With the launch of the Open Network for Digital Commerce (ONDC) in Bengaluru, it seems as though the stage is set for the democratization of e-commerce in India. According to ONDC’s official website, the company “provides you with an opportunity to grow via e-commerce by connecting you with other network partners that will complete your e-commerce solution.” By democratizing e-commerce, ONDC aims to throw open the market, which might then lead to the ebbing of platform-centric businesses, such as Amazon and Flipkart.
According to Statista, The Indian e-commerce market is estimated at $64 billion in 2020 and is projected to touch $200 billion by 2027. While the advertising spends on e-commerce platforms touched Rs 4,700 crore by the end of 2020 says Dentsu-e4m Digital Advertising in India 2021 report.
Amazon India and Flipkart dominate the e-commerce space in India, with ONDC as an entrant, it will put the ball in the court of small retailers and consumers. Similarly, Swiggy and Zomato dominate in the food delivery segment. ONDC aims to integrate e-commerce, food delivery, and mobility services, at one single space. Experts term ONDC as the UPI of the e-commerce industry. But only time will tell whether it will be quickly adopted, and go on to prove itself as a viable system, benefiting one and all. Or, would we need a catastrophic demonetization-like event for us to realize its potential.
E-commerce platforms sees major growth
E-commerce contributed Rs 4100 crore to Adex in 2021, witnessing the growth of 49% in 2020-21: PMAR 2022
The Indian e-commerce market is estimated at $64 billion in 2020 and is projected to touch $200 billion by 2027: Statista
Advertising spends on e-commerce platforms touched Rs 4,700 crore by the end of 2020: Dentsu-e4m Digital Advertising in India 2021 report
Upward trend of advertisements on E-commerce platforms
Advertising on e-commerce platforms crossed Rs 3500 crore in 2020 to garner 12% of total digital advertising as more brands used online channels to drive sales: FICCI-EY 2021 report on the M&E sector.
The report stated that digital ad spends stood at Rs 28,200 crore during the year: FICCI-EY 2021 report on M&E sector.
Advertisements on E-commerce to grow by 40% in upcoming months: Experts
Shireesh Joshi, Chief Business Officer of ONDC, while speaking to IMPACT, explained the benefits of ONDC, “ONDC is a facilitator. At ONDC, consumers will be able to access all services at one place. ONDC is a place where all sellers are available and visible to the buyers. This will definitely benefit consumers and retailers in a major way.”
Surely, a system that is being touted as the next UPI, is a far-cry from the existing system of e-commerce, so what exactly are we looking at here?
Explaining the difference between existing e-commerce websites and ONDC, Umesh Bopche, CEO, Experience Commerce says, “Unlike Flipkart and Amazon’s infrastructure, ONDC, like UPI, is an open platform which can be leveraged by almost anyone. Which means that for millions of start-ups, small retailers, and well-known brands to local shopkeepers, a democratized digital market will be readily available. Sellers who have been on the fence until now due to challenges related to terms, sales commission, etc., will now find it easier to venture in the E-commerce space.”
He further says, “For buyers, there will be more choices as a particular search will no longer be restricted to results from a single platform and every matching result from across the open network will be displayed, making it a level-playing field for all participating sellers.”
With multiple platforms corroborating with ONDC on the buyer side, seller side and delivery side, the question looms over its capability to acquire users and increase its market share in the country. Harsh Shah, Managing Partner, Dentsu Webchutney says “If we were to draw parallels to UPI, which remains the inspiration behind ONDC, we are in for a hockey-stick growth here as well. However, ONDC will have to be prepared for scale and security. These two aspects alone can easily make or break it.”
In February 2019, the Indian government had announced a policy to bring all e-commerce platforms and government regulatory bodies under one roof to regulate the e-commerce industry. The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry is in a process to introduce the law.
Will ONDC affect existing e-commerce platforms?
With an eye to democratize e-commerce market in India, ONDC is ready to bring together one of the largest marketplaces in India. With multiple e-commerce, Q-commerce, and seller listings already in place, IMPACT scrutinizes if ONDC will leave a dent in the market share of major e-commerce giants or will it just be a mere spectator.
Flipkart and Amazon together are believed to have over 60% of the ecommerce share in India. When asked if ONDC will leave a dent on e-commerce giants like Amazon and Flipkart, Joshi of ONDC says “It is possible, but not necessarily overlapping will happen. Whether ONDC will dent or gain for other platforms depends on the strategies applied by them and their timing.”
