With the right building blocks, ONDC will enable seamless commerce for 50 crore customers and 5 crore SMEs in this country
Bengaluru: First up, ONDC is not a platform like Amazon but a network of enterprises coming together to enable digital commerce. It is a two-sided network with buyer apps on one side and seller apps on the other side. Buyer apps bring traffic into the network and seller apps bring supply.
Companies like Paytm, Phonepe, Meesho, Craftsvilla, Ideamasters, and Bluestar are part of this network playing the role of either a buyer app or a seller app. This network approach has bigger benefits compared to the platform approach of e-commerce companies today. Any seller or retailer can participate in digital commerce without bias on ONDC.
The ONDC opportunity
On the ONDC platform, B2C e-commerce is expected to jump from 7% of total retail today to 50% of total retail by 2030 and e-B2B is expected to reach 25% of total B2B from less than 1%, today. It is expected to create an additional trillion dollars by 2030 to the GDP by pushing e-commerce from $100B today to $500B and fintech from $300B to $1T. This level of population-scale impact has never been witnessed globally in any country!
Despite ONDC being only two years old, it is not an experiment anymore. It is a real network with 50 lakh products now live from 50,000+ sellers across 250+ cities clocking more than 1 million orders per month.
Currently in ONDC, retail, mobility and logistics networks are live and the fintech network is going live later this year. The ONDC network is category, location and business model agnostic which means that it caters to all categories in digital commerce, is available everywhere in India and is applicable for both B2B and B2C businesses. It cannot be compared to UPI which is a network switch that enables payments between two entities in real time via banks. In UPI, a standardised digital product is moved from one bank to another and the payment ends in a single transaction. In contrast, ONDC is a much more varied network for wider use cases with much richer transaction flows.
The ONDC network is therefore useful for almost all entities in India, big or small. For example, D2C brands like WoW Skin Sciences and retailers like Sangeetha Mobile can immediately benefit by launching on the ONDC network. They need to list once, and they will be available instantly on all buyer apps with 50 crore customers collectively. Regional D2C brands can go national in just a few weeks. Also, D2C brands can benefit from the low cost of the ONDC network with almost half of the commission cost on Amazon or Flipkart. Fintech companies like Novopay and Spice Money can immediately enter new segments of business like lending, insurance and mutual funds distribution without any major effort.
The Network Effect
A network like ONDC brings ‘the network effect’, which means that the more the number of participants, the more exponential the impact in terms of benefits. There is always an inflexion point in a network with a hockey stick growth curve. A similar inflexion point was seen in the case of UPI.
Additionally, networks are more scalable than platforms but promise a longer gestation period. Networks can lower the cost of operations of e-commerce in India as each entity brings its best practices onto the network.
A platform will take years to build it at a far more substantial cost. For example, a small retailer has a much lower cost of operations with a lot of sunk cost with respect to inventory, real estate and staff.
A network like ONDC can bring large available offline inventory online resulting in faster inventory turns for the retailers. Large supply means that consumers are able to find and order anything from needles to iPhones from their neighbourhood sitting at home.
The trust factor
Going forward, ensuring customer and seller trust in the network is going to be the biggest determinant of success for ONDC. Thankfully, IGM, Score and RSP frameworks are key building blocks of trust. The IGM framework is for grievance and issue redressal. It ensures that customers get immediate and fair solutions to their issues and queries.
The RSP framework of ONDC ensures that payments to sellers can be quick and seamless and that sellers do not have cash flow issues. Lastly, the Score framework of ONDC ensures that each seller and product has ratings from customers, to help buyers filter out bad actors and make informed decisions.
While ONDC is still in its early stages, it comes with a lot of promise. Like UPI, it is expected to transform the way we buy and sell today in India. With the right building blocks, ONDC will enable seamless commerce for 50 crore customers and 5 crore SMEs in this country.