How ONDC is changing the ecommerce game in India?

How ONDC is changing the ecommerce game in India?
How ONDC is changing the ecommerce game in India?

by Tanushree Jaiswal Last Updated: Feb 23, 2024 - 06:18 pm 612 Views
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One company is shaking things up in the ecommerce space. And that isn’t a flashy VC backed start-up. It's a company backed by the Indian government. I am talking about Open Network for Digital Commerce (ONDC).

It has recorded a whopping 5.5 million transactions in December – its highest monthly figure since its inception. 

To put this into perspective, in January of the previous year, ONDC had only logged 2,000 orders.

So, what's ONDC? It's not your typical startup; it's a bunch of merchants and brands teaming up to create a super-connected digital shopping platform. 

The Indian government's Department for Promotion of Industry and Internal Trade is backing this initiative. The aim of ONDC is to democratize e-commerce in India.

How does it work?

ONDC works like a matchmaker between people who want to buy stuff and those who want to sell it. Say you're hunting for a particular grocery item. You turn to ONDC, and bam! It shows you a list of sellers hooked up with ONDC who've got what you need. It's like a digital marketplace where you can easily compare prices, quality, and discounts.

Now, let's break down how ONDC does its thing. It acts as the middleman, linking up different sellers with buyers. Members agree to use a common payment service, making it easy to plug their online stores into the ONDC network. Essentially, it's UPI for digital shopping, with a third-party app connecting restaurants and businesses with buyers.

Contrary to the popular belief, ONDC isn't a government-owned entity. It's a private company that received investments from Indian banks and stock brokers like State Bank of India, HDFC Bank, Kotak Mahindra Bank. It's a non-profit venture, but the government cheers it on as a potential game changer for digital shopping, even though it's not run by the government.

ONDC is expanding the business and spreading its wings to cover 236 cities in India, with dreams of going nationwide. One of the things that makes ONDC stand out is its focus on making things as easy and fair as possible. Members connect their online stores easily, skipping the hassle of dealing with different banks or platforms.

There are a number of key players in this ONDC universe, both sellers and buyers.

On the selling side, we have companies like Mystore, eSamudaay, GOFRUGAL Technologies, Growth Falcons, and SellerApp. 

Each of these companies cater to different niches and industries, diversifying the offerings of ONDC.

Take Mystore, for example. 

It's a marketplace that helps small businesses in India to sell their stuff online. Mystore offers its sellers cool tools and a dashboard to manage their business hassle-free. 

On the other hand, eSamudaay is all about making life easier for grocery, food, and beverage merchants, onboarding businesses from different cities in India.

Then there's GOFRUGAL Technologies, hooking up retail businesses with advanced solutions for selling within the ONDC network. Growth Falcons is teaming up with sellers from the food and beverage game, using some cool AI marketing tricks. SellerApp, in cahoots with YES Bank, is rocking the grocery, home, and decor scene.

Now, let's talk about the buyers. We've got some big players making waves on the ONDC scene. 

Paytm, was the first to jump on board in September 2022. 

Pincode, brought to you by PhonePe, is a hyperlocal company that connects users with nearby sellers. Mystore, Magicpin, and Meesho round out the top five, each bringing their unique flavor to the ONDC party.

But, here's the kicker – how do you order food and groceries on ONDC? Surprise, surprise – ONDC doesn't have its own app for that. You use partner apps like Paytm and Magicpin to get your food and groceries fix. These apps smoothly integrate ONDC, letting you access a bunch of restaurants and businesses without needing a million different apps.

Why is ONDC turning heads? 

Well, it's promising affordability. To lure users and get an edge over the big players like Zomato and Swiggy, ONDC is rolling out discounts that make the others look like they're overcharging. The secret? ONDC charges lower commission rates than its competitors. While Zomato and Swiggy take a hefty 25-30% commission from restaurants, ONDC keeps it chill at 2-4%.

And the discounts don't stop there. ONDC sweetens the deal with a flat ₹50 discount for users ordering through apps like Paytm. But hold on – as the platform saw a crazy surge in orders, they had to tweak the discounts a bit. Now, that ₹50 discount on Paytm is capped at 2,000 orders per day. The ₹75 incentive on delivery also gets capped when a restaurant hits ₹3,750 in deliveries for the day.

Now, the big question – can ONDC knock out the big shots, Zomato and Swiggy? 

Sure, the lower prices are tempting, but the discount offered by ONDC might not last forever. 

ONDC, as a private company, can't keep burning cash forever. Investors want a solid business model.

Then there's the user experience. The dream of an open system for food ordering sounds cool, but folks are griping about wrong orders and deliveries running fashionably late. 

ONDC's split structure, with multiple players in the game, lacks a smooth customer service setup. Zomato and Swiggy, with their end-to-end control, offer a more reliable service.

ONDC's promise of cheaper food is causing a stir. Social media is buzzing with screenshots showing ONDC prices way lower than Swiggy and Zomato, sometimes up to 60%. But hold your horses – industry watchers say it's too soon to count out Zomato and Swiggy. These giants have a solid fan base and a tight grip on the online food scene.

Another reason why ONDC could revolutionize the e-commerce game would be that both Paytm and PhonePe are actively engaging with the Open Network for Digital Commerce (ONDC)

Paytm's Strategic Integration with ONDC:

Paytm, the trailblazer as the inaugural buyer-side app on ONDC, has strategically reshaped its approach to incorporate ONDC prominently within its app interface. 

In a noteworthy move, the ONDC feature has transitioned from being dynamically positioned within various scroll lengths to a static presence on the homescreen. This strategic placement ensures that millions of Paytm users are can shop easily on ONDC The ONDC features resides alongside the QR code scanning feature for payments.

The ONDC landing page on the Paytm app has been redesigned with a cleaner look and features exclusive deals banner ads. 

Users can now easily access specific categories like food, grocery, electronics, and fashion through clickable options.

This integration demonstrates Paytm's dedication to ONDC and its proactive approach in leveraging the potential of this government initiative. While Paytm has officially stated that it has no direct or indirect shareholding in Paytm Mall, the buyer app on its platform, industry experts speculate that Paytm may receive a commission from the revenue generated by Paytm Mall through ONDC. This strategic move not only boosts Paytm's gross merchandise value but also provides millions of Paytm users with ONDC access.

Following Paytm's lead, PhonePe, a major fintech company owned by Walmart, has adopted an assertive ONDC strategy. They launched Pincode, a hyperlocal e-commerce app, on the ONDC platform in Bengaluru and expanded to other cities due to its initial success. During the pilot phase, Pincode processed over 5,000 orders daily.

PhonePe's commitment to ONDC extends beyond their consumer app. The company is actively involved in developing a merchant-aggregator platform to enhance Pincode's appeal. With PhonePe and Google Pay controlling around 75% of the UPI payments space, they have a significant advantage in aligning with government-backed initiatives.

PhonePe's early identification of the potential in ONDC positions them as key contributors to shaping its protocols. CEO Sameer Nigam's close monitoring of progress and active ideation for the success of Pincode and other ONDC initiatives showcase PhonePe's strategic foresight and commitment.

Paytm and PhonePe's involvement with ONDC reflects a larger trend of major tech players investing in this government initiative. These strategic moves aim to reshape the online retail landscape in India and challenge the dominance of established players.

As ONDC continues to disrupt the digital commerce scene, its longevity remains to be seen. While the promise of cheaper prices is enticing, the discount game may not last indefinitely. We will closely observe how this disruptor evolves and plays its cards.

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About the Author

Tanushree is a seasoned professional with 6 years of experience in the Fintech and Edtech industry.


Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.
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