“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,” said Ministry of Commerce & Industry in one of its press releases on ONDC.

You would have heard a lot about the price difference for food items ordered on Swiggy / Zomato vs. ONDC buyer app, making you wonder if the future of such marketplaces would be safe or not?

But before you start scratching your head with this question, let’s start from the scratch.

India has been a trailblazer when it comes to adopting digital infrastructures like UPI, Aadhaar, Unified Health Interface (UHI), etc. And now, ONDC is set to become another feather in India's cap.

ONDC is a shared digital infrastructure for the e-commerce industry, initiated by the DPIIT and Ministry of Commerce. The goal is to revolutionize digital commerce by creating a facilitative model that promotes retail e-commerce penetration. It was incorporated as a non-profit organization (Section-8 Company) in December 2021. The list of its equity shareholders includes banks and financial institutions, but not government (although it is giving full fledged support to ONDC).

So, what exactly is ONDC? It's not an intermediary, software, or marketplace. Instead, it's a set of protocols designed to promote open connections and interchange between participants. Think of it as a network-centric model where buyer and seller platforms can connect. Once a retailer joins a seller platform connected to ONDC's open protocol, their business can be discovered by buyers on any e-commerce platform that follows the same protocol. In simpler terms, buyers and sellers don't need to be on the same platform to do business together.

The seller platform plays a crucial role by onboarding and aggregating local vendors who want to be part of the network. When a buyer platform joins the ONDC network, it establishes connections with seller platforms and creates a new section on their platforms for the categories available for sale (for example, Paytm has a separate section by name of ‘ONDC Food’ on its application). With ONDC, all the aggregated sellers become visible to buyers on the buyer platform. So, buyers only need to open one of these buyer platforms and place an order. Delivery options can vary from the seller's own fleets to specialized logistics providers.

This model is fuelled by the commission paid by sellers which is likely to be divided among seller platform, buyer platform and ONDC. Also, the buyer pays a delivery charge to the delivering entity like Delhivery or Dunzo.

The high point here is that sellers get visibility on all the buyer applications without being getting into pains of doing individual tie-ups, thereby streamlining things for both the sellers & buyers; making it more convenient & efficient for all. This is ’democratization’ of digital commerce!

The wow factor associated with ONDC will increase further due to the below reasons:

• Buyers can see the location of the sellers, allowing them to choose nearby shops for quicker deliveries. This promotes hyperlocal delivery, especially for groceries, directly from sellers to buyers. This promotes inclusivity and access for sellers, especially small and medium enterprises, and local businesses.
• Lower entry barriers mean a more competitive market, which leads to reduced commission fees and better negotiation terms for sellers with the platforms.
• Buyers benefit from wider choices and increased independence. Also, ONDC is expanding its reach to include various categories, from food and groceries to clothes and mobility.

So, rolling back to the first question - will this be the start to the end of the duopolies – Swiggy / Zomato?

ONDC currently offers lower prices compared to other platforms due to discounts, much like how these existing platforms used investor funds to provide incentives. However, ONDC cannot sustain these deep discounts forever. Over time, they are expected to gradually disappear. But rest assured, ONDC will definitely help reduce the monopolistic domination of existing platforms.

Some users have reported issues with the food delivery experience on the ONDC network, such as incorrect orders and delays. Since multiple entities are involved, there's currently no centralized customer care system to address these concerns. Closed systems like Zomato and Swiggy have an advantage in controlling the end-to-end delivery experience. So, it's worth considering if buyers are willing to trade a slightly lower price for a seamless experience.

Looking ahead, it'll be interesting to see how the situation evolves in the upcoming months.

Way forward:

To succeed, ONDC must provide effective discovery tools for sellers, leveraging data analytics and ratings like established marketplaces, as buyers may not have prior experience with unfamiliar sellers. The platform should match or even exceed the online purchasing experience, delivery experience, and grievance redressal offered by existing platforms.

ONDC has the potential to fundamentally change the behaviour of participants, bringing efficiency and benefits to consumers. It will drive the digitization of commerce further. In fact, it recently launched business-to-business (B2B) transactions, enabling merchants to engage directly with other businesses in wholesale trade.

Regardless of whether ONDC becomes as successful as UPI, one thing is clear – India's digital commerce is transforming. The relationship between sellers, buyers, and platforms is changing, and it's an exciting time to witness these innovations in action.