ONDC’s February volumes more than double to 1.5 crore transactions despite slowdown in retail orders

While retail contributed a majority 53 percent of ONDC transactions in May 2024, the figure has come down to 31 percent in February 2025. Meanwhile, mobility’s share has climbed from 42 percent to 55 percent during the same period.

“ONDC is going slow and steady every month, with various segments and new initiatives being added. E-commerce strategies usually throw a lot of money, get a customer base, and then bump it up. The network’s approach is to build broad-based participation across sectors,” said the expert quoted above.

“Retail orders fluctuate based on various factors. Some segments go up, some go down. October saw peak activity, December had promotional pressures from existing players, and now we see a build-up again,” the industry expert added.

In parallel, the network has been cutting down on its incentive payouts to network participants, in a bid to cut costs. It has also started levying a fee of Rs 1.5 on each transaction starting January 1, though this is much lower than the platform fees charged by quick-commerce players such as Swiggy and Zomato, which are in the range of Rs 10.

ONDC has been giving financial incentives to network players depending on order volumes and categories. This money is, in turn, used to fund discounts and offers for customers to promote rapid adoption of the government-backed network.

Except October, where incentives were increased to seemingly capitalize on the festival season, these payouts have been on a declining trajectory since August, as the platform is looking to cut down operational expenses. Retail orders on ONDC peaked in October at 65 lakh transactions, before tapering off.

Fashion, F&B Out of Favour

Over the last month, ONDC has seen a sharp decline in retail orders across all geographies it operates in (except Telangana), and especially in its top three markets of Karnataka, Delhi, and Uttar Pradesh.

While the platform’s grocery orders remained relatively flat at 8 lakh transactions in February, categories like Fashion - at almost 7 lakh orders - and food and beverage (F&B) at nearly 14 lakh, saw a 21 percent and 10 percent month-on-month decline, respectively.

Over the past two years, multiple new-age companies such as Paytm, Ola, PhonePe, Meesho, Magicpin, and Shiprocket, have taken to ONDC, aimed at breaking the stranglehold of a few players such as Amazon, Flipkart, Zomato, and Swiggy, on online retail in India.

However, ONDC’s tightening cash payouts, especially in mature categories like food delivery, have led to slowing growth over the past six months. This, coupled with a slowdown in consumer spending and urban consumption may have impacted ONDC’s growth in these categories. Zomato and Swiggy had posted muted December quarter results owing to a broad-based slowdown in the food delivery market.

ONDC operates without a revenue model, keeping costs low by focusing solely on digital infrastructure provision. It functions akin to a utility service, comparable to the Unified Payments Interface (UPI), where operational costs are inevitable but must be managed.