ONDC: The Next Game-Changer for Indian Markets

The way we conduct business is quickly changing as the world becomes more digital. Block chain technology's development has opened the door for ideas that stand to revolutionize established business structures.

 

The Open Network for Digital Commerce (ONDC) is a prime example of this innovation Through the Open Network of Digital Commerce (ONDC), a significant shift in India's digital commerce sector is anticipated. By enhancing the seller's online presence, this Government of India project seeks to "democratize and integrate" digital commerce. The consumer will gain from this endeavor since they will be able to shop from all sellers who are available on common applications and sellers who have a large customer base without having to spend money on digital marketing.

 

It is a "game changer," according to Union Minister of Commerce and Industry Piyush Goel, who also stated that "ONDC will create new opportunities and remove monopolistic environments." We'll explore what the ONDC is, how it functions, and how it might be a game changer in the Indian market in this blog article.

 

UNDERSTANDING ONDC

 

Open Network for Digital Commerce (ONDC) is a technical infrastructure supported by the Government of India (GoI). As long as "platforms/applications are connected to this open network," buyers and sellers can transact regardless of the platforms/applications they use.

 

Simply said, ONDC can be compared to a network of digital roads along which various digital storefronts (in the form of buyer and seller apps) can be developed. The goal of the digital road network is to make it possible for e-commerce traffic to move effortlessly between these various digital storefronts, enabling buyers and sellers to transact regardless of the application or platform they employ.

 

This is a substantial shift from the platform-centric e-commerce models that are currently in use, where buyers and sellers are only able to communicate within walled platforms. To give an example, today in both cases, it is impossible for a seller on Amazon to contact a buyer on Flipkart. Over the years, these walled platforms have come to control a large majority of the market's transaction volumes in India's e-commerce sector.

 

As a result, they now have tremendous power and control over the supply chains for that country's online retailers. This concentration of power and influence has resulted in negative actions like platforms prioritizing themselves or using data to skew the market, which directly affects MSME firms and the interests of consumers.

 

WHO RUNS THE ONDC?

 

A Section 8 (non-profit) corporation, commonly known as the ONDC, is in charge of the day-to-day management and governance of the ONDC. Its owners include some of India's top banks, an e-governance technology company, and a non-profit led by the GoI.

 

The ONDC Advisory Council was established by the Department for Promotion of Industry and Internal Trade (DPIIT) and is presided over by the Union Commerce Minister. Members of the council include Nandan M. Nilekani, the chairman of Infosys, and Arvind Gupta, the executive director of the Digital India Foundation. 

 

WHY IS ONDC IMPORTANT?

 

When the epidemic hit, retail players decided that the digital commerce sector was their greatest chance of surviving. The well-known, well-liked platforms that have expanded as a result of the pandemic include Myntra, Amazon, Grofers, Big Basket, JioMart, and others.

 

According to statistics, "thanks to increased online shoppers in the country, the online retail business in India is anticipated to reach $350 billion by 2030 from an estimated $55 billion in 2021. Groceries and fashion are going to be the main drivers of the growth of India's e-commerce business, which is predicted to increase at a 19.24 percent CAGR from $46.20 billion in 2020 to $111.40 billion by 2025.

 

The Indian e-commerce business is already dominated by large global companies like Amazon, Flipkart, Tata, and Reliance. By generating new opportunities and offering guidance for building a platform that can be used by all online retailers, ONDC seeks to "curb digital monopolies." Without competing with the current e-commerce firms, ONDC seeks to offer equal chance to all players.

 

China continues to have a 45 percent market share of the global e-commerce business, according to one of the most recent assessments released by Goldman Sachs. E-commerce penetration in China and the US is currently at roughly 24% and 20%, respectively.

 

According to Shireesh Joshi, Chief Business Officer, ONDC, there is a significant opportunity for growth for more market players to participate in this tectonic change since digital commerce in India only accounts for 4-5 percent of the retail market.

 

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How does ONDC change the Game?

 

1. Decentralization for Financial Inclusion

 

India is a vast and diverse country with a significant population lacking access to traditional banking systems. ONDC's decentralized framework could provide a solution by allowing individuals and small businesses in remote areas to participate in digital commerce without the need for a traditional bank account. This can facilitate financial inclusion and economic empowerment.

 

To build a single and interoperable platform, it brings together a variety of stakeholders, including corporations, governmental agencies, and technology providers. The ONDC provides smooth system integration and simplifies information interchange, helping enterprises to access a wider client base by removing obstacles and supporting standardized procedures.

 

Additionally, ONDC promotes cooperation between corporations, institutions of higher learning, and tech companies. This collaborative environment encourages creativity, enabling the creation of fresh company strategies and hyper-local market-specific solutions

 

2. Enhanced Security and Privacy

 

India has witnessed several high-profile data breaches and security incidents. ONDC's emphasis on data security and privacy can address these concerns, ensuring that customer data is securely stored and transactions are tamper-proof. This would boost consumer confidence in digital transactions and encourage wider adoption.

