The Open Network for Digital Commerce (ONDC), an ecosystem for unbundled and interoperable ecommerce transactions has been generating immense excitement in the world of business. The excitement is about being part of a seemingly vast open network where sellers can sell their goods in any part of the country without having to worry about paying hefty commissions to ecommerce platforms, they can opt for a logistics service provider that suits them the best and most importantly they don’t need to spend a fortune on acquiring customers. So, the Madhubani artist cluster in remote Mithila in Bihar can sell their art with as much ease by merely plugging in to the ONDC network as would a new-age FMCG personal care brand wanting to spread its wings to tier 2-3 India. As far as buyers are concerned, ONDC promises to spoil them with a plethora of options on a single open network.
The pandemic has pushed most of us to shop for our monthly grocery on open networks such as Big Basket or Jio. There have been several occasions when either of the platforms is unable to fulfil our entire grocery requirement and we would have to look at Amazon or other platforms to buy those items. This would mean paying for additional delivery costs each time we shop. ONDC, explains chief business officer, Shireesh Joshi, would throw up a list of five grocery sellers which could fulfil the buyers’ entire grocery list. “The open network will look for sellers who tick all the boxes and I get presented with five sellers who are ticking all the boxes. I will have the total amount to be paid for the items from all the five shops and I will also know who is going to ship it to me. Today nobody offers that.”
The most common comparable of ONDC is UPI, which enables people to transfer money through a UPI platform without knowing each other’s bank account details. Though corporate boardrooms are bustling with discussions around ONDC, there is confusion galore. Will getting on to the ONDC network mean disintegration of the traditional supply chain mechanisms? Will ONDC come at the expense of marketplaces such as Amazon, Jio or Flipkart? In conversation with Fortune India, Joshi tries to demystify ONDC.
“ONDC brings unbundling. It’s like a jigsaw puzzle where different people play various roles and the picture gets completed,” explains Joshi. An ecommerce platform’s activities can be grouped into – buyer and seller activities and fulfilment. So, if a consumer wants to buy a pair of jeans, she searches for options, chooses and adds to cart. The seller on its part raises an invoice and packs the product while the logistics partner takes care of the fulfilment of the order. All of them are connected by a single piece of architecture proprietary to the ecommerce platform. “If I am a buyer on one platform, I can’t buy from the other seller on another platform. I will have to register only then I can buy. But if you break it up, you are allowing different people to contribute to the pool.”
One of the biggest contributors to the buyer ecosystem, according to Joshi, could be telecom companies. “They have a user base which runs into hundreds of millions and if you take the top three, they can probably throw in at least a billion buyers into their networks between the three of them. Similarly, there are hundreds of banks and if you add up their user base, they can contribute too. Even social media companies could contribute. Similarly, you will also have lots of parties contributing sellers.”
Joshi refers to the accounting software companies that build sales software for brick-and-mortar retail companies. “The computer knows the catalogue as well as inventory. If you connect that to the ONDC open network, the store’s inventory will be visible to the buyers in the network. Now, an accounting software can take the seller base that they have and connect them as sellers on ONDC. Similarly, you can have a technology company contributing as a logistics provider. If the tech company was building a GPS-based tracking tool and because of that they have a lot of logistics companies as their users, they can create an interface and all these companies can be visible on ONDC to deliver goods.”
The heart of ONDC, points out Joshi, is to unbundle services and make them inter-operable. “A buyer on the telecom company platform can search for a product that is available on the catalogue that the accounting software company has enabled. Now you are creating opportunities for a much greater pool of everything, far more than an individual organisation.”
Most ecommerce companies in India are in the red as they continue to burn capital to acquire customers and Joshi claims that with slight software adaptations they would have access to a limitless pool of buyers, sellers and logistics solution providers. “I can build an app which gets connected with the ONDC platform. I can ask a roadside vegetable seller to download my app and his catalogue is ready. I can charge him a fee of 0.1% per transaction. When the vegetable vendor gets a Rs 10 order, he has to pay me (the software company) 10 paise. The vendor won't mind.”
“On ONDC, you have a user base, a seller base, an existing cost, the same one you can leverage for others too,” he further explains. If a buyer buys a holiday on a travel portal connected to ONDC, she could also shop for other travel accessories from other sellers. “You get more revenue and at no extra cost. The road to profitability should be faster. There is an opportunity for everyone who has built a platform and acquired and invested money to now get better rewards.”
ONDC when nationally rolled out would be a boon for millions of brands wanting to expand to tier 2-3 India and are unable to do so as steep distribution costs could take the better of them. Head honchos of leading consumer goods companies are also excited about ONDC. But what happens to the traditional distribution networks that they have painstakingly built? The likes of HUL, Nestle and ITC have also invested heavily in digitisation of their distribution and supply chain network. Joshi calls ONDC a magnifier.
“The traditional structure is stable and profitable. The FMCG majors have expressed desire to bring their existing infrastructure into the network. You will have retailers who will be on ONDC selling to consumers as a seller. Retailers will also buy from distributors. They have already gone some distance in onboarding retailers, but they have an opportunity to scale up.”
Will ONDC be a threat to the likes of Amazon or Flipkart? Joshi chooses not to comment, but he says, “If a marketplace says for the next three years we will not join you. Chances are that their assets would dwindle.”
The biggest beneficiaries of an open network for ecommerce are small entrepreneurs. Platforms such as Amazon, Flipkart and Jio have indeed done their bit in giving thousands of small entrepreneurs a route to market, but there are still lots who are struggling. “The Government promotes local farm produce and crafts, but they are not strong at marketing their products. Now these local businesses can connect to ONDC and suddenly there is a platform for them to market.”
ONDC had its alpha rollout in April this year across five cities to test live transactions with a closed group of sellers and buyers and marked its footprint in 83 cities across India. As part of the beta testing phase, the network went live to public users in Bengaluru in grocery and F&B categories with buyer apps like Mystore, PayTM, and Spicemoney, 12 Seller applications (GoFrugal, Growth Falcon, eSamudaay, Digiit, Ushop, Sellerapp, Bizom, uEngage, Innobits, eVitalRx, Mystore, nStore) and two logistics providers (Loadshare, Dunzo).
Joshi claims that since September, multiple other buyers, sellers and logistics applications have gone live (ITC, EkSecond Technologies, Meesho, Uengage, Grab, Delhivery, Shiprocket). Four social sector enterprises (Tamul, Creyo, Shwet, & Anubhuti) have also gone live with the support of SIDBI (Small Industries Development Bank Of India). The platform is also being tested in Meerut.
Will ONDC really make a difference to the way India does business? It does seem like a promising proposition, but only time will say whether it is actually effective.