Harsh Shah of Dentsu Webchutney had an interesting take on the topic of ONDC affecting Amazon and Flipkart. He says “I tend to see this from a different lens. I would seek how this will complement the revolution brought on by big e-commerce giants. ONDC and the quest after that to ensure a level playing field can only benefit the consumer. ONDC and the growth that will come along, making commerce easy across the spectrum, irrespective of the platform.”
With all these talks of levelling the playing field, behemoths, Amazon, and Flipkart, should already be ideating their moves. When IMPACT reached out to Amazon India to know if the platform will join ONDC or will strategize to tackle ONDC as a platform, to which Amazon India spokesperson said, “We are excited by the potential and synergies that ONDC brings to scale up online commerce in India. We see multiple opportunities for Amazon to collaborate with ONDC, and are excited to partner with them to bring more convenience to the online customers and enable more small businesses to grow digitally.”
How will ONDC revolutionise E-COMMERCE in India
IMPACT on individual manufacturers
As per ONDC officials, individual manufacturers can list their products on multiple platforms. Other benefits:
• This will enhance the manufacturer’s reach to the entire country
• Small manufacturers who hesitated to list their products on Amazon and Flipkart due to tight purse strings will now get an opportunity to be visible on major companies selling the similar products.
• The manufacturers across multiple platforms will get a choice to select one or multiple logistics partners if offered by the platform on which the manufacturer has listed its services.
Applauding the move, Meesho spokesperson said, “ONDC is a game changing initiative around bringing in a large network of buyers, suppliers, as well as enabling the expansion of ecommerce, thereby bringing in more masses online.”
The spokesperson further said, “We also feel that ONDC can reduce the barriers for sellers to come online as well as buyers. Besides tapping into new users, ONDC will also enable platforms with sizable business-to-business verticals to tap into the seller side of the ONDC network to supply goods. As ONDC is at an early stage, we are monitoring the developments that are taking place, and waiting for further details to emerge. However, we think that this can prove to be the backbone of ecommerce in India, same as UPI has been for digital payments.”
Interestingly, ONDC recently tied up with Dunzo’s logistics arm, Dunzo for Business, when asked if ONDC will affect Dunzo’s grocery and Q-commerce business in the days to come, Dalvir Suri, Co-founder Dunzo and Head of Dunzo for Business (D4B) said, “The Total Addressable Market (TAM) for quick delivery commerce in India is currently pegged at $45 billion, and will grow three times by 2025. There’s enough opportunity for multiple players to co-exist and grow.”
He further said, “Within ONDC, we are focused on the logistics part of the business, and we intend to grow along with the network. Today, Dunzo for Business (D4B), connects over 20k merchants to customers, and we run millions of orders every month. We recently hit 1 Million orders per month. Having built expertise over years, the partnership with ONDC will only strengthen our commitment towards the grocery and Q-commerce category. Furthermore, it will also help us to provide access to quality logistics services to various local businesses that can in turn accelerate their growth and order volumes through the network.”
Flipkart spokesperson remained unavailable to comment on the queries related to ONDC and the developments in e-commerce space.
Win-win for retailers and buyers
According to experts, Amazon or Flipkart charge anywhere between 18 to 25 percent as commission from the retailers. ONDC will be transparent in nature when it comes to algorithms. For example, two brands providing similar product will have similar viewership projections. As ONDC beta test in Bengaluru is already underway, and is conducting Alpha tests in 80 cities, stakeholders will soon find out if the claims holds true, and if so, then to what degree?
Talking about the benefits ONDC will give to small businesses, Chirag Bhatia, Senior Vice President - Media, DDB Mudra Group says, “ONDC is a huge step towards breaking e-commerce walled gardens. The undue advantage of the money power to get traffic/customers or controlling consumer data or favouring only a few select sellers will come to an end. Today these advantages are only enjoyed by players with deep pockets which impacts a small local business as it doesn’t have the knowledge and finances to go online to attract customers and complete with bigger platforms.”
Bhatia says “The ONDC pilots has already started in a few cities and players will lap on this opportunity as soon as it becomes available as this will reduce their dependencies on existing marketplaces monopolistic scenarios. I however foresee the challenge of smaller players not being able to understand the ONDC platform well but that will be issue of the short terms which will disappear with time as the platform and strategies of the ONDC platform become more popular.”
IMPACT on new e-commerce startups
As per ONDC officials, new and existing e-commerce marketplaces are welcome to be a part of the ONDC network.
