According to reports, through the investment of just US $ 24 billion, Amazon and Flipkart have reportedly captured 80 per cent of India’s retail market with aggressive discounts and special offers for preferred sellers alone, impelling the MSMEs and new retailers into a vulnerable position.
New apparel retailers in India are often faced with the challenges of accessing the benefits of digital commerce because of the monopoly of existing big retailers. Whether it is to capitalise on larger markets; engage customers in superficially rich e-commerce experiences that transcend borders; or find new ways to deliver compelling shopping experiences, new retailers are at a disadvantage of being shackled to old processes and digital infrastructure.
For instance, a typical small retailer with an 800 sq.ft. store used to sell T-shirts and shorts and produced earnings close to an average of Rs. 4,000 daily but the scenario changed when people started ordering online and the retailer’s income slashed drastically. Such incidents are not only limited to one store; there are millions of stores facing the same problem. As per Statista, unorganised retail stands at 88 per cent (2019), and the explosion of e-commerce have been the toughest for small mom-and-pop stores or small retailers.
To overcome these concerns, an initial idea by Piyush Goyal and led by 9 members of the advisory board, a new network model named Open Network for Digital Commerce (ONDC) was curated that promises to break through these constraints and gradually unleash the transformative power of digital commerce in India. Some key stakeholders such as SBI, HDFC Bank, Axis Bank, BSEI & NSEI, Quality Council of India have shown faith in the system, which would help by plugging in small traders and retailers and providing them wide reach with set protocol for cataloguing, vendor match and price discovery on an open-source basis.
ONDC, the government-backed open network e-commerce platform, will cost small retailers a quarter of what they pay to e-commerce platforms like Amazon and Flipkart to access their technologies and processes. More than 20 government and private organisations have confirmed Rs. 255 crore investment.
“The seriousness and commitment by GoI to push Digital India and take it to a bigger and larger canvas is commendable. The arrival of ONDC is going to be the defining moment in the times to come. It’s going to open floodgates for MSMEs to generate more employment and deeper penetration in the untapped areas of this vast market,” said Vikram Singh, Sr. VP Sourcing, DBS Lifestyle.
ONDC is expected to digitise the entire value chain, help standardise operations, drive logistical efficiency, and, most importantly, curb the monopolies of the platform-centric model that leads to market concentration. It can be beneficial to new entrants because ONDC is not controlled or owned by a single identity and also helps improve the discoverability and accessibility of products across the platform, provides equal opportunities for small retailers, follows transparent practices and offers lower order acquisition costs.
Complete e-commerce solution will accelerate growth for new apparel retailers
Retailers and product manufacturers need not worry about segments like logistics and warehousing. Once their catalogue is available digitally, there will be many opportunities open to every single segment in this large ecosystem with a nationwide market such as enterprise resource planners, e-commerce store hosting service providers, etc. Retailers will no longer have to pay commissions to the enabling platform, unlike today’s proprietary systems.
ONDC will ensure that buyers and sellers use the same platform for all online business transactions, basically moving from a platform-centric to a network-centric model.
Basically, it is a network of buyers, sellers and gateways that uses open APIs to exchange information. The network is designed to allow for the discoverability of all sellers by multicasting the search request received from buyer applications to all seller applications based on criteria such as location, availability and other customer preferences. Initially, it starts with a single gateway to kick-start the operations, but this can later be expanded to more gateways.
Transaction data will reside only with the buyer and seller applications and will not be visible to ONDC. ONDC will not be storing/viewing transaction data.
To be precise, companies such as Dunzo, Load share and Ship rocket offer logistics services. Protean eGov Technologies Ltd (formerly NSDL e-Gov) is behind the gateway services. NowFloats and Plotch are technology service providers, Kiko Live is the industry’s live video shopping platform and the e-commerce platform Snapdeal, which offers fashion and other services, will encourage buyers and sellers to join the ONDC network. Craftsvilla, CSC Grameen eStore, Ekart, Shopalyst, etc., are already onboard, and around 500 companies, including small start-ups, are in the advanced stage of integration and are expected to come online soon.