 

3. Interoperability for Market Expansion

 

The Indian market is known for its diversity of languages, cultures, and business practices. ONDC's interoperability features can enable businesses from various regions to collaborate and expand their operations seamlessly. This can lead to a more unified national digital commerce ecosystem.

 

Current pilot programs are being conducted in Delhi, Bengaluru, Coimbatore, Bhopal, and Shillong. This year, ONDC is anticipated to be implemented in 75–100 towns around India. It plans to sign up 900 million buyers, 1.2 million merchants, and generate $48 billion in gross merchandise value (GMV) during the next five years. In 2020, the GMV of India's e-commerce market was $38 billion. By 2025 and 2030, it is anticipated to reach $140 billion and $350 billion, respectively.

 

4. Supply Chain Transparency

 

The Indian market often faces challenges related to supply chain transparency, especially in sectors like agriculture and retail. ONDC's transparent ledger can help track the journey of products from source to consumer, ensuring quality, authenticity, and fair trade practices.

 

BENEFITS OF ONDC FOR THE INDIAN MARKET

 

1.  Empowering Small Businesses: India has a thriving small and medium-sized business sector. ONDC's reduction of transaction costs and elimination of intermediaries can provide these businesses with a cost-effective platform to showcase their products and services. This can level the playing field and foster entrepreneurial growth.

 

2. Counteracting Counterfeiting: Counterfeit goods are a major issue in India, affecting both consumers and legitimate businesses. ONDC's transparent and traceable ledger can help identify counterfeit products and ensure that consumers are purchasing genuine items. This can safeguard consumer rights and protect the reputation of genuine businesses.

 

3. E-Commerce Expansion: The Indian e-commerce market is rapidly growing, driven by increasing internet penetration and smart phone usage. ONDC's secure and efficient platform can further boost online sales by providing a trustworthy environment for buyers and sellers to transact.

 

4. Agricultural Trade Facilitation: Agriculture plays a crucial role in India's economy. ONDC's supply chain transparency can benefit the agricultural sector by providing accurate information about the origin, quality, and handling of produce. This can lead to fair pricing for farmers and improved quality for consumers.

 

5. Government Initiatives: The Indian government has been actively promoting digitization and technological innovation. ONDC aligns with these initiatives by offering a block chain-based solution that can enhance transparency, reduce corruption, and streamline processes in various sectors.

 

6.Job creation: Numerous job opportunities have been established in India as a result of the expansion of open network digital commerce. It has increased demand for delivery workers, warehouse employees, customer care agents, and technology specialists. In addition to creating direct jobs, these platforms have promoted the expansion of supporting sectors like packaging and logistics.

 

The Road ahead for ONDC

 

The future impact of ONDC on the Indian digital commerce sector is positive. The program will support the creation of fresh business models that are suited to extremely local demands. In turn, this will increase local entrepreneurship and open up job prospects.

 

Additionally, ONDC will offer a productive environment for startups and technology suppliers to work together and develop solutions that address the particular problems facing the Indian market. It will encourage the creation of locally focused services, delivery paradigms, and supply chain efficiency, ultimately improving the total consumer experience.

 

The expense of discrete onboarding at individual marketplaces will also be decreased for the seller and e-commerce platform thanks to ONDC, which serves as the seller's passport to travel everywhere on the network. ONDC can lower client acquisition expenses by changing the advertising paradigm from impressions to transactions by connecting content and commerce. Increased demand awareness can lower logistical costs, which can account for up to 10% of GMV.

 

Economic growth and entrepreneurship are positively impacted by the development of a hyper-local digital commerce ecosystem powered by ONDC. It promotes grassroots entrepreneurship, opens up job opportunities, and boosts regional economies.

 

By utilizing the digital infrastructure offered by ONDC, small and medium-sized enterprises can scale their operations and increase the number of customers they serve. The emphasis that ONDC places on inclusivity is among its greatest benefits. It seeks to close the digital divide and give remote and rural enterprises an equal chance to participate in the digital commerce ecosystem. 

 

By granting local firms access to a shared digital infrastructure, ONDC enables them to compete on an even playing field with larger players, promoting economic growth and generating employment possibilities at the local level.

 

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CONCLUSION 

 

The Open Network for Digital Commerce (ONDC) represents a seismic shift in India's digital commerce landscape. With its decentralized structure, ONDC opens doors to financial inclusion, empowering remote communities and small businesses. The focus on security and privacy addresses data breach concerns, bolstering consumer confidence in digital transactions.

 

ONDC's emphasis on interoperability breaks down barriers, enabling seamless collaboration across diverse markets. By fostering small business empowerment, countering counterfeiting, and expanding e-commerce horizons, ONDC acts as a catalyst for equitable economic growth. Its alignment with governmental goals and potential for job creation underscore its pivotal role in shaping India's economic future.

 

The ONDC revolution is about democratizing commerce, breaking monopolies, and nurturing local entrepreneurship. As it pioneers pilot programs and expands nationwide, ONDC has the potential to reshape the Indian market, fostering innovation and prosperity. It embodies the promise of technology to drive positive change, creating an inclusive digital commerce ecosystem that benefits consumers and businesses alike, and propels India towards a brighter tomorrow.