ONDC sees orders from 620 cities, plans to double down on Tier 2 and 3 geographies

ONDC managing director and CEO T Koshy

Despite no special marketing efforts outside the top few metros like Bengaluru and Delhi, users from 620 cities have placed orders on the Open Network for Digital Commerce (ONDC). The government-backed ecommerce network is now planning to double down on Tier 2 and beyond in the next iteration of its incentive scheme, which may be released this week.

“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,” said T Koshy, chief executive officer and managing director of ONDC.

“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 told Moneycontrol.

Also read | Understanding ONDC, the open network billed to be the UPI of e-commerce

Billed as the unified payments interface of e-commerce, ONDC started its pilots in around six cities in April 2022. Until March 2023, the number of orders per day remained quite low, at around 50 per day.

Two things have boosted the network to around 95,000 to 100,000 daily transactions per day since then. First, ONDC started an incentive scheme for seller-side platforms to onboard more merchants to the network. More importantly, it started giving significant discounts to new buyers on the network.

With additional promotional campaigns by network participants such as Paytm, PhonePe's Pincode, and Magicpin, ONDC has been able to ramp up to more than 1.1 million retail transactions (food, grocery, apparel, etc.) and 5.4 million mobility transactions since its inception. The spike in mobility has come from the Juspay-backed Namma Yatri app, which aggregates auto rickshaws without charging any fees to drivers in Bengaluru.

On the retail side, 54,500 merchants have joined ONDC, offering about 75 lakh stock-keeping units (SKUs). In the past few months, they have averaged 16,000 orders per day, with a peak of 35,000 orders cumulatively last month.

“At least 24 cities have seen more than 100 orders twice in a week in the last few months… It is not that there are big volumes, but the good thing is people are trying it out and the daily transactions are growing… By September or so, you expect to see some more bigger names joining ONDC and launching their extensive outreach program nationally,” Koshy said.

For its next phase of growth, ONDC has multiple strategies in place. For example, to popularise the network in tier 2 and 3 cities and beyond, it has started an online educational course for merchants that will be disseminated in 14 to 18 languages. Additionally, state broadcaster Doordarshan will soon begin regular programming to educate buyers and sellers about ONDC across the country.

“Doordarshan is also extending their support to evangelise this initiative under the Digital India vision of the Honourable PM Modi by providing an opportunity to the ONDC ecosystem seven days every month to present a programme related to ONDC. This will give exposure to ONDC network participants and sellers in the network to a national audience,” said Koshy.

ONDC is also eyeing the international markets. Moneycontrol reported last month that the network plans to pilot B2B purchases in geographies like Dubai and Singapore by September-October. 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.

It is also planning to launch financial services products like 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.