With lower costs, higher flexibility and simplified operations, this merger will accelerate growth. A variety of payment options, lower transaction fees and no registration fee make ONDC affordable for new retailers, making it easy to start selling on the platform.
“Small retailers are delighted that there’s going to be a way for them to participate in the global digital e-commerce world. It is going to give a big boost to hyper-local commerce, quick commerce,” said Nandan Nilekani, Non-executive Chairman of Infosys and Member of advisory council of ONDC.
With efforts to increase e-commerce penetration from 8 percent to 25 percent of all consumer purchases in 2 years and to sign up 90 crore buyers and 12 lakh sellers on the shared network within the next 5 years, the country’s open retail network route seems to be fast-tracked.
Consumers will have a vast variety of choices and freedom to choose
In the present scenario, the bigger e-commerce giants only allow customers to reach those whom the company wants to endorse. Due to this, customer choices are restricted. Also, customers on the specific platform can access that particular platform but now things are changing as ONDC acts as a neutral platform that creates protocols around price and vendor match.
For example, if Vendor X is registered on Platform A and the consumer is registered on Platform B, ONDC enables access to transactions between Vendor X and Consumer B, eliminating the need to lock into a specific e-commerce platform. It also allows consumers to match demand with the closest available supply.
This would also allow the sellers to provide the consumer with a vast product assortment to choose from. Being open and free, the sellers in ONDC no longer need to pay commission to the enabling platform, unlike today’s proprietary platforms. As per T. Koshy, CEO, ONDC, a seller can be on Amazon (get its benefits) and still be on ONDC as well (to expand their reach and penetration).
Strategy to onboard buyers and sellers
With ONDC, the GoI aims to restore the balance of power. By creating a digital marketplace, commonly accessible to all, as it should be, ONDC will empower sellers and buyers to gain the same visibility and advantages as their larger counterparts. ONDC does not require special apps as it is available on major e-commerce platforms, just like UPI is as a payment method. Adoption will be driven through these integrations. The three main focal points of discoverability, interoperability and product review will push both parties to come along together on the ONGC platform. E-commerce players can join hands with ONDC to protect their own user base and business models.
“As the protocol stabilises, more and more e-commerce players will be integrating to bring the benefits of ONDC to their users. The Government is already working with Paytm, one of the largest in terms of reach. I believe that citizens are tired of the poor customer service from major e-commerce players and are more likely to give smaller players a chance. Moreover, this Government is very good at spreading knowledge about Government programmes and I find ONDC using the same tools to get people to talk about it. Finally, I feel citizens are also pushing for the adoption of it,” said Himanshu Sukhwani, Founder, WhatCX.
We are looking at ONDC very closely and are working to build a seamless integration, allowing businesses to set up shops within Whatsapp connected with ONDC. It’s still early days, but our consumers are already excited by the possibilities this opens up. No more website, no apps, no technology overhead – just ease of business, one platform that is already accessible to users. Exciting times ahead! Himanshu Sukhwani
ONDC may not be a challenger but a facilitator
ONDC does not compete with other marketplaces. ONDC creates connections between retailers and buyers so that sellers can take advantage of both marketplaces like Amazon, Myntra, Flipkart and ONDC. The platform does nothing to impede the growth of others; rather, it serves as a facilitator for digital commerce, but the larger retailer giants have a different say on it. For them, a lot of monetary investment in technology and processes is already done, and integrating into a new platform might be challenging but the talks are underway.
Everything depends on the adaptability and grey areas can be changed after seeing the results post the complete phases are over but it should always be remembered that these small retail traders are the backbone of the Indian retail economy and if this segment is excluded, it will directly impact the financial data of the economy which will shake the pillars of growth. Though ONDC gives enough leverage to unbundle the supply chain in the upcoming five years, the picture will be clearer as the efforts to push the Indian e-commerce industry to US $ 200 billion by 2027 seems strong.