Tier 2 cities drive 65% of retail orders on ONDC in April

The share of retail purchases in the total monthly transactions stands in stark contrast to early 2023 when it accounted for only 5-10 percent, while the mobility category dominated with 90-95 percent of all transactions.

Smaller Indian cities outpaced major metros on the Open Network for Digital Commerce (ONDC). Tier 2 and beyond cities accounted for 65 percent of all retail purchases in April, while the total number of orders remained flat at 3.6 million on the government-backed network.

"Non-mobility segment continues to grow and now has reached 50 percent of total network transactions with 3.6 million transactions in April 2024, despite a marginal drop in the food and beverages category in the first half of the month due to low demand during Navratri. All other domains continued to post robust growth," said a person close to the developments.

The share of retail purchases in the total monthly transactions stands in stark contrast to early 2023 when it accounted for only 5-10 percent, while the mobility category dominated with 90-95 percent of all transactions.

However, ride-hailing transactions on the network through the Namma Yatri platform dropped 12 percent from 4.1 million trips in March to 3.6 million trips in April. The Juspay-backed Namma Yatri is the only ride-hailing platform on ONDC as yet — and is currently looking to raise $10-15 million in its first funding round from potential investors like Blume Ventures, Antler and Google.

“In the mobility segment, existing large ride hailing apps have started pivoting to subscription based business models causing temporary instability in on-network demand generation. We are continuously extending the on network mobility services to across modes of transportation in various cities,” said another person close to the developments.

Growth of retail

In April, the retail segment logged a record-high of 171,000 orders in a single day, propelled by strength in the grocery and fashion sectors. Moneycontrol previously reported that ONDC completed a week with an average of 150,000 daily retail orders for the first time last month.

“More than 120 cities now receive more than 10,000 orders monthly, indicating widespread network penetration. Maharashtra recorded 10,000 orders per day, while Gurgaon surpassed 20,000 daily orders in April. High traction was observed in extreme geographies, with cities like Jammu (25,000 orders), Kanyakumari (7,000 orders), and Leh (3,000 orders) showcasing high adoption,” said one of the people quoted above.

The ONDC network has expanded its footprint to over 1,000 cities, with more than 765 cities achieving more than 100 monthly orders for three consecutive months.

Meanwhile, the government-backed network has recently restructured the way it funds discounts for purchases for the May-June period.

Three changes stand out in the new version of the incentive scheme: payouts per order on all categories of orders have been decreased by up to 30 percent, only the top 20 cities will receive incentives for food & beverage orders, and only a certain percentage of a buyer side app's orders will be eligible for the network's support.

Street vendors adopt ONDC

According to people familiar with the matter, 89 street food vendors of Delhi received 2,155 orders in April via ONDC.

The network has initiated a pilot project aimed at bringing street food vendors in Delhi and Lucknow on board. The plan is to onboard 500 street food vendors by the end of May in the two cities. Depending on the pilot's success, the network will be scaled up nationwide with more seller and buyer apps.

A total of 246 vendors had been onboarded to ONDC by the end of April and the number was 200 for Lucknow.

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.