Open Network for Digital Commerce (ONDC), the government-promoted ecommerce platform, is expected to shake up the online retail space in the coming days albeit it is still in the initial phase, industry experts told e4m.

Touted as “Atma Nirbhar Bharat” initiative, ONDC doesn’t only aim to challenge the duopoly of the US-based giants like Amazon and Walmart-owned Flipkart, but has the potential to emerge as a disruptor in the entire e-commerce segment.

The growing number of D2C brands and even home-grown e-commerce players like Meesho and Dunzo have already joined the ONDC bandwagon.

Shireesh Joshi, Chief Business Officer of ONDC, told e4m, “So far, we have our limited presence in about 230 cities across the country. Over 35,000 sellers are also part of our network, which is growing fast. We are not charging any commission from the sellers. All e-commerce players are also welcome at ONDC.”

Ordering platforms on ONDC like Paytm, Magicpin and PhonePe offer additional discounts on many food brands such as burger, biryani and coffee chains.

Consumers are happy as they are getting a better deal now but food delivery apps seem to be bearing the brunt. National Restaurants Association of India (NRAI), which in 2021 had first approached the Competition Commission of India (CCI) to complain against ‘anti-competitive practices’ of food delivery apps, is now encouraging member restaurants to start exploring ONDC as an alternative to the existing delivery services.

Dalvir Suri, Co-founder and Head, Dunzo Merchant Services explains, “From a market that is dominated by a couple of big players, we will now see a democratization of e-comm in India, with players of all sizes getting a share of this pie. The network will have an equal opportunity for all merchants and e-commerce players to engage with customers. Customers will also get multiple price options and a wider choice of product selection. Overall, it seems like a win-win for a much larger universe of business and customers.”

Dunzo for Business (D4B) got onboarded on the platform in April 2022 to provide last-mile delivery services to numerous local enterprises on the ONDC network.

Shashank Rathore, Vice President, E-commerce, Interactive Avenues (the digital arm of IPG Mediabrands India), says, “The heightened competition resulting from ONDC will undoubtedly pose challenges for existing e-commerce and food delivery apps, potentially affecting their profitability. Nevertheless, in my view, if these players prioritize after-sales support and maintain price parity, the impact of ONDC may be mitigated to a certain extent.”

Boost for ad sector?

ONDC will boost the advertising sector for sure, says Kishore Pentyala, COO, Auburn Digital Solutions.

“Since many small- and medium-sized business owners now find it nearly hard to become digital, ONDC will make it possible for them. It will encourage healthy competition between huge businesses that dominate the market in terms of reach and marketing expenditures and smaller competitors, who specialize in speedy delivery or next-door touch-and-feel services. Additionally, this will increase the number of advertisers in the digital ecosystem and provide opportunities for new market entrants,” explains Pentyala.

Sujay Ghosh, Executive Vice President & Business Partner, DDB Mudra, agrees. “It will attract a certain set of advertisers who would probably not advertise on Flipkarts and Amazons of the world because of its reach and connection with the audience which is different, in the short term”, he said.

It is noteworthy that eCommerce is the second-largest contributor to India’s advertising expenditure pouring Rs 7,000 crore in a year with over 14 per cent contribution in the overall advertising spend.

India has the third largest online shoppers base globally, with 14 crore e-retail shoppers in 2020, only behind China and the US, states the ONDC website. The sector, which is currently valued at over $100 billion, is expected to reach $350 billion by 2030, consultancy firm RedSeer said in its 2021 report. The government’s own estimate also pegs it at $350 billion by 2030.

Democratization, say experts

According to Ghosh, the impact of ONDC on food delivery apps and e-commerce players is yet to be seen as the platform has been rolled out in only a few cities with fewer restaurant options.

“However, as ONDC aims to provide a level playing field for small traders. It could, in the long run, challenge the existing dominance of big e-commerce players and food delivery apps by providing an alternative platform for customers to buy products. The entry of a government-backed platform could also bring in more competition, leading to increased innovation and better value/services for customers,” Ghosh noted.

Small traders, especially those from tier 2 and tier 3 towns, who have not been able to join the e-commerce race so far would flock to ONDC due to trust and affordability factors, says Kumar Awanish, Chief Growth Officer, Cheil India.

Brands still wary

Most big brands are still not part of ONDC. However, it’s still early days and much will depend on how the platform evolves, experts say.

Suri opines that our country has always been two markets - India and Bharat. ONDC will, it seems, do better for Bharat while Flipkarts and Amazons will cater to India. “And that will be the lead indicator of what kind of brands will participate in which platform. There will of course be duplications. ONDC, I am guessing, will be able to attract a lot of first-time advertisers because of its unique reach and costs if it grows well in Bharat,” he noted.

Rathore echoes the sentiments. “Established brands may find ONDC slightly intimidating since their partnerships with leading e-commerce players and food delivery apps, along with their annual ad spend commitments, have given them a slight advantage over new entrants. However, ONDC creates a level playing field for all sellers, which is undeniably beneficial for both end users and small businesses.”

Limitations

The biggest challenge for the government-backed network will be establishing the technology with which delivery network like Amazon and Flipkart lured merchants and buyers to their platforms, experts say.

Besides, currently, food and grocery delivery seem to be the growth driver for ONDC, having more than 95% contribution of the orders. But that seems to be more on the back of subsidies offered by the platform (and not inefficiency elimination), which will be short-lived, Ghosh points out.

“We will need to wait and watch what happens when these subsidies are gone. Also, the penetration of e-commerce itself is still very low but growing rapidly. Hence, there is a scope for all the players to coexist. But growing profitably in the long run will be the name of the game and that will not be easy,” Ghosh noted.

Ghosh also points out that the UI and UX of ONDC are different from other eCommerce players like Amazon and Flipkart.

“ONDC is a network that allows different kinds of businesses to directly sell their services and shouldn't be confused with an app. And that is a very big difference considering that the current ecomm consumer is used to a certain kind of interface and experience,” Ghosh opines.

He adds that the other factors which will play a role in its success in shaping the ecomm scene in India will be its payment options, product catalogue, order management system, customer support and analytics and reporting, allowing businesses to track sales, customer behaviour, and other important metrics.

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