Context: Despite best efforts, the Government’s Open Network for Digital Commerce could go in vain if proper supply chain management is not being developed.
What is Open Network for Digital Commerce?
- Open Network for Digital Commerce (ONDC) is an initiative aiming at promoting open networks for all aspects of exchange of goods and services over digital or electronic networks (like e-commerce).
- Sponsored by DPIIT (the Department for Promotion of Industry and Internal Trade), the non-profit programme, will bring together all stakeholders – buyers, sellers, logistics players, and digital payment providers – on one platform for convenience and growth.
- ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform.
- ONDC are to be open protocols for all aspects in the entire chain of activities in exchange of goods and services, similar to hypertext transfer protocol for information exchange over internet, simple mail transfer protocol for exchange of emails and unified payments interface for payments.
- These open protocols would be used for establishing public digital infrastructure in the form of open registries and open network gateways to enable exchange of information between providers and consumers.
- Providers and consumers would be able to use any compatible application of their choice for exchange of information and carrying out transactions over ONDC.
- The initiative will not only facilitate the rapid adoption of e-commerce but also boost and strengthen the growth of startups in India. By facilitating scalable and cost-effective e-commerce through the open protocol, ONDC will empower startups to grow collaboratively.
- ONDC will take ecommerce penetration to 40-50% in the coming years, as opposed to the current 10% share within India’s overall retail market.
- For businesses, this will help create a level playing field and further drive open commerce, similar to how the United Payments Interface (UPI) democratised the digital payments segment.
- Buyers, too, will benefit from easy access to a massive merchant base, great pricing, faster delivery, and enhanced customer experience.
- ONDC will keep referral commissions capped at 3-5% at a later stage (for now, it is free), a massive reduction in costs compared to what businesses have to pay now for selling their goods online. According to a Gofrugal estimate, this is 7 to 10 times less than the usual online-selling commission rate of 23% to 28% on the cart value.
Challenge to ONDC:
- ONDC does not have the best of the supply chain management when compared to other ecommerce giants like Amazon or Flipkart.
- It still depends upon the ability of the others to facilitate logistics and warehousing.
- Number of participants is still very low (not very popular among people).