• New e-commerce sites and apps can avail logistics support
• They can individually build their network with retailers and provide delivery services via logistics partners that are onboarded with ONDC
• Similarly, these new e-commerce sites and apps can utilize payment gateways onboarded with ONDC and enhance its user base for the listed retailers
• For example: A small kirana store owner in a locality wanting to register the business on e-commerce sites, will list the business via a seller application instead of listing on multiple apps. He will pay a certain amount depending on the commercial terms of the seller application. This cost will differ depending on the services provided by the seller onboarded by the ONDC.
Rakesh Gambhir, Business Head,WAI WAI India, wants to list the products on ONDC and other e-commerce platforms, and calls it to be a hand in hand process, he says, “ONDC does hold the potential to democratize the entire digital commerce space. ONDC is a super app, a digital market place where sellers (brands) will be visible by virtue of being available and listed across e-comm retail platforms. A brand such as WAI WAI will not have to independently register on ONDC. FMCG companies are already creating and strengthening their D2C channels, and ONDC could become another way for them to reach their customers directly. Also, crucial business data would be made available through the entire ecosystem instead of being concentrated with one party or marketplace.”
Enabling sellers and buyers to participate in the open network of ONDC is seen as a veritable boon in the industry. Sanjay Kumar Kalirona, CEO and Co-Founder, Gizmore says, “Open Network for Digital Commerce (ONDC) is an excellent initiative by the government that seeks to open new avenues, especially for micro and small enterprises. The newer players get a platform to share their wares, and even consumers get a far greater choice. The system is also designed to reach rural customers like never before.”
Kaushik Mukherjee, Co-founder and Chief Operating Officer of SUGAR Cosmetics believes that ONDC as a platform will definitely increase retail sales of the products. Mukherjee says “If customers hadn’t adopted UPI, UPI would have failed by now, because customers are market users. I absolutely feel that ONDC can help improve our sales just like as another channel. But I doubt that ONDC will affect our existing Amazon and Flipkart growth trajectory.”
Explaining the importance of ONDC for a brand, Anushka Iyer, Founder and CEO, Wiggles said, “ONDC has the potential to fundamentally improve Indian customers’ experience of discovering and shopping brands digitally. Collaboration between key players will be pivotal to this. As a brand we intend to be present wherever a customer is interested in interacting with us. We are constantly evaluating every platform that can help us get there. We are already present on all the large platforms and intend to keep increasing our footprint.”
Iyer further says “ONDC has been set up with a vision that will help any product or service company drive sales digitally. As the platform scales and evolves, it’ll definitely give a young business like ours better access to pet parents and animal lovers across the country. Further, with the pet care category growing faster, it will help new pet parents discover young homegrown brands like Wiggles.”
IMPACT on D2C platforms
• ONDC officials have welcomed D2C websites and apps to be a part of ONDC.
• ONDC will have major effect on the D2C platforms, a consumer will prefer buying multiple products at one place rather than visiting every D2C website for required products.
• Small D2C brands, instead of spending money on building its own D2C app or website, can register with the network via seller applications.
• Small D2C brands will share the same visibility on ONDC as any of the major D2C brands, such as HUL or PepsiCo
Arjun Ranga, MD Cycle Pure Agarbathi cites importance of marketplaces and how brands need to grow. Ranga says “E-commerce and the D2C space have been an urgency for brands to grow over the last few years. And Cycle is excited to share that they could keep up to par and make a strong presence in the digital world over the last few years. Cycle could successfully strengthen its footprints in all the tier 1, 2 & 3 cities with the help of its presence in the online market.”
He further said. “Cycle is extremely enthusiastic to explore other platforms at synergy and explore all the possibilities so that the products are available widely across the peninsula for everyone.”
Sanjay Vakharia, CEO, Spykar said, “We will definitely list ourselves on ONDC. ONDC will also help retailers in a very big way. We as a brand would always want to be where the consumers are. Looking at the advertisement perspective, we do advertise on e-commerce websites and apps. Looking at the ONDC perspective, if the app and website has the right audience, we would definitely look forward to it.”
As e-commerce continues to grow, one can say that the dramatic entry of ONDC could further aid to its growth. Even though experts suggest that Amazon and Flipkart will continue to dominate the e-commerce space due to big data and high-end innovations, ONDC is on its way to cause ripples, which will be beneficial for both retailers and buyers.