The ONDC: Build for Bharat Hackathon provided an immense opportunity to learn about recent developments in ONDC.
The network’s nascence did not deter 200+ builders and investors who came together to support their belief in ONDC’s potential as the UPI moment of e-commerce, to onboard the next 500M+ digital consumers into the folds of the digital economy.
Industry veterans, builders and investors shared their roadmaps for incorporating or adapting to this new digital reality and areas where they see deep value creation in the coming years.
Sharing below an overview of ONDC and key takeaways from the discussion.
ONDC is about Freedom. Freedom to Innovate, Freedom to Prove and Freedom to Fail, and Try Again
The Open Network for Digital Commerce (ONDC) connects buyers and sellers to facilitate digital commerce.
As a brand owner in the physical world, you decide your terms of trade, your campaigns and your advertisements, exercising complete control. When it comes to the digital world, however, you do not have the same freedom. You had to play by the rules set by somebody else. ONDC gives that ownership back to me: I get to decide my terms of trade in the digital world as I did in the physical world, with an ecosystem of partners, and specialists managing their nodes, enabling these transactions.
That is the value of an open network of ONDC. It democratises access to e-commerce: handing back the reigns from platforms to sellers.
ONDC is an interoperable network based on the BeckN protocol. It unbundles digital commerce and makes it interoperable/platform-agnostic by bringing buyers and sellers on a single network making them globally accessible with ecosystem services ensuring a seamless transaction experience.
A simplified comparison:
A buyer can use any buyer app on the network to access products across suppliers. A purchase transaction is communicated from the buyer app, through technology rails on the network, to the seller app. The seller takes ownership of the transaction and picks a logistics provider from the network to deliver the goods, paying commissions to the seller and the buyer app for facilitating the transaction.
Contrast this with traditional e-commerce. You can purchase goods only listed by a seller on a specific platform. The platform takes ownership of the transaction, hires logistic providers, delivers the goods to the consumer, collects money, and pays the seller after deducting its often unclear fees and commissions, withholding the buyer’s information.
Need for ONDC
With $70B+ in gross merchandise value (GMV) transacted by 50M+ households through online retail channels, we must ask ourselves: Why do we need ONDC?
ONDC solves two critical problems in digital commerce:
Forget Tier-2+ India, marketplaces are still unable to serve people in larger cities. I was not able to purchase a television for my relative living in <Indian Metro City>. Despite an order value of INR 64,000, a large e-commerce platform did not service that pincode. I had a similar experience while buying air purifiers.
We were wondering who would purchase electronics online through ONDC and were surprised to learn that a local provider had listed an air-conditioner with a discount offer which was purchased through our application with installation service also being provided.
While e-commerce is growing fast, 25%+ Y-o-Y, the penetration is still 8% with a lot more to go. Major E-Commerce platforms today have solved for the 50M+ households who live in Metro/Tier-1+ regions but for the UPI moment to happen for E-Commerce, to reach 300M+ users, we need to provide greater access to Tier-2+ India.
ONDC’s value is not just in disrupting existing e-commerce markets/supply chains today, but in creating newer markets, providing local sellers in Tier-2+ regions with broader demand visibility.
These sellers will no longer struggle with managing multiple platforms’ listings with their own rules. Onboarding on one seller app will provide them access to a global demand network while expanding the option set for consumers, giving them more competitive choices.
The keyword for Shampoo has become more expensive than the cost (MRP) of the Shampoo itself
With digital acquisition costs increasing, it has become more expensive to acquire customers, which, combined with the rising marketplace commissions, has made it uneconomical for certain categories of products to be sold online.
In ONDC, with marketplaces no longer exercising disproportionate control over the network, the value they could potentially capture decreases. Open access to the global supply and demand network increases competition, driving down commissions.
The use of horizontal service providers offsets these costs. The switch from a platform to a network provides fertile ground for creating an ancillary network of shared services across technology, logistics and dispute resolution, for instance in areas like catalogue management, RTO, vendor reputation management etc.
Democratic access to transaction data is expected to allow horizontal network participants to operate on a lower cost base than a single entity. This is expected to reduce transaction costs in the network, providing better economics.
Solving For Trust
A critical question asked of ONDC is the development of consumer trust, ensuring goods/services get delivered per consumer specifications.
While there is no clear answer, a few technological interventions to build consumer trust and drive adoption were discussed:
Much like the early days of e-commerce in India, the expectation is that over time, the market will weed out poor network participants.
Governing the Network
Governance in ONDC is expected to be community-led, playing an enabling role rather than being overly controlling. Some key principles discussed:
The goal of governance should be enabling open innovation, not controlling it. If done right, light-touch governance can help ONDC maximise its potential as a self-organising digital ecosystem.
There were 4 key takeaways on the future of ONDC:
With rising per capita income, consumers of Bharat will demand higher-quality products and services, and the convenience of digital commerce.
Despite open problem statements around cultivating trust, driving adoption and governing ecosystem behaviour, with 1 lakh+ daily orders, early green shoots are visible.
We are excited to see founders build on this new fabric of commerce. If you are building on ONDC, please reach out to me here.