ONDC is a pioneering initiative spearheaded by the Government of India to create an open and inclusive digital commerce ecosystem. It is part of India Stack, the nation’s Digital Public Infrastructure (DPI).
It allows any registered seller to connect with any registered buyer in India. Doing so breaks the monopolies and duopolies established in the online retail and service spaces to provide a level playing field for small businesses and local retailers.
In June 2023, this groundbreaking service emerged across multiple locations in India, creating a network to reshape the online business landscape.
How does it work?
ONDC works by providing a set of open protocols that allow different e-commerce platforms and service providers to interoperate with each other. This means that buyers can use any ONDC-compatible app to purchase goods and services from sellers on any ONDC-compatible platform.
Much like the Unified Payment Interface (UPI), ONDC allows users to make mobile payments irrespective of their payment app. When a buyer sought a grocery item using ONDC, they received a comprehensive list of affiliated sellers offering the product.
ONDC aims to onboard 30 million sellers and 300 million shoppers onto its network by the end of 2024. The plan is to expand into all spheres of goods and services. The pilot phase of ONDC took off in five cities on April 29, 2022.
The maiden transaction on ONDC involved Bengaluru-based Woolly Farms receiving an order through Paytm. Notably, companies like Paytm and Phonepe have already embraced ONDC. At the same time, Ola, Uber, Swiggy, and other new-age apps are reluctant as they believe it will impact their commission-based revenue. Recently, Microsoft made headlines as the first major tech company to join the network.
Features of ONDC
Here are some of the key features of ONDC:
Sellers on ONDC have the freedom to choose their preferred payment method, such as UPI, credit cards, or cash on delivery (COD). This flexibility is especially beneficial for small businesses, which may not have the resources to support all payment options.
ONDC is designed to be compatible with a wide range of e-commerce platforms and applications. This enables small businesses to integrate their existing systems with ONDC easily, and buyers can use their favorite e-commerce apps to shop on ONDC.
ONDC protocols standardize key operations such as inventory management, cataloging, and delivery, making it easier for sellers to manage their online stores and for buyers to find and purchase products.
ONDC aims to establish interoperability and standardization across different e-commerce platforms and service providers.
ONDC takes measures to ensure the confidentiality and privacy of data in the network.
Unbundling the digital commerce ecosystem
ONDC unbundles the digital commerce ecosystem into more minor, more specialized services. This allows niche players to spring up and build apps that cater to specific needs. For example, there could be apps that help sellers with inventory management or apps that help buyers find the best deals on specific products.
Unlike Amazon, which is a closed platform that controls all aspects of the e-commerce process, ONDC is an open network that allows all players to participate. This includes buyers and buyer apps, sellers and seller apps, logistics players, and payment partners.
Here are some examples of how ONDC is already unbundling the e-commerce ecosystem:
- Seller apps like Woolly Farms are helping sellers get onboarded to ONDC and manage their online stores. The process includes registration, cataloging, building an online storefront and inventory management.
- Buyer apps like Paytm and MagicPin bring buyers to the network and helping them find and purchase products.
- Logistics companies like Shiprocket and Shadowfax are fulfilling deliveries for ONDC orders.
- Payment partners like UPI and Paytm are processing transactions for ONDC orders.
- Unbundling the digital commerce ecosystem makes selling online easier for small businesses and local retailers. It increases competition and innovation in the e-commerce market. Also, it gives consumers more choices and lower prices.
How is ONDC changing the digital commerce space in India?
ONDC is still in its early stages of development, but it has the potential to revolutionize the e-commerce industry in India. Here are some of the key benefits of ONDC:
ONDC is changing the e-commerce space in India in several ways. First, it makes it easier for small businesses and local retailers to sell online. In the past, these businesses had to rely on large e-commerce platforms like Amazon and Flipkart, which charged high commissions and imposed restrictive terms. With ONDC, businesses can sell online without going through any intermediaries.
