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Explained: Why ONDC push could boost small retailers online

This is being seen as a step in the direction of making e-commerce processes open source, thus creating a platform that can be utilised by all online retailers and vendors.

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

The Department for Promotion of Industry and Internal Trade (DPIIT) went live with its Open Network for Digital Commerce (ONDC) project last week on a limited scale, enabling small merchants and mom-and-pop stores in some parts of the country to access processes and technologies that are typically deployed by large e-commerce platforms such as Amazon and Flipkart.

This is being seen as a step in the direction of making e-commerce processes open source, thus creating a platform that can be utilised by all online retailers and vendors.

What processes could be open-sourced with this project?

Several operational aspects including onboarding of sellers, vendor discovery, price discovery ,and product cataloguing could be made open source on the lines of the Unified Payments Interface (UPI).

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An executive of an e-commerce company has said that if mandated, this could create problems for larger e-commerce companies, which have proprietary processes and technology deployed for these segments of operations.

Where is ONDC live, and which companies are involved?

During its test run, the platform expects to onboard 150 sellers in places such as Delhi-NCR, Bengaluru, Coimbatore, Bhopal, and Shillong.

The platform basically works on two ends — the seller side and the buyer side. On the seller side, players such as enterprise resource planning company GoFrugal, and digital business platform Digiit are involved, while the buyer side interface is being built on Paytm.

How does this work?

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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, for 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 sellers that have listed that particular item. On the ONDC, there will be several other backend partners such as logistics service providers, enterprise resource planners, e-commerce store hosting service providers, etc.

Who is behind this project?

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The ONDC project was commissioned by the DPIIT through the Quality Council of India (QCI). The building blocks of the project were designed by a nine-member advisory council that included Infosys Co-founder and Chairman Nandan Nilekani, National Health Authority CEO R S Sharma, QCI Chairman Adil Zainulbhai, National Payments Corporation of India CEO Dilip Asbe, and others.

What does the DPIIT expect from the project?

The DPIIT has said earlier that the ONDC “aims at promoting open networks developed on open-sourced methodology, using open specifications and open network protocols, independent on any specific platform. ONDC is expected to digitise the entire value chain, standardise operations, promote inclusion of suppliers, derive efficiency in logistics, and enhance value for consumers”.

Another key stated aspect of ONDC is that it is aimed at curbing “digital monopolies”. The creation of ONDC also means access to a large repository of buyer and seller data for those joining the open-source platform. Such data has so far been accumulated by large e-commerce marketplaces without them enabling access to this data for their individual sellers.

What does making something open-source mean?

Making a software or a process open-source means that the code or the steps of that process is made available freely for others to use, redistribute and modify.

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For example, while the operating system of Apple’s iPhones — iOS — is closed source, meaning it cannot be legally modified or reverse engineered, Google’s Android operating system is open-source, and therefore it is possible by smartphone OEMs such as Samsung, Xiaomi, OnePlus, etc to modify it for their hardware.

If the ONDC is implemented and mandated, it would mean that all e-commerce companies will have to operate using the same processes. This could give a huge booster shot to smaller online retailers and new entrants.

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First published on: 03-05-2022 at 03:19:40 pm
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