From carts to cabs: With retail slowing, can ONDC ride on mobility, logistics?

From carts to cabs: With retail slowing, can ONDC ride on mobility, logistics?

Over the last six months, the government-backed Open Network for Digital Commerce (ONDC) has seen its growth engines recalibrating. With retail orders stagnating and new momentum emerging in mobility and logistics, the network is expanding – albeit at a slower pace than expected.

ONDC transactions are broadly classified into three categories - mobility (ride-hailing), retail (food, grocery, fashion, and electronics), and logistics.

A mix of factors — lack of clear differentiation, poor user experience, shrinking incentives, and mounting pressure from quick commerce rivals — has stalled ONDC’s retail momentum, according to several industry stakeholders who spoke to Moneycontrol.

The network recorded an all-time high of 1.6 crore transactions in March, more than double the volume from a year ago, and crossed 20 crore cumulative transactions during the month.

However, retail’s share in this growth has been on a consistent decline over the past six months. After peaking at 65.4 lakh orders during the October 2024 festival season, retail volumes dropped to a ten-month low of 45.8 lakh in February. While March saw a modest 2.5 percent month-on-month uptick to 46.9 lakh orders, growth remains subdued.

Retail, which accounted for 47 percent of ONDC’s total transactions in October 2024, fell to 29 percent by March 2025. Meanwhile, mobility’s share rose from 40 percent to 56 percent over the same period.

ONDC's largest retail segment, food and beverage (F&B), also declined by 10 percent month-on-month to 14 lakh orders in February, while grocery orders stayed flat at 8 lakh. During the month, its fashion category declined 21 percent to 7 lakh orders.

What’s breaking the cart?

Initially touted as the ‘UPI of e-commerce’, ONDC quickly rose to prominence in the retail segment almost two years ago when it began offering food delivery orders at heavy discounts compared to incumbent players. This, in turn, led many to question whether ONDC would kill the duopoly of Swiggy and Zomato. Multiple new-age companies such as Paytm, Ola, PhonePe, Meesho, Magicpin, and Shiprocket, also took to ONDC during this period.

Today, the network has not been able to make a meaningful dent in the market. Analysts point to unsustainable discounting and a lack of differentiation from existing food delivery platforms as key issues.

"ONDC was initially compared to UPI, but that is a false equivalence. UPI offers a superior and more convenient experience when compared to payments via cash or credit cards. ONDC has not been able to build that differentiation and customer experience. Customers, today, are looking for a better experience and fast deliveries," said Satish Meena, founder, Datum Intelligence – a market research firm.

In categories like F&B and fashion, where physical delivery is key, established players like Swiggy and Zomato have an edge by controlling the entire value chain, cutting delivery time and operational costs. ONDC, with its many network participants, introduces friction instead, Meena added.

In recent months, ONDC has also cut incentive payouts to network participants, reducing discounts offered on the platform. Incentives, which varied by order volume and category, have generally declined since August—except for a brief spike in October to capitalize on the festive season.

Starting January 1, ONDC also began charging a nominal Rs 1.5 per transaction. However, this is significantly less than the Rs 10 platform fees charged by players like Swiggy and Zomato.

The reduction in incentives has also discouraged more seller apps from integrating with the network, analysts say.

In fact, PhonePe’s Pincode app exited fashion and electronics last year to focus on high-frequency categories like food and grocery—further denting retail volumes.

In parallel, the platform has been facing increasing competition from quick commerce operators like Zomato-owned Blinkit, Swiggy Instamart, and Zepto, which have been expanding at a rapid pace in a bid to claw away market share from their competitors. This may have led to stagnation in ONDC’s grocery transactions.

“ONDC is still too technical for small sellers. We need hand-holding, not just dashboards. However to be fair, it's still early days for a network to get as big as quick commerce players. For a small seller ONDC is great in terms of savings but not for volume,” said a retail network participant to Moneycontrol requesting anonymity.

“They say ONDC levels the playing field, but without visibility and aggressive marketing like quick commerce apps, we’re invisible to buyers to some extent. The dream of ONDC is great, but we need more buyers on the platform,” the person quoted above added.

To be sure, more than two-thirds of online grocery orders and one-tenth of e-retail spending last year took place on these quick commerce platforms, Moneycontrol reported earlier.

Can mobility, logistics take the wheel?

As retail volumes falter, ONDC’s growth is being driven by mobility and logistics.

While retail orders remained flat, mobility transactions surged to 90 lakh in March—up 12 percent month-on-month. Logistics orders, albeit from a smaller base, rose 21 percent to 24 lakh.

That said, ONDC’s mobility volume is largely powered by Bengaluru-based ride-hailing platform Namma Yatri. While Ola is also integrated into the network, it currently offers only F&B and logistics services.

“Mobility is not a separate category, but a key segment for growth on ONDC. It has the potential to democratize urban transport just like we’re doing with e-commerce. Mobility is something that's been wanting a disruption in the market and ONDC was able to solve for it. ONDC is also onboarding several other players into the network. The network is betting big on this segment,” an Industry expert close to developments at ONDC said.

Analysts, however, caution that relying on a single large player for mobility could limit ONDC’s long-term growth.

"Dependence on a single player is against what ONDC was trying to build. The network needs to onboard others like Uber, Ola, and other local players as well, which is not happeneing. A lack of meaningful options is also a deterrant for customers to use ONDC," said a consumer internet analyst who requested anonymity.

Logistics, meanwhile, is unlikely to become a major growth engine despite large 3PL players like Delhivery, Shiprocket, Shadowfax, DTDC, and eKart being on the platform.

"Logistics is primarily business-to-business (B2B) or SME-driven. So volumes will be low in this segment. It is a category that will not drive significant volumes for ONDC, unlike mobility or retail," added Datum's Meena.

Present imperfect, future tense for ONDC

Subdued order growth isn’t ONDC’s only challenge. The network has also seen a leadership shake-up.

Last week, MD and CEO T Koshy, who led ONDC for nearly three years, resigned citing personal reasons. His exit marks the third top-level departure in six months, following the exits of CBO Shireesh Joshi and non-executive chairperson R S Sharma.

“There was definitely pressure to hit aggressive targets — 100,000 daily orders, onboarding marquee buyer apps, and expanding rapidly into tier-2 and 3 cities. Koshy has always believed in building for the long term, and he’s been instrumental in bringing ONDC to where it is today. But with growing expectations from the government, the board may have felt that ONDC now needs someone with a more startup-like mindset to lead its next phase of growth,” said an industry executive familiar with ONDC’s workings.

Meanwhile, the ONDC board has set up an interim management committee to oversee daily operations and ensure business continuity as Koshy transitions out.

The top-level exits pose yet another challenge for the government-backed network, as it looks to compete with e-commerce incumbents and unlock its next phase of growth.

“To succeed, ONDC needs to clearly communicate why customers should use the platform. Sellers do have better pricing power on the network due to lower commissions, but that messaging hasn’t been conveyed well by ONDC,” the analyst quoted earlier said.

The network would also benefit from enhancing user experience, setting a defined operational budget, and developing a long-term, target-driven growth strategy, the analyst concluded.