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Will ONDC kill Zomato and Amazon?

Created on 08 May 2023

Wraps up in 8 Min

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Updated on 09 May 2023

What is ONDC? - Complete Explanation

India’s e-commerce market is expected to reach $350 billion by 2030. E-commerce has revolutionised our shopping, making our lives easier in countless ways. With just a few clicks, we can now order almost anything online and get it delivered directly to our doorstep, saving us time and effort. 

It has also created new job opportunities, increased competition and lowered prices, providing consumers with more choices and better deals. 

The Open Network for Digital Commerce (ONDC) is an initiative by the Government of India to create a shared digital infrastructure for the e-commerce industry in the country. It is a digital platform that aims to make online commerce more efficient and accessible by providing a standard technology infrastructure for various stakeholders, such as merchants, payment providers, and logistics companies. 

How does ONDC work?

ONDC strives to bring together all aspects of digital commerce and ensure the security and privacy of user data. With ONDC, you won't need to go on a wild goose chase to find what you need - everything is sorted in one place! 

It's like having a personal shopping assistant who does all the work for you, so you can sit back and relax. Also, the payment gateways offer a convenient and seamless digital commerce experience to buyers and sellers and secure the confidentiality and privacy of user information.

ONDC can create an everyday logistics platform that is accessible to all e-commerce players in India. This will enable them to ship their products more efficiently and at a lower cost, as compared to using their own logistics networks or relying on third-party logistics providers.

Another example is that there are multiple digital payment systems in India, each with its own rules and regulations. This can make it difficult for smaller players to navigate the system and can lead to a lack of interoperability between different payment systems. With ONDC, a common digital payments system could be created that would be accessible to all e-commerce players, making it easier for them to accept payments and reducing the need for multiple payment integrations. 

Marketplace Model vs Inventory model

E-commerce companies in India use two different business models - the inventory model and the marketplace model - to operate their businesses.

To explain things better, imagine that you want to buy a new shirt for yourself. You have two options: you can either go to a store that only sells shirts that they make themselves (like a small boutique), or you can go to a store that sells many different brands of shirts (like a mall store).

The first store is like the inventory model because they only sell what they make themselves. They have complete control over the quality of the shirts, but they may not have as many options for you to choose from.

The second store is like the marketplace model because they sell shirts made by many different brands. They have a wider variety of options for you to choose from, but they may not have as much control over the quality of each shirt since they are made by different brands.

So, in the marketplace model, the e-commerce platform acts as an intermediary between buyers and sellers. A platform is provided for multiple sellers to list their products, and buyers can purchase products from any sellers listed on the forum. The e-commerce platform earns a commission on each transaction and is responsible for the proper management, facilitating transactions, and handling customer support.

Whereas in the Inventory model, the e-commerce platform purchases products from suppliers and maintains its inventory of products. Buyers can purchase products directly from the platform, and the platform is responsible for managing the inventory, shipping, and handling customer support.

Both models have their advantages and disadvantages. The marketplace model allows for a wider variety of products, as multiple sellers can list their offerings on the platform. It also allows for lower overhead costs, as the platform does not need to maintain an inventory. However, the platform has less control over the quality of the products and the shipping times.

The inventory model allows for greater control over the quality of the products and shipping times. However, it requires a larger investment to purchase and maintain an inventory of products. It also limits the variety of products that can be offered on the platform.

E-commerce giants in India use the inventory model to push out smaller players by using their financial strength and infrastructure to maintain large warehouses and inventories. This enables them to offer faster delivery and lower prices, which makes it difficult for smaller players to compete. 

Additionally, the inventory model allows these companies to maintain control over their supply chain and ensure product quality, which helps them gain customer trust and loyalty. As a result, many smaller players are forced out of the market, leading to consolidation in the e-commerce industry.

ONDC vs Swiggy and Zomato

In recent years, there have been several cases where restaurant owners have filed complaints and lawsuits against food delivery platforms such as Swiggy and Zomato. These disputes often arise due to disagreements over the commission fees these platforms charge, ranging up to 30% of the order value.

Restaurant owners argue that these fees are too high and eat into their profit margins, especially for smaller businesses. They also claim that food delivery platforms engage in unfair practices, such as prioritising orders from restaurants that offer higher commission rates or charging fees for services that were not requested.

On the other hand, food delivery platforms argue that their commission fees are necessary to cover the costs of running their services, including marketing, logistics, and technology infrastructure. They also claim that they provide restaurants with increased visibility and access to a larger customer base, which can ultimately lead to increased sales and revenue.

Overall, the conflict between restaurant owners and food delivery platforms reflects the challenges and complexities of the rapidly growing food delivery industry. As the market continues to evolve, it will be important for all stakeholders to work together to find solutions that are fair and sustainable for everyone involved. 

