The Open Network for Digital Commerce (ONDC) saw a 12 percent month-on-month growth in transactions in June to 9.95 million, compared to 8.9 million in the previous month, helped by a spurt in retail category purchases, according to people close to the developments.
Of the total, 3.94 million transactions were in the mobility category via the Namma Yatri platform and the rest — around 6.01 million — were retail purchases made by consumers on the government-backed network.
The retail category has been growing at a fast pace in the first six months of 2024 as players like Ola, Paytm and Magicpin have pushed on the pedal. For comparison, the number of retail orders on ONDC in December 2023 was 2.1 million, which means that monthly purchases have almost tripled in the past six months.
In June, food orders grew 40 percent month-on-month to hit 1.4 million, grocery orders decreased from 1.02 million to 870,000 and fashion fell from 630,000 to 580,000. Remaining orders were from smaller segments like beauty and personal care, electronics and gift cards.
The retail category’s growth as a whole grew 20 percent month–on-month from 5 million in May. As such, the food segment’s contribution to the retail category marginally rose from 20 percent in May to 23 percent in June.
Meanwhile, the mobility category’s growth has somewhat stagnated in the first six months of 2024, when established players in the space like Ola and Uber started experimenting with a similar subscription model for drivers that Namma Yatri had started. The mobility category on ONDC had seen 3.5 million transactions in the last months of 2023.
Changes afoot
Over the past year-and-a-half, 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 the country.
With ONDC, the government hopes to increase e-commerce penetration in the country to 25 percent in the next couple of years, reaching a gross merchandise value of $48 billion.
Amid the retail category’s fast growth, ONDC has announced a phased reduction of up to 75 percent in financial incentives for network participants by the September quarter. Network participants have also been advised against adjusting the incentive payouts against their goods and services tax calculation.
The network 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.
The new incentive structure has also reduced the maximum monthly limit of incentives that can be availed of by a player to Rs 2.5 crore from Rs 3 crore earlier. In addition, it has also designated a quarterly limit of Rs 6 crore.
In the new structure, the highest drop in incentives is for the food & beverages (F&B) and grocery categories which together make up about 40 percent of the network’s monthly retail order volumes at present.
For example, a buyer app that did 10,000 monthly orders in the F&B category in the June quarter would have received an incentive of Rs 70 per order. This is being rapidly brought down to Rs 42 in July, Rs 32 in August and Rs 21 in September — which translates to a 70 percent drop by the end of the ongoing quarter.
Similarly, a buyer app that did 10,000 monthly orders in the grocery category in the June quarter would be eligible to get a subsidy of Rs 65 per order. This is to be decreased to Rs 39 in July, Rs 29 in August and Rs 20 in September — which means a drop of 75 percent at the end of the quarter.
For non-food and grocery categories like fashion, home decor and electronics, the decrease in incentives is a bit lower i.e. 40-60 percent under different scenarios.
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