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Wednesday, Dec 07, 2022

Open Network for Digital Commerce beta testing likely in Delhi: How does the system work?

ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform.

The ONDC platform lies in the middle of the interfaces hosting the buyers and the sellers. (Representational/File)

The Open Network for Digital Commerce (ONDC), which is a government-backed project aimed at enabling small merchants and mom-and-pop stores in parts of the country to access processes and technologies that are typically deployed by large e-commerce platforms such as Amazon and Flipkart, is expected to extend beta testing in Delhi after having commenced services in Bengaluru.

What is ONDC?

It is an initiative aimed at promoting open networks for all aspects of exchange of goods and services over digital or electronic networks. ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform. It is being developed as a counter to the current stranglehold of two big players in the Indian e-commerce market, which is largely dictated by Amazon and Walmart-owned Flipkart. In May this year, the Department for Promotion of Industry and Internal Trade (DPIIT) went live with a test run of ONDC in cities like Delhi-NCR, Bengaluru, Coimbatore, Bhopal, and Shillong where it plans to onboard 150 sellers. On September 30, the services launched across 16 pin codes in Bengaluru.

What are the plans for Delhi?

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According to reports, ONDC is expected to expand beta testing into areas with strong delivery and logistics footprint of its network participants, as well as the capacities of these logistics players that can be deployed. Further, the segments to be launched initially are expected to be electronics, home decoration and fashion.

How does ONDC work?

The ONDC platform lies in the middle of the interfaces hosting the buyers and the sellers. So far, the buyer side interface is being hosted by Paytm, whereas the seller side interface is being hosted by other players like GoFrugal, etc. When a buyer searches for an item on the Paytm app, from where ONDC has gone live, the app will connect to the ONDC platform, which will connect it to seller side interfaces that will list all the companies from where you can buy the particular item. On ONDC, there will be several other backend partners such as logistics service providers, enterprise resource planners, e-commerce store hosting service providers, etc.

What are the challenges ONDC aims to address?

An ONDC strategy paper published earlier this year has flagged the rising dominance of global players in India’s e-commerce ecosystem, pointing out that the large quantum of investment required to build competitors to the integrated solutions offered by the big players has become an entry barrier for digital marketplaces. It also flagged the inability of marketplace sellers to move out of the platform ecosystem, given that the value created by these small players is stored with the larger platforms. With this in mind, ONDC aims to transform the marketplace ecosystem from an operator-driven platform-centric model to a facilitator-driven interoperable decentralised network. News reports also pegged that the Bengaluru launch only saw 600 orders between ONDC launch on September 30 and October 6. Industry players also point to multiple gaps in the arrangement, including clarity over data handling, end to end linkages and supplier liability.

First published on: 12-10-2022 at 03:38:50 am
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