ONDC has the potential to address some of the challenges faced by restaurant owners in their dealings with food delivery platforms like Swiggy and Zomato.

One of the key benefits is that it provides a common technology infrastructure that can be used by multiple players in the e-commerce ecosystem, including merchants, payment providers, and logistics companies. This can help reduce the dependency of restaurant owners on a single platform, giving them more options and bargaining power in their negotiations with food delivery platforms.

In addition, ONDC can help reduce the commission fees charged significantly by the food delivery platforms by creating a more competitive market. By lowering the entry barriers for new players, ONDC can increase competition, leading to lower fees and better terms for restaurants.

Moreover, ONDC can help ensure transparency and fairness in the dealings between restaurants and food delivery platforms. By providing a common platform for all players, ONDC can help standardise pricing, terms, and conditions, making it easier for restaurants to compare offers and choose the best ones.

Overall, ONDC has the potential to create a more level playing field for restaurant owners and food delivery platforms, promoting a more sustainable and fair business environment for everyone involved.

Benefits of ONDC

Implementing ONDC can be a "win-win" situation for everyone. Let's see how everyone involved in the ecosystem can be benefitted : 

1. Merchants: It can help merchants, including small and medium-sized businesses, by providing them with a common technology infrastructure to sell their products and services online. By reducing the entry barriers and providing more options for online sales channels, ONDC can increase competition and improve pricing and terms for merchants.

2. Payment Providers: By creating a common payment infrastructure, and reducing the fragmentation and complexity of the current payment landscape, ONDC can help increase the efficiency, reduce costs, and improve the customer experience.

3. Logistics Companies: ONDC can help logistics companies by providing a common logistics infrastructure, reducing the fragmentation and complexity of the current logistics landscape. This can help increase efficiency, reduce costs, and improve the customer experience.

4. Consumers: ONDC can help consumers by providing a more diverse range of products and services, improved pricing, and a better customer experience. This can also help promote trust and confidence in online commerce, leading to increased adoption and usage.

How to use the ONDC app?

ONDC is in its early stages and has not yet launched fully. It does not have its own app. Users need to use one of its partner apps to place an order.

Currently, ONDC is accessible through the following apps :  

  • Paytm
  • Meesho
  • Magicpin
  • Craftsvilla
  • Mystore
  • Spice Money

ONDC will operate as an open network, unlike single platforms like Amazon or Flipkart. It will act as a gateway connecting buyers and sellers across different e-commerce platforms, enabling them to transact seamlessly, similar to UPI.

How to register as a seller?

At the moment, the ONDC is still in the development phase, and the registration process for sellers has not been announced yet. However, the government has indicated that the registration process for sellers on ONDC will be made simple and user-friendly.

Sellers can follow the instructions to create an account and register themselves on the ONDC platform. 
The registration process is likely to involve basic information about the business, including legal and tax-related information, product details, and other necessary documentation.

Why is the Government intervening?

The ONDC platform is a game-changer that will benefit countless individuals in multiple ways! It will be beneficial for the government in terms of promoting digitisation and formalisation of the economy, which can lead to increased tax revenues and improved governance. Additionally, the platform can help to reduce fraud and other forms of wrongdoing, which will benefit both businesses as well as consumers.

The ONDC platform can limit digital monopolies by providing a standardized framework for digital transactions, reducing dependence on dominant players, and addressing issues related to data privacy and security.  Several third-party apps limit the data that they collect to themselves and use it for their own benefit. With transparency being assured, the information provided will benefit small businesses, empowering them to compete more effectively and enabling them to tap into new growth opportunities.

This can promote competition, reduce the bargaining power of dominant players, and increase trust in the digital commerce ecosystem.

The Bottom Line

Gone are the days of hopping around different platforms for your digital shopping needs! 

With ONDC, you can now surf a single spot to get all that you want without any fuss. You can finally bid adieu to the annoying process of managing multiple accounts and remembering a plethora of passwords. ONDC is here to make online shopping a fun and stress-free experience for everyone!

It has the potential to revolutionise the digital commerce industry in India by providing a standardised and interoperable platform that benefits all stakeholders involved. By integrating all aspects of digital commerce, ensuring ease of use and security, and promoting a level playing field for all sellers, ONDC could pave the way for a more transparent and efficient e-commerce ecosystem. 

As the platform continues to develop and gain traction, it will be interesting to see how it impacts the existing players in the market and shapes the future of e-commerce in India.

Get ready to join the digital revolution with ONDC!

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Sakshi Dhakre

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Sakshi is an adventurous spirit who enjoys both the intellectual stimulation of Finance and the sensory experiences of good food and nature’s beauty. She has a passion for delving into complex financial topics and distilling them down into easy-to-understand insights. When she's not poring over financial reports, you might find her exploring a new corner of the city, trying out new restaurants and cuisines or admiring the beauty of the night sky.

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