In what is expected to be the first big test for Open Network for Digital Commerce (ONDC), the government-backed interoperable network has gone live for users at 16 pin codes of Bengaluru on September 30. More than 200 grocery stores and restaurants in the city have been onboarded for this phase of the trial.
"Until now, the pilot programme had been restricted to select whitelisted users. The beta testing launch in Bengaluru is a major step forward for ONDC as we will be able to make improvements based on user feedback," said ONDC chief executive officer and managing director T Koshy.
"It will take time for the network to operate in full swing. But in the sentiment of the famous dialogue from Star Trek, we are going somewhere nobody has gone before," he added.
The Bengaluru trials will begin with Paytm, MyStore and Spice Money as buyer-side apps – platforms where users can sign up and place orders via the network. However, according to people close to the developments, the onboarding of users in the Bengaluru beta testing will happen in a phased manner and not all at once.
"This is a major milestone in the democratisation of e-commerce in India. We believe this is aligned with the company’s vision to create a long-term sustainable business in partnership with ONDC," said a Paytm Mall spokesperson.
"This will enable the purchase and sale of goods in the Indian market, driving transparency and digital independence for small businesses in the country," he added.
Over the next one week, Kotak Mahindra Bank and IDFC First Bank apps are also expected to be live on the network for users.
The roster of 11 seller-side apps, which will host grocery merchants, food and beverage outlets and consumer packaged goods (CPG) brands, include Unilever’s UShop, GoFrugal, SellerApp, GrowthFalcons, nStore and Innobits, among others.
Ecosystem gears up
“We have worked quite hard to smoothen out things at the back end. Last night, we figured out that our servers were placed in the US which was leading to an increased latency. So, we had to shift to servers in India. This will help us in bringing down the latency from 300 milliseconds to 50 milliseconds,” said Dilip Vamannan, co-founder of seller onboarding platform SellerApp.
SellerApp has onboarded around 50 participants in Bengaluru on the seller side to the network, including 31 kirana stores and supermarkets, 12 direct to consumer (D2C) brands like Kapiva, Boldcare, TrueNext, and five CPG brands like Patanjali and P&G.
The seller platform has done testing to be able to handle 1,000 search requests per second and 100 orders per second.
While SellerApp is focussed on grocery, GrowthFalcons is a seller-side app looking to bring restaurants and F&B companies on to the network. It has already onboarded around 150 food outlets to the network – from Foodism in Indiranagar, Ovenfresh Cakes in Whitefield to Five Star Chicken in Nagarbhavi.
“We have been a part of ONDC since September 2021 and taken part in multiple hackathons. I think we were among the first ones to complete a cascaded transaction on the network,” said Girish Pai, founder and CEO of GrowthFalcons.
While the technology puzzles at the back-end may have been solved, one of the biggest challenges for the ONDC participants is expected to be attracting users. While closed-loop platforms woo consumers with deep discounts, it is not yet clear which of the ONDC ecosystem participants will assume that role – buyer side apps, seller side apps or seller themselves.
Meanwhile, Pai has a plan to get going.
“I told restaurants that anyway they are listing the same prices for their menu as on Swiggy and Zomato, whereas those prices are hiked to account for the 20-30 percent commissions that are charged. But the take-rate on ONDC would be just about 12-15 percent. So, I have asked them to give a part of the benefit to users as discounts,” he said.
The structure of separate buying and selling platforms is one of the key differences between the closed-loop model of e-commerce and the open network model. As all e-commerce platforms – from Amazon and Flipkart to Swiggy and Zomato – today are cast in the former style, they can control which sellers are given prominence in the listings and have gated communities of users.
ONDC seeks to break down this structure into a modular form of e-commerce where, potentially, any user on any platform can buy from any seller on any other platform.It aims to raise e-commerce penetration in the next two years to 25 percent of India's consumer purchases, from nearly 8 percent now. It also hopes to sign up 900 million buyers and 1.2 million sellers on the shared network within the next five years, while achieving gross merchandise value of $48 billion.