Government to launch ONDC to take on Amazon and Wal-Mart

ONDC to take on Digital Giants

by 5paisa Research Team Last Updated: 2022-04-29T20:52:28+05:30

When a project is undertaken by the redoubtable Nandan Nilekani, the former CEO of Infosys, you can be sure that it is going to be potent and significant.

The man who launched the ubiquitous Aadhar in India, Nandan Nilekani, is the brain behind the Open Network Digital Commerce (ONDC).

Unlike the Aadhar, that was seen as a statement of identity, the ONDC has a larger business implication. It will empower the millions of small traders in India to take on the might of big digital names like Amazon and Wal-Mart (owner of Flipkart).

With the ecommerce market in India likely to scale $200 billion by 2026, the time was ripe for such a launch. It will be launched in five cities to begin with viz. Delhi, Bengaluru, Coimbatore, Bhopal and Shillong.

Today, most offline traders have been complaining of the arm twisting tactics employed by Amazon and Flipkart and the ONDC will actually allow these small traders and businesses to take on the digital challenge head on. Here is how.

Today, if anybody wants to buy a product online, they need to automatically go through a centralized portal like Amazon or Flipkart. ONDC will do away with that requirement. That is because the ONDC is an agnostic central repository where all the large ecommerce offerings and buyers can list.

The trader can actually have a choice and execute their online transactions without having to deal with any of the big digital names.

To understand the concept of ONDC, try drawing an analogy with the UPI system offered by the government. This is an independent and cost free system that does not require you to deal with a bank website at all.

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As UPI became popular in India, more and more banks signed up. A similar situation is envisaged in the case of ONDC also. As the government platform becomes popular, the private sector automatically makes a beeline to join.

There have been several objections in the last few years about the way players like Amazon and Flipkart have dominated with their deep pockets. The ONDC will create a level playing field for smaller traders on the selling side and the procurement side.

Under ONDC, buyers and sellers can transact irrespective of where they are registered. Nandan Nilekani has rightly called ONDC as an idea whose time has come.

To quote Nilekani, this ONDC project will allow the democratization of digital commerce. That has become too platform-centric today and the ONDC actually moves digital commerce to an open network.

This makes it easier and cheaper for everyone to participate and make the best of the benefits proffered by digital commerce. Hopefully, once the initial launch meets with success, it will be rapidly expanded to other places too.

According to a study conducted by Bain & Company, India has the fourth largest retail market in the world valued at $810 billion. A big chunk of the growth in the coming years is going to be via the digital commerce mode.

The government has long been unhappy with some of the digital commerce practices like flash sales, surge pricing, cornering markets, favouring select suppliers and vendors etc. Hopefully, ONDC will democratize the digital platform and make it less of a duopoly in the coming years.


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