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ONDC and impact on Marketers: E-commerce sector in India is about to be revolutionised

ONDC is an autonomous open network ecosystem that will act as a catalyst that connects buyers and sellers across categories, giving the access to e-commerce facilities.

By  Storyboard18Dec 8, 2022 5:31 PM
ONDC and impact on Marketers: E-commerce sector in India is about to be revolutionised
The ONDC network will act like a catalyst and allow value to flow down the chain, benefiting all parties involved in the process instead of centralising it between few players. There will be no discouraging entry barriers that prevent players from participating and preventing innovation. (Representational image via Unsplash)

The pandemic force-fuelled the growth of not only e-commerce but also the number of internet users in the country. Moreover, the rising number of entrepreneurs and an increase in awareness of multiple growing startups and unicorns in the country, further promoted rapid digitisation and fostered a digitally inclusive economy. Publicis Group has released a report decoding ONDC and the impact it will have on marketeers. Let's take a closer look at some of its findings.

The proliferation of online commerce is reshaping the international economy and levelling the playing field for businesses of all sizes. As per the ‘Publicis Decoding ONDC’ report, online shoppers in India have increased by 175 percent in the last five years alone. With this increase in adoption of digital channels, startups in the fintech, edtech and online retail sector have pioneered and challenged established conventions on recent years. The Coronavirus dramatically accelerated demand and brought a whole new set of opportunities in the e-commerce sector. Massive growth has been witnessed in tier 2 and tier 3 cities as a result. With more and more people adopting digital channels, e-commerce has grown fivefold between 2020 and 2022 alone.

It wasn’t just the pandemic that brought about exponential growth in the digital sector in India. There were signs of growth before the pandemic as well. The government’s ‘Digital India’ initiative which aimed at approving online infrastructure and increasing internet accessibility in the country, led to the emergence of great demand across online shopping, banking, edtech and online transactions.

Where does ONDC come in?

As per the Publicis report, ONDC aims to pave the way for revolutionising digital commerce in India and creating a globally accepted paradigm. To ensure widespread involvement by stakeholders in India's digital commerce ecosystem through various gateways, an “open network built on open protocols based on open-source standards with established registries” is being developed. It is not an application or platform but an open network designed to enable broad based innovation without acting as a central intermediary. Local neighbourhood supplies for categories such as grocery, fashion, home handicrafts, flight tickets and insurance will be available on ONDC.

Apart from this, ONDC claims to enable more than 2 million retailers with e-commerce facilities. An estimate of over 250 million buyers will be able to purchase goods and services. ONDC also plans to cover over 75 percent of pin-codes in India.

The ONDC network will act like a catalyst and allow value to flow down the chain, benefiting all parties involved in the process instead centralising it between few players. There will be no discouraging entry barriers that prevent players fro participating and preventing innovation.

ONDC also plans to enable interoperability. To achieve this, the underlying architecture must be “non-rivalrous and non-exclusive" in nature. These become the ‘digital public goods’ that can stimulate and activate larger participation to ensure that the value derived by participants is not locked in a particular platform.

ONDC promotes autonomy. It plans to create an ecosystem free of any governance that offers inclusivity choice and agency to all participants. Also, since all players will be visible with a single search on ONDC, price comparison will become a piece of cake. You will be able to see how different websites are charging you for the same product. Thus, all players, small and big alike, can benefit from ONDC.

According to the same report, there are three participants on the ONDC network. Buyer apps, Seller apps and Gateways.

Buyer apps are Network Participants that handle buyer-side operations, such as buyer acquisition, search and discovery, and give functionality to the buyer to place orders on the open network. Customers will use buyer apps to access ONDC. Some examples of ONDC-enabled buyer apps are Paytm, SpiceMoney, or MyStore.

Seller apps manage seller-side operations and can be of two types:

Marketplace Seller Nodes (MSNs): MSNs act as aggregators for eventual sellers of products or services on ONDC. MSNs do not hold any inventory, but rather function as pure-play marketplaces. Some examples of ONDC-enabled MSNs are GoFrugal, SellerApp, Digiit, etc. 

Inventory Seller Nodes (ISNs): ISNs are themselves sellers who also are Network Participants. Large commerce players with significant physical presence, distribution, and technological maturity can register as ISNs. Examples include retailers such as Unilever, Marico, etc., who may register as ISNs. 

Gateways function purely as nodes for multicasting search queries and collecting results. Thus, they play a crucial role in search and discovery.

Other than these main participants, ONDC also has provisions for logistics service providers like Dunzo, payment service providers, Reconciliation service providers, settlement agencies and online dispute resolution service providers.

A network like this that plans to revolutionise the e-commerce sector in India does come with some inherent risks.

Customer service and returns:

ONDC does not prescribe how to handle returns, refunds, and cancellations as it deems itself a facilitator and not a regulator. ONDC operates in a decentralised, rule-based system. Unless brands join ONDC, they would have limited control on actual delivery and customer service. ONDC has set up a dispute resolution framework to address inter-party conflicts. As these frameworks get tested and refined, eventual customer experience remains at risk in the interim.

However, ONDC plans to work on solving this and building trust via transparency and a series of contracts between the buyer and the seller.

Managing roles and responsibilities in an evolving ecosystem:

The fact that ONDC’s role is of a facilitator, it sets guidelines for roles and responsibilities for all network participants. ONDC relies on community support and 3rd-party online dispute resolution (ODR) platforms to resolve disputes. The risk involved here is significant. There can be an increase in malicious activities, delays in dispute resolution and poor customer service in general since ONDC wouldn’t be handling this on a one-to-one basis.

While the precision of this model can only be proven over time, brands that are a part of the ONDC network can take charge of their own fulfilment, delivery and customer service. This will mitigate risks in the interim.

Regulation and compliance:

The standards governing the ONDC network demand an independent auditor to conduct periodic reviews to ensure that all policies are being followed. Given that the anticipated number of buyers and sellers that would be a part of ONDC, it reins to be seen how efficiently these audits would be carried out.

First Published on Dec 8, 2022 3:28 PM