A private non-profit e-commerce platform, The Open Network for Digital Commerce (ONDC), may trigger a price war as the disruptive platform gains critical mass with more vendors and consumers signing up in the Indian e-commerce market.
The ONDC is the latest initiative of the Indian Government to build a digital economy. The government launched the ONDC as an open online sales platform for large, medium, and small-scale businesses.
The Indian e-commerce market is set to cross the US $ 100 billion milestone by 2024 and apparel is a significant part of this market.
Bobby Verghese of GlobalData, said, “As ONDC operates as a direct-to-consumer sales platform for manufacturers, traders, and food service operators, the ONDC can accelerate the digitalisation of India’s huge unorganised sector.”
As ONDC operates an open market without charging any third-party service fees, both vendors and consumers can realise considerable cost savings on their transactions. As the platform’s user base acquires critical mass, it can serve as a benchmark for price discovery for both vendors and consumers, instead of allowing the leading online retailers and food aggregators to dictate prices.
The experts also believe that the ONDC scale-up will result in a new wave of price wars. While sellers on ONDC will sell for less primarily because there are lower commissions, the platforms losing business could, in the short term, increase discounting to end consumers to bring prices down and sustain volumes for their sellers. And such discounting may only be temporary, as the burn may not be sustainable. Eventually, a reduction in seller margins on all platforms competing with ONDC will be a natural evolution.
