Some of the excellent catalysts behind India’s digital revolution has been UPI (United Funds Interface), projected to cross the Rs 100 trillion mark quickly. An identical motion is on the horizon for e-commerce. The ONDC (Open Community for Digital Commerce) is envisioned because the UPI of e-commerce, because the IT Minister just lately reiterated this ambition for the platform. Nevertheless, to be a UPI, ONDC must place itself and talk its advantages to completely different stakeholders.
The favored notion no less than amongst basic media is that ONDC is an “Amazon-Flipkart Killer”. Typically visualised as a separate “competitor” platform, most media appear to counsel that ONDC goals to enter a direct confrontation with huge e-commerce platforms. This false impression needs to be consciously corrected with motion and statements from ONDC and the federal government, in any other case ONDC might be a non-dubium est.
The Ministry of Commerce and Industry defines ONDC as “an initiative geared toward selling open networks for all points of trade of products and companies over digital or digital networks. ONDC is to be primarily based on open-sourced methodology, utilizing open specs and open community protocols unbiased of any particular platform”. Which might imply technologically it’s unbiased of any distributors and its job is to advertise open networks for e-commerce. Which might imply interoperability and standardisation throughout all platforms.
This implies ONDC just isn’t a platform, simply as UPI just isn’t a pockets or a financial institution. Technically, these are digital public items; as an alternative, it’s a set of open requirements and protocols in open supply software program that allow the seamless interoperability of various platforms.
What does interoperability imply? When a purchaser searches for a product on-line, the customer ought to be capable to entry choices from not simply Amazon, but additionally Flipkart, native sellers and anybody on the community who can present the mandatory product. Presently every platform is a walled backyard of proprietary protocols, requirements, know-how and doesn’t speak to others. This walled backyard inhibits the general development and penetration of e-commerce within the nation. It additionally results in every kind of costs of oligopoly, vendor manipulation, worth distortion, and opaqueness. These costs are creating the weak spot out there that ONDC is meant to handle, like UPI addressed the challenges of a worldwide bank card duopoly controlling retailers and customers.
The mainstream media paints ONDC as a menace to huge e-commerce corporations. Alternatively, UPI managed to place itself as an integrative resolution that linked financial institution accounts to wallets and elevated the pace of transactions with retailers. UPI was thus appropriately perceived as a back-end technological infrastructure which was in a roundabout way competing with any pockets firm or banks.
Amazon and Flipkart must see ONDC as an enabler that may facilitate their subsequent spherical of development. UPI’s acceptance by the biggest Web wallets like Paytm, PhonePe and GooglePay and banks, each private and non-private, was the important thing to its success. Mixed, the market that UPI enabled was bigger than what anybody may do individually with one-one tie ups with banks or going by way of credit score/debit card networks.
Examine this to the inconclusive or uneasy relationship between Amazon, Flipkart and ONDC: Integrating these platforms with ONDC might be of paramount significance to the success of ONDC.
How is ONDC enabling the ecosystem in order that current platforms have an incentive to affix and take part with ONDC? ONDC at present appears to be integrating native sellers and unorganised retail and it appears extra like following the diktat of what the federal government needs it to do. Whether or not that’s ample sufficient, or will including sellers make them increasing the market, is the essential query at this stage.
An e-commerce market like some other market wants consumers and fulfilment of transactions. In contrast to UPI, fulfilment includes logistics infrastructure on the bottom. Getting consumers on board is an much more troublesome proposition because it wants shopper incentives equivalent to low cost pricing and free deliveries. For every day consumption, FMCG merchandise, shopper durables and the present market locations have already arrived at a reduction worth with producers. This pricing even cuts the distributors and the standard small store retail community. Amazon and Flipkart have pumped in billions into warehouses that inventory merchandise from the producers. They promise the customer zero supply value. Although it’s debatable who’s paying for deliveries, as this value is opaque to the customer.
Negotiating the rifts in communication between the completely different brokers working to produce the products to the buyer would possibly enhance the prices and scale back effectivity for each the customer and vendor. Redressal mechanisms and refund insurance policies are a giant ingredient of all marketplaces. The e-commerce giants declare that they settle any dispute of returns and damages all the time in favour of the customer, thus bearing a a lot greater value of products offered or GMV.
ONDC’s makes an attempt at integrating native sellers won’t result in higher pricing; at present, ONDC doesn’t have an answer for logistics or easy methods to defray the price.
ONDC’s hyperlocal search engine and technique at present prioritises the pursuits of native sellers versus these of the consumers; massive platforms prioritise consumers preferences primarily based on knowledge, reputation and the platform’s profitability. This concentrate on small native sellers at the price of consumers prevents the creation of an precise market. This anomaly or strategic hole in ONDC needs to be resolved for it to succeed.
The algorithms utilized by massive e-commerce corporations now have tons of knowledge to outline not simply higher pricing for the buyer but additionally future wants. These are, by design, refined by the massive quantities of shopper knowledge collected by these. The outcomes the client receives on looking for a product are intuitive and handy, owing to the information the platform accesses and shops on the buyer. These embrace earlier historical past of buy, preferences and patterns outdoors the platform as nicely. This terabytes of knowledge are the differentiator for these platforms and that is the place the partitions additionally are available in blocking entry to this knowledge to even the sellers on the platform.
Whereas sharing it with sellers owned by the platform helps them in pricing, logistics, stock and even structuring new product providing. Presently, below the ONDC framework, knowledge utilization and storage is restricted and minimal; there needs to be regulatory change for knowledge trade as that’s the key to interoperability. Until such knowledge trade occurs, interoperability might be a pipe dream.
One other benefit that the UPI had was that it had the blessing of the regulator RBI, although it was managed by Nationwide Cost Company of India (NPCI). This benefit ensured that banks understood that the cost roadmap laid down by the UPI was additionally a regulatory roadmap. Presently, that is lacking within the e-commerce panorama. It’s due to the dearth of consensus within the incumbent gamers that e-commerce rules are being delayed repeatedly. Till such time these rules don’t set up some working guidelines, it’s troublesome for ONDC to succeed as a creator of a bigger market system for e-commerce.
Yatish Rajawat is a public coverage researcher at Centre for Innovation in Public Coverage. Analysis inputs have been supplied by Gouri S Nair and Aditi Srivastava. The views expressed on this article are these of the writer and don’t signify the stand of this publication.