana stores, to get digital visibility across multiple apps and receive online payments. For example, an ONDC-enabled buyer app built using Eazehub can be used to buy from a roadside vendor listed on a separate seller app. This transactional model shows how independent yet interconnected the participants are in the open network.

Governance and Institutional Support

ONDC is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT), operating under the aegis of the Ministry of Commerce and Industry, Government of India. It is structured as a Section 8 (non-profit) company and receives substantial backing from a consortium of public and private sector financial institutions, including the State Bank of India, HDFC, LIC, NABARD, Quality Council of India and the National Stock Exchange (Press Information Bureau, 2022).

Comparative Analysis: ONDC vs. Traditional E-commerce Platforms

This comparative analysis underscores ONDC’s fundamental divergence from traditional e-commerce paradigms. By decentralizing control, ONDC aims to empower both buyers and sellers, thereby diminishing their reliance on specific platform algorithms or proprietary business rules.

Conclusion and Future Outlook

ONDC is more than just a tech upgrade; it’s a philosophical relook at digital commerce to make it more inclusive, fair and competitive. Its potential to disrupt transaction dynamics in India, like UPI did for digital payments, will be across all scales of commerce, from small vendors to large cooperatives. As the network grows its application and seller base, end users will have more choices, better comparison shopping and less platform bias. The journey of open e-commerce in India has just begun, and ONDC is at the forefront of it.

References:
● Competition Commission of India. (2020). Market Study on E-Commerce in India.
● DPIIT Annual Report 2023–24. (2024). Government of India.
● ONDC Official Website. (n.d.). ONDC.org. Retrieved from https://ondc.org
● Press Information Bureau. (2022). Government of India.