Increased competition and lower prices:
The ONDC currently keeps the buyer-seller commission capped at 3-5% instead of the usual 20-30% charged by service apps like Swiggy, for instance, in the food delivery space. This increases competition in the market and is likely to lead to lower prices for consumers and more choices of products and services.
Greater transparency and accountability:
ONDC is making e-commerce more transparent and accountable. This is because ONDC is built on open protocols, making it more difficult for e-commerce companies to engage in anti-competitive practices.
More choices for consumers:
ONDC will give consumers more choices of e-commerce platforms and sellers. They can also choose the logistics and payment providers that best suit their needs.
Key Businesses Collaborating with ONDC
Ride Hailing Revolution on ONDC
Most people think that ONDC is just about e-commerce, but it has also revolutionised how people move. Ride hailing, a cornerstone of modern urban life, has found a new home on the ONDC platform, ushering in an era of open, efficient, and user-centric mobility solutions.
Bengaluru’s Namma Yatri:
Leading the charge is Namma Yatri, the Bengaluru-based auto-booking app that made history by becoming one of the first mobility apps on the ONDC platform. Developed by Juspay Technologies and rooted in Beckn-like protocols, Namma Yatri swiftly embraced the ONDC vision. It boasts more than 20 lakh registered users, 96,000 drivers, and has completed 1.11 crore rides and driver earnings of 163 crores since its launch in November 2022.
Kochi, a city in Kerala, embraced ONDC through the Yatri app, marking a significant step towards integrated state transportation. Yatri, operating seamlessly on ONDC protocols, boasts over 2 lakh users and 5,000 registered drivers with 180,000 completed trips and driver earnings of 4.5 crores. Its success story mirrors the larger vision of ONDC, where an open network enriches the value proposition for both riders and drivers. By expanding the open mobility network in the state, ONDC and Yatri have pioneered a model that fosters innovation, inclusivity, and efficiency in urban mobility.
West Bengal’s Yatri Sathi:
In West Bengal, the Yatri Sathi app embarked on a groundbreaking pilot program with ONDC in July 2023. The app facilitates over 5,000 rides per day, redefining the ride-hailing experience for customers and drivers alike. Expanding its reach into the bustling streets of Kolkata, the Yatri Sathi app, in collaboration with ONDC, now offers rides in both black-and-yellow taxis and other cabs. Since its launch, the Yatri app has completed 250,000 trips, onboarded 365,000 registered users and 18,600 registered driver partners. It’s driver earnings have surpassed seven crores overall.
ONDC and the Affordable Food Delivery Experience
ONDC is also reshaping the way we dine and the way restaurants operate. Unlike Zomato and Swiggy, ONDC offers a unique and affordable dining experience, making it a preferred choice for both restaurants and customers.
- One of the standout features of ONDC is its affordability. The platform charges a significantly lower commission rate compared to its competitors. While Zomato imposes a hefty 25-30% commission, ONDC only sets a modest 2-4%. This substantial difference allows restaurants to offer better prices to customers without compromising their profits.
- ONDC sweetens the deal further by offering a flat Rs 50 discount per order. For example, a cold coffee from McDonald’ is available for Rs 208 on Swiggy, Rs 226 on Zomato, and only Rs 108 on ONDC (Data from May 8).
- The convenience of ONDC extends with the variety of available platforms. Whether you prefer Paytm, PhonePe’s Pincode, or Magicpin, ONDC ensures a consistent and pocket-friendly dining experience across these platforms. By partnering with such diverse apps, ONDC ensures its affordability reaches every corner of the digital market.
- While ONDC doesn’t operate its own delivery system, it has streamlined its logistics through third-party partners such as Shadowfax, Dunzo, Loadshare, eKart, Grab, and Shiprocket. Restaurants, in turn, pay a reasonable fee to these providers for the efficient delivery of orders. This approach not only ensures timely deliveries but also keeps the overall operational costs in check, a benefit that is passed on to the customers.
