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India’s ONDC Aims to Democratize e-Commerce

Don Apgar by Don Apgar
June 1, 2022
in Analysts Coverage, E-commerce
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India's ONDC Aims to Democratize e-Commerce

India's ONDC Aims to Democratize e-Commerce

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The Open Network for Digital Commerce (ONDC) was launched across 5 cities in India last month amid much fanfare and high expectations. Digital commerce in India is estimated to be a $45B annual industry, and up until now has been largely controlled by Amazon and Walmart. The ONDC, operated by the Indian government, aims to democratize e-commerce and create a more level playing field where smaller, local businesses can compete effectively with the giants. Users shopping on any app that is registered with ONDC will see products from multiple sellers, both online and local stores. Since ONDC’s platform also unbundles supporting services like payments and logistics, shoppers can choose not only which store to purchase from, but also which payment scheme and shipping carrier to use. 

“This model enables not concentration, but more dispersion and healthy competition,” says ONDC chief executive T. Koshy. “It is going to happen from broad sets of people who will bring their specialized and value-added services.”

Prime Minister Narendra Modi has also publicly endorsed ONDC and its stated mission to help small businesses across the country..

The government plans to scale ONDC significantly, including 10 million merchants on its platform and expanding to 100 cities by 3Q22. Government intervention into free markets is rarely a good thing, however, and it remains to be seen if ONDC will actually help small businesses, or simply favor the big players by making it easier for the consumer to shop more stores on price alone. Many e-commerce sellers restore lost margin on heavily discounted products through markups on shipping and delivery, and the ONDC will end the viability of that strategy if shoppers are able to unbundle shipping from their product purchase.

Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group

Tags: Digital Commercee-commerceEcommerceIndiaMerchantMerchants
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