ONDC will let ‘market forces’ set commissions charged to restaurants

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In a meeting with restaurants, Open Network for Digital Commerce (ONDC) said that it will not be giving any guidance on what percentage of commissions seller-side aggregators can charge them and let market forces determine the amount.

“We provided guidance when we started. But, in the long-term, we want market forces to determine the commissions,” Shireesh Joshi, chief business officer of ONDC, told a gathering of restaurants in Delhi on October 17.

Network participants like seller aggregators, point-of-sales companies in the food and beverages industry and logistics tech platforms also attended the meeting. According to a presentation shown at the gathering, restaurants have to currently shell out upwards of 40 percent of the order value currently in the form of commissions and marketing fees paid to online food aggregators.

Another important issue that came up at the meeting was about logistics. For example, a restaurant owner complained that he could not trust certain third-party logistics players on the network as he did not have a good experience with them on prior occasions.

ONDC officials said that restaurants would have the option to choose their logistics partners or even make the deliveries themselves. Only in cases where the food outlets don’t want to take care of deliveries, consumers would be given an option to select a logistics service provider to fulfill the order.

The network also told restaurants that they will get the name, address and telephone numbers of consumers – data points that online food aggregators like Swiggy and Zomato do not share with eateries.

On the issue of governing buyer-side platforms so that they don’t end up favouring one seller or restaurant over another, ONDC chief T Koshy said social audits by users and network participants and periodic compliance reviews will encourage good behaviour.

While the buyer-side platforms on the network can innovate on parameters to show search results, they have to ensure that the logic or algorithm followed is maintained across the results. For example, a buyer-side platform showing results based on ratings can’t show an eatery with lower ratings above one with higher ratings in the listing.

However, no penalty has been set to punish bad actors. “We are not here to police anyone. If users realise that one buyer-side platform is not up to the mark, they will gravitate to another platform,” said Koshy.

“In the network system, the source data of sellers is the same for all the platforms. So, no one platform can become a lone gatekeeper. The current model of e-commerce is like an apartment complex with two gates. The ONDC model is akin to one with a thousand gates,” he added.

ONDC is a government-backed initiative that aims to make e-commerce interoperable in the country – and restrict a few online marketplaces from capturing the entire e-commerce value chain from users to sellers and logistics networks.

Piloted in more than 80 cities since April this year, the network is now moving to the second stage of testing where all consumers in the top cities will be whitelisted to make purchases via the network in a phased manner. Earlier this month, Bengaluru was the first city to witness the start of this beta-testing phase while Delhi-NCR is set to be the next city in the next few weeks.

Moneycontrol reported in June that a note prepared by ONDC on a potential collaboration with food outlets said: "With multiple NPs (network partners) offering their services on the open network with no pre filters, it will help break away from current monopolisation/cartelisation of the online food delivery ecosystem."

Last year, the National Restaurants Association of India had filed information with the Competition Committee of India against foodtech majors Zomato and Swiggy, claiming that their practices have "appreciable adverse effects on competition". Issues such as bundling of services, data masking, deep discounting, lack of transparency and exorbitant commission were highlighted in the submission.

“The current ecosystem of food deliveries is broken and yet no one is able to disrupt it as it will take an infinite amount of funding. At present, the business model of foodtech can’t let a third party handle the hyperlocal logistics even though restaurants and end customers might end up benefiting from such a thing,” a restaurant owner who did not want to be named had told Moneycontrol at the time.

“That’s why the ONDC effort is worth giving a try where an integrated network may allow more localised food aggregators and intra-city logistics providers to come up. Ultimately, this has the potential to reduce commissions that restaurants have to pay and better prices for customers as well,” he had said.

In the ONDC system, restaurant network partners (RNP) in different areas may solely focus on aggregating restaurants, onboard them onto the network and manage them post onboarding i.e. educating restaurants on how to conduct online delivery business, advise on packaging and hygiene norms, ensure food preparation as per service level agreements.

This RNP need not worry about building the consumer pipeline and delivery infrastructure as other NPs will focus on those areas.