ONDC is a platform-agnostic e-commerce system that allows all kinds of vendors, sellers, and merchants, both big and small, to display their products and services. The role of ONDC (Open Network for Digital Commerce) in the retail industry is to transform and enhance the online market accessibility for small retailers in India, while increasing the freedom of choice for consumers.
ONDC is expected to disrupt the Indian retail industry currently valued at ~US$ 1T and has the potential to upend the dominant position of major e-commerce players in the country and establish a fairer environment for smaller and mid-sized merchants and traders, seamlessly incorporating them into the digital landscape. India aims to achieve a genuinely decentralized, cohesive, and inclusive e-commerce system with ONDC that can be accessible to all.
In today’s newsletter, we will try to understand ONDC as a burgeoning platform, exploring its value addition for both sellers and buyers, as well as examining the potential challenges it may face!
ONDC is poised to transform Indian e-commerce by significantly enhancing the discoverability of merchants and vendors. Despite being at a nascent stage, India’s e-commerce market is projected to grow from US$ 83B in 2022 to US$ 150B in 2026, according to FIS 2023 Global Payments Report. This move towards a comprehensive and inclusive system like ONDC could propel India's e-commerce ambition to new heights, reshaping the entire industry.
ONDC's vision involves digitizing the entire value chain, streamlining operations, encouraging supplier engagement, optimizing logistics, and enhancing customer value. Once fully implemented and regulated, all e-commerce businesses in India, irrespective of their brand, will be mandated to adhere to the standardized protocols, similar to Android-based mobile devices.
This move will introduce discoverability, interoperability, and inclusivity, benefiting smaller online stores and new players in the market. By breaking the monopolies held by major platforms in sectors like retail, food, and mobility, ONDC will empower suppliers and customers, enabling them to drive innovation and transform their businesses.
From the time of its establishment, ONDC has accomplished remarkable achievements. It has witnessed exponential growth with over 26,000 collaborating merchants providing a diverse selection of more than 2.7M products, resulting in over 600 daily transactions.
The extensive reach and inclusivity of ONDC is evident through its thriving network of over 40,000 sellers and participation from more than 45 entities in 236 cities. The platform's success stems from its capacity to encourage collaboration, attract both established and emerging players, and offer consumers a wide variety of products and services.
The rapid growth of India's customer base is propelling the retail and e-commerce market to become a massive industry, expected to reach a valuation of US$ 150B in the near future. In this context, ONDC emerges as a potential enforcer, bringing small retailers into the digital fold. However, to realize its full potential, ONDC will need to overcome challenges and adaptability issues during the complete roll-out phase.
Recognizing the significance of small and medium enterprises in the economy, ONDC is well-positioned to digitize the entire supply chain in the coming years. By providing a level playing field for all businesses, ONDC aims to bolster India's digital infrastructure and connectivity, facilitating smoother online operations for growing businesses. However, this sector is filled with incumbents hyper-focused on increasing customer acquisition and engagement by investing significant capital in marketing, discounts and seamless user experience. ONDC will have to take notes from its payments counterpart UPI in driving innovation at a good pace in order to keep up or disrupt its heavily funded counterparts.