ONDC (Open Network for Digital Commerce) is an initiative by Indian government to expand ecommerce in India. With ONDC, ecommerce becomes decentralized and democratized which means that no single entity has central power and value and everyone can participate. In fact one of the goals of ONDC is to ensure a small seller like a Kirana store can participate in ecommerce ecosystem without the hegemony of few large players like Amazon and Flipkart.
ONDC essentially breaks down the ecommerce platform into three different parts: Seller App, Buyer App and Protocol. The ONDC protocol defines how seller and buyer apps can communicate with each other to enable commerce. The communication protocol is governed by ONDC but ONDC does not store any transaction data centrally.
Buyer apps bring customers to ONDC network while seller apps bring supply and dispatch the products. Payment can be collected by either party. Buyer apps can be large platforms like Google Pay or Airtel while seller apps can be Kirana stores or seller aggregators.
Imagine a customer going to a buyer app like Google Pay and searching for jewellery in their neighborhood. Since on ONDC network, thousands of local sellers will be available from the neighborhood, the customer will now start discovering products from their local shops nearby which will increase the revenue of local retailers and also make ecommerce delivery more environment friendly as products are getting fulfilled from closer fulfilment centers.
Overall Impact of ONDC
ONDC is expected to be the primary channel of online discovery and sales in India in coming decade
- More than 300 million customers are expected to use ONDC
- More than 1 billion orders per month are expected on ONDC channel
- More than 15 million sellers are expected to use ONDC
- 75% pincode coverage for ecommerce from current 20% pincode coverage
- Huge long tail local neighborhood supply is expected to come online due to ONDC
- ONDC is location, category and business model agnostic
- ONDC supports all categories including grocery, fashion, home, handicrafts, flight tickets, insurance and much more
Emergence of Deep Hyper Logistics
ONDC can be visualized as a big search engine which allows you to discover your neighborhood for anything from insurance, sarees, IIT tutors to parle G. Since ONDC brings local retailers online in large numbers, interesting business models start to emerge wrt to logistics and warehousing.
- Home delivery of products will take next leap. This will lead to more mohalla level logistics companies who will enable pickup and delivery of products in much faster and cheaper way giving boost to local employment. Bicycles and small EV vehicles will likely become default choice for delivery leading to increased sale of bicycles in India. This will also lead to more sustainable ecommerce.
- Pickup of products from local retailers will become more prevalent. This behaviour will lead to more cross sell and up sell opportunities for local retailers leading to increased revenue for them.
- Network of small dark warehouses will become more ubiquitous. This will lead to neighborhood real estate markets booming bringing more prosperity in an equitable way.
- A brand will have more distributed inventory at local level instead of central large warehouses. This will ensure faster delivery of branded products with possibility of try and buy option for customers.
In summary, hyperlogistics will be become deeper with neighborhoods again becoming key commercial centers wielding more economic power.
Population Scale Impact
The level of impact ONDC is expected to have is population level scale. This means that almost every aspect and element of our society will be influenced by ONDC. The realms ONDC is expected to cover are in various sectors and themes:
- Credit for MSMEs: Since ONDC is orchestrating a huge number of commerce transactions, this transaction data can be used by lending organizations as criterion to determine credit lines for MSMEs. These are verifiable transaction data and lending entities can have more comfort on lending to MSMEs based on this data.
- Impact on insurance sector: ONDC can be the primary channel of online discovery and lead generation from millions of customers for Insurance. Local insurance agents can service the customer inquiries quickly and a pan India agent network can be built without any office setup. In fact, live location coordinates of the agents can be shared on the network for faster servicing of the customers. This can be lead to lesser cost per lead for insurance companies and more revenue for insurance agents and companies.
- Cross border ecommerce: Since ONDC is location agnostic, it can potentially generate orders from customers based outside of India for sellers based in India leading to higher cross border export ecommerce.
ONDC can potentially transform multiple aspects of commerce in India leading to higher neighborhood commerce and more equitable participation of all stakeholders of ecommerce. It would be interesting to follow the journey of ONDC and see whether it can disrupt the commerce landscape in India and globally. It can be the angel event Indian ecommerce has been waiting.