ONDC: Revolutionizing the Indian e-commerce landscape

Pradeep Raman, Senior Product Manager at Fine and Rare, London, UK

The Open Digital Commerce Network (ONDC), a groundbreaking initiative initiated by the Government of India, is radically transforming the e-commerce landscape in the country. ONDC’s primary goal is to democratize e-commerce by fostering a fairer and more competitive market through the creation of an inclusive, interoperable network. This network has been designed to seamlessly connect buyers and sellers from all corners of India, thereby redefining the dynamics of e-commerce in the country.

ONDC, the open digital commerce network, was officially launched in December 2021, marking a key change in the digital commerce industry. Unlike conventional e-commerce platforms that dictate the entire process, from product listings to transactions, ONDC introduces a decentralized network model. This innovative approach facilitates seamless transactions across multiple platforms, providing small and medium-sized enterprises, as well as local enterprises, with an empowered environment to compete on a level playing field with established industry players.

Progress and impact

Since its inception, the Open Network for Digital Commerce (ONDC) has gained significant popularity and participation. The platform operates on open source protocols that standardize operation and allow sellers of various scales to contact potential buyers. This system eliminates the need for high commissions and stringent barriers to entry that typically characterize the e-commerce landscape. By mid-2023, ONDC has successfully integrated thousands of merchants into its network. These sellers cover a wide spectrum, from local artisans to large retailers, demonstrating the platform’s growing influence.

ONDC’s growth is further driven by strategic alliances with major financial institutions and technology companies. These partnerships have enriched the platform’s capabilities, enabling it to offer users more comprehensive and beneficial services. Apart from this, the Government of India has played an active role in supporting the expansion of ONDC. Their efforts to improve digital skills and develop infrastructure have played a key role in expanding the reach and impact of the platform.

A buyer from Mumbai is looking for authentic handmade pottery for her home decor. Through ONDC, he can connect with a small ceramics company in rural Rajasthan. The platform allows her to browse offers, interact with sellers and make a purchase seamlessly. It also ensures safe transaction and reliable delivery. In this way, we not only provide urban consumers with unique, high-quality products, but also promote and support rural craftsmen and businesses.

A farmer from a remote village in Bihar wants to buy high-quality seeds and agricultural equipment. ONDC can connect this farmer with an agricultural supply company based in a city like Hyderabad. The farmer can browse products, compare prices and make purchases without having to go to the city. The transaction is safe and delivery to his village is guaranteed by ONDC. This enables rural consumers to access a wider range of products and services, and urban businesses to reach new markets.

Benefits	Challenges	Beyond physical objects
Inclusiveness and availability: ONDC lowers entry barriers, ensuring a level playing field for SMEs and local suppliers.	Trust and reliability: Building trust in a decentralized network where buyers and sellers interact across multiple platforms is difficult. It is essential to maintain consistent quality and service standards across all participating platforms.	Fintech: By integrating financial services, ONDC can provide seamless payment and lending solutions. This helps SMEs access credit and manage their finances more effectively.
Reduced costs: Sellers can enjoy lower transaction fees and marketing costs, which can lead to better prices for consumers.	Buyer’s trust: Consumers accustomed to the guarantees and returns policies of traditional e-commerce giants may have concerns about the credibility and responsibility of sellers in the new, decentralized system.	Insurance: Insurers can use ONDC to offer tailored insurance products to a wider audience. They can leverage their broad network reach and data insights to tailor their offerings.
Greater consumer choice: Consumers can benefit from a wider range of products and sellers, leading to greater variety and competitive prices.	Dispute resolution: Resolving disputes and ensuring fair solutions in a decentralized network requires robust mechanisms that are still under development.	Sales of services: ONDC can support service companies such as travel agencies, consultants and local service providers. It provides a platform to promote and sell your services to a wider range of customers.
Data ownership: Sellers remain in control of their data, which helps build trust and transparency.	Technological integration: The need to seamlessly integrate different platforms requires advanced technology and coordination, which poses a significant challenge.

International transactions and global reach

ONDC’s vision transcends national borders and aims to facilitate international transactions. By promoting global connectivity, ONDC can help Indian sellers reach international markets. The network’s open protocols enable integration with international payment gateways and logistics partners, ensuring seamless cross-border transactions.

For example, an Indian textile exporter can list its products on ONDC, making them available to buyers in Europe or North America. This global exposure can significantly improve the growth prospects of Indian businesses by promoting international trade and economic development.

Supporting ONDC: The role of EVALUATIONS

Another notable initiative by the Indian government is the Open Credit Enablement Network (OCEN), which aims to democratize access to credit by connecting lenders and markets through open APIs. Integrating OCEN with ONDC can simplify access to affordable credit for small businesses, thereby helping them scale their operations and increase their competitiveness in the market. This integration could further strengthen ONDC’s overall impact by fostering a more supportive ecosystem for digital trade.

The solid technology behind ONDC

The ONDC framework is based on a set of advanced technologies:

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  Blockchain: ONDC uses blockchain technology for secure and transparent transactions. This technology records transactions in a decentralized ledger so that they cannot be changed without changing all subsequent blocks.
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  Bee: APIs enable seamless integration with various platforms and services. They define how different applications communicate, enabling ONDC to integrate with various payment gateways.
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  Artificial intelligence and machine learning: Artificial intelligence and machine learning improve personalized recommendations and fraud detection at ONDC. They learn from data to make predictions or make decisions, such as personalized product recommendations and identifying fraudulent patterns.
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  Cloud computing: Cloud computing provides ONDC with a scalable and reliable infrastructure. It provides a variety of services online, enabling ONDC to scale resources during peak shopping seasons and ensuring constant availability.

Together, these technologies ensure that ONDC remains resilient, scalable, and adaptable to future needs.

Competitors’ mindset and the way forward

The emergence of ONDC has definitely shaken up the status quo. Existing e-commerce players are re-evaluating their strategies to adapt to the changed competitive landscape. Some see ONDC as a threat to their market dominance, others interpret it as an opportunity for innovation and collaboration.

Several large players have begun exploring ways to integrate with ONDC, recognizing the prospects of expanding their reach and accessing new customer demographics. This collaborative strategy has the potential to transform e-commerce competition by encouraging a more collaborative ecosystem.

ONDC is a testament to India’s commitment to digital inclusion and innovation. As this platform evolves, it is expected to transform the e-commerce landscape by fostering inclusion, competitiveness and consumer friendliness.

About the author: Pradeep Raman is an experienced product manager with deep expertise in the e-commerce sector. He is adept at strategizing, designing and launching e-commerce products that drive business growth and customer satisfaction. His understanding of digital market dynamics positions him as a thought leader in this field. You can connect with him or follow him http://www.linkedin.com/in/ramanpradeep/