Open Network for Digital Commerce | 07 Jun 2024

Source: TOI

Why in News?

Recently, Open Network for Digital Commerce (ONDC) recorded an all-time high of 8.9 million transactions across retail and ride-hailing segments in May 2024, representing a 23% month-on-month increase in total transaction volume.

What is ONDC?

• About:
  • Open Network for Digital Commerce (ONDC) is a network of interconnected e-marketplaces through which sellers, including brands, can list and sell their products directly to customers bypassing any middlemen or intermediaries.
    • It allows transitioning from a platform-centric model to an open source network for buying and selling goods and services.
  • It was launched in 2021 under the Department for Promotion of Industry and Internal Trade (DPIIT) by the Ministry of Commerce as part of the Digital India initiative.
  • It offers delivery services for groceries, home decor, cleaning essentials, food delivery and other products.
  • It is a not-for-profit organisation that provides a network enabling local digital commerce stores across various industries to be discovered and engaged by any network-enabled applications.
  • Similar to the Unified Payments Interface (UPI), ONDC aims to level the operational playing field among e-commerce platforms.
  • The Quality Council of India has been tasked with integrating e-commerce platforms through this open-source technology network, allowing users to modify, enhance, or improve the original code.

• Objectives:
  • Democratisation and decentralisation of e-Commerce
  • Inclusivity and access for sellers, especially small and medium enterprises as well as local businesses
  • Increased choices and independency for consumers
  • Making goods and services cheaper.
• Working Mechanism:
  • ONDC functions on the basis of an open network where it will not be a single platform similar to Amazon or Flipkart but rather in the form of a gateway where buyers and sellers across different platforms will be able to connect.

What are the Potential Advantages of ONDC?

• Empowering Consumers: ONDC fosters a more transparent environment by potentially increasing access to information.
  • This empowers consumers to make informed choices and benefit from a wider array of sellers, potentially leading to lower prices.
• Boosting Competition: By breaking down the dominance of existing platforms, ONDC creates a level playing field. This incentivizes competition among sellers, ultimately translating into a wider variety of products and potentially lower prices for consumers.
• Innovation: The open-source architecture of ONDC fosters innovation.
• Cost Efficiency: ONDC's decentralised structure has the potential to streamline operations and reduce redundancies and lead to significant cost savings.
• Boosting Small Businesses: ONDC removes entry barriers for small and medium-sized enterprises (MSMEs) and local vendors. This paves the way for greater participation in the digital marketplace, fostering a more inclusive e-commerce ecosystem.

What are the Challenges to ONDC?

• Complexity Factor: Compared to user-friendly systems like UPI, ONDC's underlying mechanisms are intricate. The ease of adoption witnessed with UPI might not be easily replicated with ONDC.
• Breaking Established Habits: Consumers are accustomed to the existing e-commerce platforms' user interfaces and functionalities. ONDC will need to provide a seamless and user-friendly experience to compete effectively.
• Dispute Resolution Concerns: Unlike traditional platforms that manage the entire transaction lifecycle, ONDC focuses solely on online buying and selling.
  • This separation might lead to an increase in disputes related to deliveries, product quality, or after-sales service, as ONDC doesn't function as a direct intermediary.
• Lack of a Robust Grievance Redressal Mechanism: The lack of clarity on responsibility for customer service and handling complaints may deter people from joining the platform.
• Challenges from Existing E-commerce Platforms: Existing e-commerce giants have fostered strong relationships with consumers through loyalty programs, bundled services, and other incentives.
  • ONDC will need to develop compelling strategies to attract and retain customers in this competitive landscape.
• Price Advantage Uncertainty: As a facilitator, ONDC might not be able to directly influence product pricing or offer discounts on the scale of established players who leverage bulk deals and partnerships.

Way Forward

• Enhancing Digital Infrastructure: The government can play a crucial role in fostering a robust digital infrastructure that supports ONDC.
  • This may involve investments in broadband connectivity and initiatives to bridge the digital divide in rural and remote areas.
• Promoting Digital Literacy: A comprehensive digital education policy that caters to diverse regional languages is crucial.
  • This will empower both consumers and sellers, particularly small businesses and local vendors, to navigate the ONDC platform effectively. User-friendly interfaces that prioritise ease of use will further enhance adoption.
• Targeted Outreach Programs: Extensive outreach programs with adequate funding are necessary to attract and onboard small sellers, especially micro, small, and medium enterprises (MSMEs) and kirana stores.
  • Incentives and handholding support can be instrumental in overcoming initial hurdles and promoting platform adoption.
• Dispute Resolution Framework: Establishing a secure and efficient single window mechanism for addressing issues like information asymmetry, opaque pricing, quality concerns, and buyer-seller disputes is essential.
  • This will build trust and confidence among stakeholders in the ONDC ecosystem.

Conclusion

The success of ONDC hinges on a collaborative effort between the government, industry players, and civil society.

By prioritising digital infrastructure development, promoting digital literacy, facilitating seller onboarding, and establishing a robust grievance redressal mechanism, ONDC can usher in a new era of inclusivity, transparency, and competition in the Indian e-commerce landscape.