Open Network for Digital Commerce | 17 Dec 2022

Why in News?

Open Network for Digital Commerce (ONDC) will charge a “small fee" from platforms that will contribute towards “maintenance and development" of the network.

• The network will seek to reduce the compulsory commissions charged from sellers and logistics partners on the network by private e-commerce firms such as US-based Amazon and homegrown Flipkart — the two largest e-commerce firms in the country.

What is ONDC?

• About:
  • It is an open e-commerce protocol set up by the Ministry of Commerce’s Department of Promotion of Industry and Internal Trade (DPIIT).
  • Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).
  • Presently, buyers and sellers have to be on the same app for a transaction which happens through the same platform. For example, a buyer needs to go to Amazon, to buy a product from a seller on Amazon.
• Objectives:
  • Democratisation and decentralization of eCommerce
  • Inclusivity and access for sellers, especially small and medium enterprises as well as local businesses
  • Increased choices and independency for consumers

What Benefits Does the ONDC Offer?

• Level Playing Field: ONDC is keen to level the playing field for e-commerce operators and widen the digital market access for Micro, Small and Medium Enterprises (MSMEs) and small traders in the country.
• Competitive and Innovative Ecosystem: ONDC will empower suppliers and consumers by breaking the monopoly of giant platforms to drive innovation and transform businesses in sectors like retail, food, and mobility.
• Freedom of Choice for Consumers: Consumers can potentially discover any seller, product or service in a common platform, thus increasing freedom of choice for consumers.
• Neutral and Regulated Platform: ONDC aims at fostering open networks developed on open-sourced methodology, using open specifications and network protocols, and independent of any specific platform.
  • It will set protocols for cataloguing, vendor match, and price discovery on an open source-basis, like the Unified Payments Interface (UPI).

What are the Issues with ONDC?

• ONDC is a complex ecosystem to implement, unlike UPI.
• Switching customers from the incumbents, which are offering a satisfactory service, will be difficult.
• Network participants may not make significant market development investments initially.
• Growth in the seller base will not necessarily improve buyer experience on the network.
• Monetisation on the network is not very clear.
• Attaining critical mass will be difficult as buyer and seller sides are disconnected.
• Lack of clarity on accountability, especially in addressing customer complaints and returns.

Way Forward

• A better digital space for e-commerce must be built by the government in order to compete with the dominant e-commerce platforms.
  • Along with this, it's important to create a proper digital education policy that takes into account various languages and user-friendly interface for the benefit of the consumers as well as sellers.
• A massive, well-funded adoption campaign will be needed to bring over tens of millions of kirana stores to the platform.
• The demand and supply sides should be able to access a secured single window to resolve issues such as information asymmetry, opaque pricing, quality concerns, and buyer-seller disputes.

Source: PIB