The Open Network for Digital Commerce is a groundbreaking initiative aimed at democratizing and revolutionizing e-commerce in India, particularly benefiting an estimated 63.39 million Micro, Small, and Medium Enterprises (MSMEs). Launched by the Government of India, ONDC is designed to create a level playing field in the e-commerce sector, which has been dominated by large platforms like Amazon and Flipkart. This initiative holds significant promise for MSMEs, enabling them to compete more effectively in the digital marketplace.
Consider Ranjan, a bamboo artisan from Majuli, Assam, who has spent years weaving intricate baskets and furniture. Despite his exquisite craftsmanship, reaching a wider audience was a challenge. Ranjan initially tried selling on Amazon but struggled with low visibility due to algorithms favouring established brands and high advertising budgets. This vicious cycle kept his products buried in search results, limiting his sales and recognition.
Open Network for Digital Commerce ONDC transformed Ranjan’s prospects. Unlike traditional platforms, ONDC is a network that connects sellers directly with buyers through various apps. This eliminates the struggle with single-platform algorithms and high commissions. Ranjan can choose apps that suit his products, set his own commission rates, and keep more of his earnings. He can now showcase his bamboo creations to a wider audience, extending beyond local tourists to customers across India who appreciate his craftsmanship. ONDC’s open system removes technical hurdles, allowing Ranjan to focus on his passion while the seller apps handle the technical details.
ONDC is built on the Beckn Protocols, an open and interoperable protocol that allows various digital commerce platforms to interact seamlessly. This interoperability ensures that MSMEs can connect with multiple platforms and reach a wider audience of 500 million potential customers without being locked into a single ecosystem. This is crucial for small businesses that need to maximise their market reach without incurring high costs associated with platform exclusivity.
ONDC aims to include all forms of commerce, from retail and mobility to insurance and finance. This wide purview means that even small artisans, weavers, and rural entrepreneurs can benefit from the network. As of October 2023, Open Network for Digital Commerce had already processed over 5,000 orders in the social sector, showcasing products from underserved communities.
ONDC promotes transparency and fair practices within the e-commerce ecosystem. By standardising protocols and reducing the influence of dominant platforms, ONDC ensures that MSMEs have access to fair pricing mechanisms, unbiased search results, and equitable treatment. This transparency helps in building trust between sellers and buyers, fostering a healthier competitive environment.
ONDC promotes hyperlocal commerce by enabling local businesses to connect with nearby customers. This can include anything from fresh groceries from a local farmer’s market to handcrafted souvenirs from a nearby artisan. This focus on local commerce helps sustain community-based businesses and promotes sustainability.
One of the most significant impacts of Open Network for Digital Commerce on MSMEs is the increased reach and visibility. MSMEs can now list their products on multiple platforms connected through the ONDC network, reaching a broader customer base without incurring high listing fees or marketing costs.
One of the key advantages of ONDC is its potential to reduce the cost of serving MSMEs by 5-10%. Here's how:
Access to formal credit has been a longstanding challenge for MSMEs. Open Network for Digital Commerce addresses this by leveraging alternative data sources for credit underwriting. By integrating with digital public goods like Account Aggregators (AA) and Unified Payments Interface (UPI), ONDC facilitates seamless credit access for MSMEs. This integration allows lenders to assess MSMEs' creditworthiness based on comprehensive financial data, including transaction histories and utility bills.
A significant portion of MSMEs still relies on offline transactions. ONDC promotes the digitalization of these transactions, which can lead to better operational efficiency and transparency. By offering digital tools and services such as e-KYC (Know Your Customer) and e-signatures, ONDC simplifies the process of transitioning from offline to online commerce.
ONDC’s collaboration with organisations like Common Services Centers (CSCs) under the Ministry of Electronics and Information Technology (MeitY) enables rural entrepreneurs to access e-commerce opportunities. This support is crucial for bringing rural products to urban markets and boosting the incomes of rural entrepreneurs.
While Open Network for Digital Commerce holds immense potential, there are challenges to be addressed for it to achieve its full potential. Key challenges include:
Establishing a clear and efficient dispute resolution mechanism is essential for building trust and resolving issues between buyers and sellers. ONDC needs to develop a robust grievance redressal system that is fair and transparent.
Integrating existing platforms and onboarding MSMEs, especially those with limited technical resources, can be complex. ONDC needs to provide clear guidelines, technical support, and incentives to encourage widespread participation.
Building user awareness and trust in a new platform takes time. Effective marketing campaigns and educational initiatives are needed to inform both buyers and sellers about the benefits of ONDC.
Efficient logistics infrastructure is crucial for a seamless e-commerce experience. ONDC needs to collaborate with existing logistics providers and explore innovative solutions to address challenges in remote areas.
Recent developments and milestones in the Open Network for Digital Commerce (ONDC) highlight its growing impact and support from various sectors, showcasing its potential to democratize e-commerce in India.
The government of Uttar Pradesh has integrated the One District One Product (ODOP) scheme with ONDC. This initiative promotes local products and artisans, enabling them to reach a broader audience. By leveraging ONDC's network, unique regional products can gain national and international visibility, boosting local economies and preserving traditional crafts. ONDC has partnered with the National Bank for Agriculture and Rural Development (NABARD) to integrate agricultural and non-agricultural platforms. This collaboration aids in market linkage for Farmer Producer Organizations (FPOs), providing small farmers and rural entrepreneurs with access to larger markets and improving their income levels. This initiative addresses critical issues like limited market access and high logistics costs for rural producers.
The Small Industries Development Bank of India (SIDBI) actively promotes small industries' participation in ONDC by providing financial and technological support. This support is crucial for MSMEs, enabling them to leverage the digital platform to expand their businesses and compete effectively in the digital marketplace.
As of May 2024, ONDC has achieved significant milestones, reaching an all-time high of 8.9 million transactions across retail and ride-hailing segments, representing a 23% month-on-month growth. The retail segment alone saw 5 million orders, with grocery and food delivery categories each surpassing 1 million orders. ONDC's seller base has expanded to around 535,000 across 1,200 cities, with small businesses making up 84% of the sellers and contributing 56% of total orders. This growth demonstrates ONDC's effectiveness in increasing visibility and market reach for MSMEs.
ONDC represents a transformative shift in the Indian e-commerce landscape. By dismantling the walls of closed ecosystems and fostering an open, inclusive, and collaborative network, ONDC has the power to democratise e-commerce and empower millions of MSMEs. This initiative not only promotes fair competition and innovation but also enhances consumer choice and transparency. As ONDC evolves and adapts to new technologies and trends, it has the potential to serve as a model for a more inclusive, equitable, and sustainable digital economy worldwide. The future of ONDC is bright, and its success could pave the way for a more democratic and vibrant e-commerce ecosystem in India and beyond.