ONDC: Next big disruption in India's e-commerce ecosystem

India is bracing for the next big disruption in e-business retailing with the launching of Open Network for Digital Commerce (ONDC), which is expected to be launched soon. ONDC will usher a new frontier to unify India's e-commerce and retail business. It is making e-commerce processes open-source, therefore creating a platform that all online retailers can employ

Industry insiders and techies believe, there are challenges that ONDC will have to face. For example, is the product delivered by the seller genuine or fake? How was the delivery experience of the buyer? Did the customer receive the same product that he purchased? Platforms, like Amazon, Flipkart and others invest millions of dollars to keep track of these on their platforms. These platforms develop proprietary technologies that prioritise sellers who can fulfil orders most efficiently. Government's rhetoric apart, how the above concerns will be addressed by the ONDC platform gateway is the real test for the digital retail transformation

India is bracing for the next big disruption in e-business retailing with the launching of Open Network for Digital Commerce (ONDC) which is expected to be launched soon. ONDC will usher a new frontier to unify India's e-commerce and retail business. It is making e-commerce processes open-source, therefore creating a platform that all online retailers can employ. For sellers, an ONDC gateway will mean their products become visible on multiple e-commerce websites without them having to register on each platform separately.

All seller and buyer platforms will work through one open protocol and can connect through ONDC. It would provide an open network, and if one has to buy a product, ONDC will show all the options of various platforms for the product, and the consumer can choose what he or she wants.

The ONDC project is a government initiative to promote open networks for all aspects of the exchange of goods and services over digital networks. The move supports small retailers, small manufacturers, startups and suppliers. It has been in the works since last year, will be operated and managed by a private non-profit enterprise.

Operationalization of ONDC will revolutionize the digital commerce and retail business, the government claims, what Unified Payments Interface (UPI), launched in 2016, did to transform the digital payments ecosystem in the country. "In 2016, I had termed the arrival of UPI as the 'WhatsApp moment' for Indian banking, ONDC's work will herald a similar disruption," proclaimed Nandan Nilkeni, Member of ONDC Advisory Council to the government. Explaining why ONDC will usher in a revolution in open commerce, he observed "India will have a trillion-dollar retail economy and even if 10-20 per cent of this goes online, we will have $100-200 billion online retail biz".

Riding on the thriving e-commerce industry of the country which is expected to grow to $200 billion by 2026, the government has charted the roadmap for a tech-driven economy. The Commerce and Industry Ministry plans to democratise e-commerce with ONDC by providing a level-playing field for all players and curb what it says monopolistic practices adopted by e-retailing giants like Amazon, Flipkart, Myntra, Snapdeal and others in India.

The implementation of ONDC will help all online businesses get the required visibility and fair access to growth opportunities. Now the small-medium retailers/entrepreneurs in tier 3 and 4 towns can go digital and grow their business. Startups can reach out to potential financiers, and consumers have more options before them.

Department for Promotion of Industry and Internal Trade (DPIIT) in July last year, while launching the project, had said that the ONDC is expected to "digitize the entire value chain, standardize operations, promote inclusion of suppliers, derive efficiencies in logistics and enhance value for consumers."

Earlier this month, Commerce and Industry Minister Piyush Goyal said "we will be able to launch a beta version of Open Network for Digital Commerce in a few months". Confirming about the formal launching of the digital interface, CEO of ONDC, T Koshy said ONDC is currently working on testing their network across four locations in India. If all goes well, it will be up and running in 2 to 3 months.

Transition from platform-centric model to open-network model

"At present, a customer who is connected to only one portal can buy goods from that portal only. To buy from any other portal, he has to go to another portal, whereas on this network, he is completely free to buy goods or services from any company without logging into any other e-commerce portal," explains Praveen Khandelwal, Secretary General, Confederation of All India Traders (CAIT), who is part of the ONDC advisory council to the government. "Now it will be mandatory for them to register according to the draft rules made for e-commerce," he further added.

According to an official statement of the DIIT, "open Network for Digital Commerce christened ONDC is a globally first-of-its-kind initiative that aims to democratise Digital Commerce, moving it from a platform-centric model to an open-network. As UPI is to the digital payment domain, ONDC is to e-commerce in India. ONDC will enable buyers and sellers to be digitally visible and transact through an open network, no matter what platform/application they use. ONDC will empower merchants and consumers by breaking silos to form a single network to drive innovation and scale, transforming all businesses from retail goods, food to mobility".

How Open-source Works?

Open-source network means developing a software or a process, its code or the steps of that process is made available freely for users, redistributing and modifying it. For example, while the operating system of Apple's iPhones – iOS - is closed source, meaning it cannot be legally modified or reverse engineered, whereas Google's Android operating system is open-source and therefore it is possible by smartphone manufacturers such as Samsung, Xiaomi, OnePlus and others can modify it for their hardware/handsets. If the ONDC gets implemented and mandated, it would mean that all e-commerce companies will have to operate using the same processes. It could give a huge boost to smaller online retailers and new entrants, government claims.

There are over 4,000 small and big e-commerce companies in India, 500 logistics companies that deliver goods from the portals to customers, and more than 20,000 companies that provide services through e-commerce including travel, hotels, etc. ONDC is expected to give a leg-up to offline retailers, helping them compete with online sellers, thus boosting hyperlocal deliveries. For sellers, ONDC will mean their products becoming visible on multiple e-commerce websites without them having to register on each platform separately.

What does the govt intend from the ONDC project?

While forming the Advisory Council, the DPIIT noted that the ONDC "aims at promoting open networks developed on open-sourced methodology, using open specifications and open network protocols, independent on any specific platform. The open network will empower both consumers and sellers. It is expected to result in cost savings for sellers and provide better prices to consumers. If such an open network comes, it ends the monopoly of big closed-loop platforms".

ONDC will work for everything and not just limited to products but also services. Security, data privacy and confidentiality will be ensured that will create new opportunities and remove monopolistic environments. ONDC shall initially give special attention to help onboard small and medium players, the statement stated.

Challenges to ONDC

It is being developed, in part, in response to protests from market bodies, merchants, and sellers concerned about the growing dominance of larger players in India's digital commerce market according to industry body which expected an open network could undoubtedly challenge the private incumbents and provide the sellers with the freedom to choose.

The main objective of this platform is to provide protection to the policies and rules of the government and also to monitor all aspects of development in the e-commerce business. That is the reason why operational aspects including onboarding of sellers, vendor discovery, price discovery and product cataloguing could be made open source on the lines of UPI. But if mandated, this could be problematic for larger e-commerce companies, which have proprietary processes and technology deployed for these segments of operation.

Industry insiders and techies believe, there are challenges that ONDC will have to face. For example, is the product delivered by the seller genuine or fake? How was the delivery experience of the buyer? Did the customer receive the same product that he purchased? Platforms, like Amazon, Flipkart and others invest millions of dollars to keep track of these on their platforms. These platforms develop proprietary technologies that prioritise sellers who can fulfil orders most efficiently. Government's rhetoric apart, how the above concerns will be addressed by the ONDC platform gateway is the real test for the digital retail transformation.

(Author is a journalist who writes on defence, strategic affairs and technology)