ONDC launches new incentive scheme with more autonomy for buyer apps, support for small cities

ONDC seeks to prevent the dominance of a few large platforms, such as Amazon, Flipkart, Swiggy, and Zomato, in the e-commerce and food delivery sectors

The Open Network for Digital Commerce (ONDC) has revised the structure of its incentive scheme to give more flexibility to buyer-side apps on how they disburse discounts to consumers, lowered the average subsidies given in the food category by half, and provided for a boost to the density of merchants on the network in 45 non-metro districts.

The notification regarding the fifth version of the incentive scheme was sent to network participants (NPs) late last evening (September 4) and will be effective from today. Moneycontrol has reviewed a copy of the circular.

Changes

While the latest incentive structure raises the maximum amount that can be claimed by buyer-side apps from Rs 25 lakh per week to Rs 40 lakh per week and done away with monitoring the discounts for a specific order, it has also announced certain changes on the average level of discounts given to users in different categories.

For example, the average incentive has been lowered to Rs 50 per order for order values greater than Rs 200 in the F&B category, kept it at Rs 100 per order for order values greater than Rs 200 for grocery, beauty and personal care, Rs 100 per order for order values between Rs 200 and Rs 1,000 for electronics, etc.

In the previous version of the scheme, there was no category based differentiation on the maximum incentive per order and the number was fixed at a flat Rs 100.

More importantly, the number of transactions for which a buyer can avail incentives per week has been capped at 2 from 5 earlier.

To be sure, ONDC had capped incentives per order to Rs 100 in June after it was criticised for trying to gain market share by heavy discounting in the food and beverage category.

ALSO READ | Understanding ONDC, the open network billed to be the UPI of e-commerce

The government-backed e-commerce network has taken the staggered approach of incentives on the seller-side app front as well —- for example, platforms will get up to Rs 6,000 for onboarding each seller in the metros, up to Rs 7,500 in the focus tier-2, -3 cities, and Rs 5,000 in all other cities when the number of stock-keeping units is greater than 5,000 in the grocery category.

These incentive levels will also change based on the number of stock-keeping units that an onboarded seller has and the category it plays in.

“There are no local merchants beyond 400 cities, yet we have seen users have placed orders from 620 cities. We have not even done any promotion from our side to give it a push beyond some of the cities like Bengaluru, Meerut and Delhi. But as people get more and more aware through social media and the efforts of sellers, we are seeing a gradual proliferation of consumers testing out ONDC,” T Koshy, chief executive officer and managing director of ONDC, had told Moneycontrol last month.

“When we re-architect the vision for the incentive programme, which might happen sometime this week, we will give some priority to smaller towns, artisans, farmer producer organisations, etc.,” he had said at the time.

While ONDC doubles down on small cities in India, it is also eyeing the international markets. Moneycontrol reported in July that the network plans to pilot B2B purchases in geographies such as Dubai and Singapore by September-October.

Also Read: ONDC is going global, eyes B2B exports to UAE, Singapore by year-end

For this, it has also lined up an initiative through which small sellers in India will be given badges of quality by an international rating company to garner the trust of buyers abroad.

Disruption

It is also planning to launch financial services products such as credit and insurance on the network. At an event in Delhi recently, ONDC said that a working committee with the representation of the Reserve Bank of India is finalising the modalities of disbursing financial products on the network.

Backed by the government, ONDC seeks to prevent the dominance of a few large platforms, such as Amazon, Flipkart, Swiggy, and Zomato, in the e-commerce and food delivery sectors.

The government hopes to increase e-commerce penetration in the country to 25 percent in the next two years, reaching 900 million buyers and 1.2 million sellers through the network. It is projected to generate a gross merchandise value of $48 billion.

ONDC is banking on three key pillars to reduce the cost of doing business for everyone, including retailers: dynamic pricing, inventory management, and delivery cost optimisation.