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What is ONDC and How Will It Impact India’s Retail Market?

Due to the COVID-19 pandemic, maintaining physical stores became difficult, especially for small-scale retailers, causing them to shift to the online market. However, small retailers may not have much bargaining power over big platforms like Amazon and Flipkart. So, they have to follow policies made by the platforms.

Anyone who has tried to find the best price for something online encounters the same problem- which product suits me best, and where can I get the best price? This, too, is one of the problems the ONDC project aims to solve.

ONDC is an initiative to make the online market accessible to small retailers and increase the freedom of choice for consumers. This article explores what ONDC is, the current reality of the retail industry in India, and what kind of impact ONDC is expected to have.

What is ONDC?

Open Network for Digital Commerce (ONDC) is a freely accessible online platform for traders and consumers. It aims to challenge the dominance of e-commerce behemoths like Amazon and Flipkart and support micro, small and medium enterprises (MSME) and small traders.

The ONDC project is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT). On 29th April 2022, its pilot phase was launched. 

In its pilot phase, ONDC was rolled out in 5 cities, which were:

  1. Delhi-NCR
  2. Bengaluru
  3. Bhopal
  4. Shillong
  5. Coimbatore

India’s retail and e-commerce industry

According to IBEF’s Retail Industry Report of March 2022, in FY19, traditional retail, organised retail, and e-commerce segments account for 88%, 9%, and 3% of India’s retail market, respectively.

Source: IBEF

The organised retail market is growing at a CAGR of 20-25% per year. The e-commerce market is expected to grow 25-30% annually over the next 5 years.

After China and the US, India has the highest number of e-retail shoppers. Being able to sell online can be a big plus for sellers as it makes it easier for them to connect with buyers. As of February 2022, at 65.8 crores, India had the highest number of internet users after China.

There are various online retailers in India like Snapdeal and eBay. But, according to a Forrester report, more than 80% of India’s online retail market is estimated to be collectively owned by Flipkart, Reliance, Amazon, and Tata (FRAT).

What does ONDC hope to achieve?

The most desirable effect of e-commerce is that it enables consumers to find products that suit their needs for the best prices. However, India’s online market is dominated by a few platforms the government believes are tightly controlled and not working together.

As a result, finding the right product for the right price is a hassle, and small businesses are kept out of the online market.

In a press release dated 6th April 2022, it was mentioned that ONDC protocols would standardise the operations like cataloguing, inventory management, order management and fulfilment. From this, the government expects to free small businesses from platform-centric policies and give them multiple options for being discoverable online.

ONDC is also expected to increase the freedom of choice for consumers as they might be able to discover any seller, product or service.

According to a report by The Economic Times, some of the goals of ONDC are:

  • Raise e-commerce penetration in the next 2 years to 25% from nearly 8% now
  • Sign up 90 crore buyers and 12 lakh sellers on the shared network within the next 5 years

Final Thoughts

The ONDC project has the potential to simplify discovering products and make the online market accessible to small-scale retailers. As of now, consumers need scourge through various platforms to find the best product at the best price. On the other hand, retailers must comply with policies made with the platform’s interest in mind.

When consumers can choose freely, and more sellers are present online, it might lead to more competition which in turn leads to:

  • Lower prices
  • Improvements in quality

On WealthDesk, you can find WealthBaskets which stand to gain from the digitalisation of India. WealthBaskets are combinations of stocks and ETFs managed by SEBI registered professionals.

FAQs

What is Indian ONDC?

Open Network for Digital Commerce (ONDC) is a project of the Department for Promotion of Industry and Internal Trade (DPIIT). ONDC aims to promote open networks for the online trade of products. It hopes to make it simpler to find the right product for the right price and help small retailers access the online market.

What is the main aim of Project ONDC?

India’s small-scale retailers find it difficult to be on online markets dominated by tightly controlled platforms. ONDC aims to promote open networks for all aspects of online buying and selling products to make the online market accessible for small retailers.

Who owns ONDC?

ONDC has been incorporated as a private, non-profit (Section-8) company, and 20 government and private organisations of national repute have confirmed investments of ₹255 cr.

Why ONDC is important?

As the number of internet users increases in India, being able to sell products online is important for retailers. But, tightly controlled platforms with varying policies make it difficult for small retailers to sell online. ONDC aims to solve this problem.

What is ONDC and How Will It Impact India’s Retail Market?

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What is ONDC and How Will It Impact India’s Retail Market?

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