The Government of India has launched the Open Network for Digital Commerce (ONDC) as an alternative to ecommerce platform aggregators like Amazon, Flipkart, etc., where small businesses in India can enter ecommerce and sell their products online. ONDC is a freely accessible online system for consumers and traders who wish to sell products. It is an open network that will display products and services from all participating ecommerce platforms in search results across all apps on the network. It is a network that connects sellers, buyers, payment and logistic providers with each other.
The main vision of ONDC’s platform is to expand the market and bring in baby retailers who wish to sell their products online. The next goal is to remove the monopoly of large aggregators. This will allow retailers to go digital on their own terms without adhering to e-commerce rules set by big players and yet reach a huge bulk of users. Third is creating solutions on top of the pre-designed networks,which means creating more business. Just are built on the base of UPI. All these conclude to provide momentum and acceleration to the Indian Economy.
The popularity of online shopping continues to grow, making ecommerce businesses very attractive. Many people are looking at establishing an online store rather than a physical store. Not only does such a set-up allow you to launch quickly, it also helps save real estate or rental costs. Setting up a business requires certain mandatory registrations. Any small business must be established as a sole proprietorship, partnership firm, Limited Liability Partnership (LLP), or a company before setting up a store on an ecommerce platform.
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The Open Network for Digital Commerce (ONDC) is an open-source network that will provide a common platform for all buyers and sellers to transact and order goods and services from their preferred place. The open network will take on big e-commerce aggregators in India. To explain it further, it will work just like UPI in an online payment system, which means users will have the choice to buy and transact from their choice of app, and they will have the liberty to choose from all sellers, as well as vice versa.
ONDC is just like the UPI of e-commerce. It will democratize online shopping, making it an open network from the earlier platform-centric model.
Following are some features of ONDC:
It will have an open protocol for all buyers and sellers.
Consumers will have more choices to buying a product.
Local merchants will be able to make their online presence and build credit history and a consumer base.
ONDC will make sure the privacy of data in the network remains confidential.
ONDC will ensure that buyers and sellers use the same platform or app for all online business transactions. Like the UPI, the ONDC will develop an open network designed in such a way that lets all e-com apps and platforms connect with each other in the same way that the UPI allows all payment apps to transfer money seamlessly. The ONDC network will also bring small retailers online.
Unlike UPI, ONDC requires a complex ecosystem to implement. It will be challenging to convince clients to leave the incumbents, who are providing a good service. Initially, network players might not make large market development investments. Expanding the seller base will not always result in a better user experience for network users. The network’s monetization is not entirely evident. Previous attempts to scale up similar models have been unsuccessful. Given the divide between the buyer and seller sides, reaching critical mass will be challenging.
Buyers will have the following benefits when ONDC comes into action:
They will have access to more sellers and, therefore, have more choices.
Customers will receive better service and faster deliveries due to local retailers.
Overall, a better customer experience because of transparency in costs and delivery.
Sellers will also benefit from this initiative. The following are some benefits:
Will have access to more customers.
Their product discoverability will be better.
The cost of doing business will be lower.
More options for services like logistics.
The government has launched a pilot of this programme in select cities like Delhi NCR, Bengaluru, Bhopal, Shillong, and Coimbatore. However, the Department for Promoting Industry and Internal Trade (DPIIT) from the Ministry of Commerce and Industry is currently building this open network. Soon, a private-sector non-profit organisation will be set up to gear up for its faste roll-out. Once the network is ready, local retailers and other established businesses will have the option to opt in, and then buyers will also have access to it.
The ONDC will help millions of small businesses go digital. Recently, these SMEs have suffered during the COVID-19 pandemic, and this is a great opportunity as well as a future-proof thing for these vendors. Once they go online, they will be able to list their products or services. Then these small businesses will be discovered on e-com platforms. Consumers searching for a product will see these local sellers and buy from them for faster delivery.
ONDC is aiming to onboard buyers and sellers from every pin code in India. The government aspires to bring 300 million shoppers and 30 million sellers onto the ONDC network via all existing platforms by the end of 2024 and to further increase the numbers in the next five years.
ONDC is an open network that will allow both buyers and sellers to use the same platform to conduct a business transaction. Basically, e-commerce portals such as Amazon, Flipkart, and Zomato will have to join the platform in order to be available there. To be specific, ONDC is neither an aggregator app nor a hosting platform. All existing e-commerce apps can voluntarily choose to be a part of the ONDC network. The onboarding of sellers and buyers and their management will continue to be inside the network-enabled apps.
ONDC is a company with a shareholding of banks and financial institutions from the private and public sectors. The institutions investing in ONDC include HDFC Bank, ICICI Bank, Axis Bank, SBI, Bank of Baroda, PNB, NABARD, SIDBI, Bombay Stock Exchange (BSE), National Stock Exchange (NSE), National Payments Corporation of India (NPCI), etc.
The government has formed an advisory council for ONDC. The council includes Anil Agarwal – Additional Secretary, DPIIT; R.S. Sharma – CEO of the National Health Authority; Nandan M. Nilekani, non-executive chairman of Infosys; Adil Zainulbhai – Chairman, Quality Council of India; and Anjali Bansal – Founder, Avaana Capital, among others. This was all about the ONDC network, which is still a work-in-progress. Once the network is ready to be implemented, we’ll have more clarity on how things will actually work. Stay tuned to this page for all the upcoming updates.