ONDC limits discounts to Rs 100 in revised incentive structure

An increasing number of internet analysts underscored that the initial food delivery volumes on ONDC are unsustainable.

Open Network for Digital Commerce (ONDC) has revised its incentive scheme for network participants to reduce the dependency on discounts for adoption, largely putting to rest questions around the network's potential to end the duopoly of Zomato and Swiggy, even as reduced incentives have brought down daily order values by around 64 percent to 9,000 from the peak.

This comes after an increasing number of internet analysts underscored that the initial food delivery volumes on ONDC are unsustainable. After Jefferies and Motilal Oswal Financial Services Ltd (MOFSL) said ONDC was not going to end the duopoly of Zomato and Swiggy, analysts at JM Financial have now flagged that the ONDC, in its current shape, isn’t a threat to any player's business, especially in the absence of discounts.

The revised incentives will come into effect from June 1, 2023 and succeed the programme rolled out first on January 30, 2023. The current phase of the programme will be live until June 28, 2023.

Among the several changes being introduced on ONDC, some major ones will likely discourage buyers from using the network. ONDC will only fulfil orders if the minimum threshold is met.

While food and beverage orders need to have a minimum cart value of Rs 200, it is much higher at Rs 300 for all other categories, including shipping charges, prior to any pricing intervention, as per official communication between ONDC and network participants.

Further, a buyer is now eligible for incentives for a maximum of five transactions per month. Earlier buyers could avail discounts on three orders per day but capped at a total of 30 orders in total.

Even the maximum incentives will be capped at Rs 100 per order, from around Rs 125 earlier. Importantly, all prices included, overall discounts should not exceed 50 percent of the total order value.

"ONDC first conceived the incentive programme when the network was clocking less than 100 orders a day. With the stimulus, the volume of orders increased to over 13,000 per day, after which the incentives were tweaked and the impact was observed," ONDC's communication stated.

Daily order volumes fell to an average of 9,000, down 64 percent from the peak of 25,000 that was achieved earlier this month.

"Presently, ONDC is averaging over 9,000 orders a day proving that interoperable unbundled e-commerce is not just viable but can also continue momentum beyond the stimulus. Thus, given the current stage of growth, ONDC has decided to revamp the incentive programme," the letter added.