Gov. To Roll Out Its Indigenously developed Online E-Commerce Network
Government of India outlines plans to roll out its indigenously developed online e-commerce network in 100 Indian cities to provide millions of Kirana stores and consumers an alternative to multinational platforms such as Amazon and Flipkart. Minister of Commerce & Industry Piyush Goyal announced the test-launch of the open-source system. The beta launch will unveil the IT applications of the Open Network for Digital Commerce (ONDC) and registry covering a small number of retailers and customers initially in Bengaluru, will also cover cities such as Delhi, Coimbatore, Bhopal and Shillong. The formal launch will take place after successful testing of the system.
The Open Network for Digital Commerce (ONDC) — which may soon be launched by the Indian government — aims at democratising the Indian e-commerce landscape, creating a level-playing field for all players. ONDC is a government initiative to promote open networks for all aspects of the exchange of goods and services over digital networks. ONDC is not platform-centric, and its objective is to match the online consumer’s demand with the nearest available source of supply. Consumers can thus find any seller, product, or service via any compatible application or platform – offering real freedom of choice. The system will have multiple choices for both retailers and customers in terms of cataloguing, inventories, warehousing, suppliers, logistics and payments. ONDC is expected to make e-Commerce more inclusive and accessible for consumers, standardize operations, promote inclusion of local suppliers, drive efficiencies in logistics and lead to enhancement of value for consumers.
Once the ONDC gets implemented and mandated, as is expected by August 2022, all e-commerce companies in India will have to operate using the same processes, akin to android-based mobile devices, irrespective of the brand. This would provide a boost to smaller online retailers as well as new entrants by ushering in discoverability, interoperability, and inclusivity. It will empower suppliers and consumers by breaking the monopoly of giant platforms to drive innovation and transform businesses in sectors like retail, food, and mobility. Businesses are expected to benefit from transparent rules, lightweight investment, and lower cost of business acquisition. It is also expected that the time-to-market as well as time-to-scale shall also be substantially reduced.
Large e-commerce firms have protested as they have already invested heavily in the R&D as well as deployment of their own processes and technology. Yet, the government likely considers India’s e-commerce market value – estimated to reach US$200 billion by 2027 by Statista – to be significant enough for the participation and engagement of all types of business competitors. Amazon and Flipkart alone have poured a cumulative US$24 billion to capture 80 percent of the Indian e-commerce market through their aggressive discounts and by promoting preferred sellers. Indian retail giants like Reliance and Tata have also launched retail platforms and shopping apps and super apps. Experts said the ONDC model may also have some challenges such as the return policy, which is currently the responsibility of the e-commerce platforms. The other challenge could be related to consumer grievance redressal.
Currently, online retail accounts for about six percent of India’s overall retail market, but traditional retailers and merchants are aware of how rapidly this could change and do not wish to be locked out or priced out. With 800 million smartphone users, India’s appeal to global retailers is also not easily dismissed. The only other comparative market landscape, by size, is China where local rivals have thrived in an indigenously created ecosystem amid Beijing’s stringent rulemaking and supervision. Meanwhile, the Competition Commission of India raided the offices of top sellers on Amazon and Flipkart on April 28, coincidentally a day before the ONDC was launched. The move was reportedly triggered by complaints of local traders who accused the marketplace platforms of predatory pricing, deep discounting, collusion with corporate sellers, and owning the inventory they sold via a network of holding companies.