Online Shopping through ONDC
With major players like Paytm, MagicPin, Pincode, and Meesho and innovative platforms like Mystore, ONDC is revolutionizing the e-commerce industry in India. Here’s a glimpse of some of the shopping platforms onboarded on ONDC.
Mystore: StoreHippo’s Mystore application has democratized e-commerce for small and medium enterprises (SMEs) across India. Offering tools for efficient catalog management and order processing, Mystore ensures businesses can thrive without hefty subscription costs.
eSamudaay: Designed to uplift local economies, it simplifies order processing and catalog management for food and beverage retailers by facilitating seamless interactions between buyers and sellers via the ONDC network.
SellerApp and YES Bank Collaboration: This collaboration provides an exclusive ONDC application catering to corporate consumers. The platform offers comprehensive functionalities like inventory management, consumer orders, and detailed reporting processes and simplifies the online selling experience.
ITC Store: Focusing on groceries, stationary items, and personal care products, the ITC Store facilitates businesses across 11 cities in India, connecting them with consumers in over 1,000 pin codes.
Digiit: Digiit simplifies business transactions in the food and beverage, grocery, and home decor sectors. Digiit enables seamless purchases, benefiting both consumers and platform owners.
Paytm: Paytm is the first application to go live on the platform. Paytm offers unparalleled convenience to shoppers.
MagicPin: MagicPin’s unique approach to hyperlocal shopping resonates with buyers looking for diverse options. Connecting users with smaller retailers and startups, MagicPin offers a myriad of choices. Exclusive cashback offers, specially curated collections, and a seamless browsing experience make it a go-to app for savvy shoppers.
Pincode: PhonePe’s Pincode application ensures affordability without compromising quality. Secure payments through trusted gateways add an extra layer of trust, making it a reliable choice for buyers seeking quality products at competitive prices.
ONDC’s Role in the Gig Economy
ONDC’s impact on the job market is profound. By facilitating connections between gig workers and retailers, ONDC is expected to surge the demand for gig work, especially in delivery sectors. Logistics partners, warehousing players, dark stores, and delivery partners are in high order, creating many job opportunities for individuals seeking work in these domains.]
In fact, cab aggregators (Ola/Uber) and food delivery apps (Swiggy/Zomato) sowed the seeds for a platform like ONDC when they started onboarding delivery or driver partners (gig workers) way back in 2010s.
Their idea was simple – They didn’t want the workforce on the payroll to reduce the cost of service. The same gig-work model is followed in the US.
But, the Indian market is different:
1. Only 36% of the working class population have a full-time employment. The gig-work environment creates lower wages for everyone – at least in the blue-collar economy.
2. The current e-commerce ecosystem is an operator-driven, platform-centric model where the more prominent players dictate terms to the gig workers.
3. Online platforms have razor-thin margins and want to push the gig worker percentage to the upper limit if possible.
How does ONDC democratize gig-work?
Aadhar + UPI (India stack) enables anyone to onboard a gig worker without sharing a single piece of paper, and ONDC is taking full advantage of this. It brings online platforms and gig workers to a single point.
What does it mean?
A Rapido bike taxi partner can now also deliver a Swiggy food order, and they don’t have to be on two platforms to maximize their earnings. The India stack also makes stakeholder management easier and trackable by making ONDC the only place they need to be registered.
For instance, delivery partner ratings for an individual can be ported and viewed across platforms like Zomato or Swiggy. Not just ratings, order history across platforms can be viewed in ONDC, facilitating better incentives and work culture for gig partners.
ONDC also opens access to customer data, and businesses will be empowered to derive analytical, actionable insights into selling their products across digital platforms. And these are just some of the realised possibilities of ONDC.
In a world where digital identities like Aadhaar and payment systems like UPI have set remarkable precedents, ONDC’s journey must be closely watched. It may pave the way for the next era of retail, not just in India but beyond. It is a significant step towards creating a more inclusive and competitive digital economy.