5-stars and dhabas can co-exist: Open Network for Digital Commerce MD & CEO T Koshy

It could take a little time but around 180 entities — across functions — are in various stages of preparedness.

5-stars and dhabas can co-exist: Open Network for Digital Commerce MD & CEO T Koshy
Players will be free to decide the pricing like in a free market and specific arrangements can be entered into between apps.

Could we get a status update on the pilots?

Currently, we are running pilots in 29 cities and by the end of August, we are hoping to throw one city open — maybe 50 pincodes — to the public so that we get a sense of the problems. We are starting off with groceries, food and apparel and we will add merchants. Following Loadshare, logistics players Shiprocket, Ekart and Dunzo will go live very soon. Kotak Mahindra Bank should be ready to go live in 10 days. PhonePe will join in at the end of the month and Paytm of course, is already live. Snapdeal is going live this month. It could take a little time but around 180 entities — across functions — are in various stages of preparedness.

What is in it for sellers?

For sellers, onboarding customers is a costly and painful proposition, but, on ONDC all sellers can access all buyers. So even the small sellers, specialising in one or two products, can make their own portals to meet the requirements of specific clients and become visible on the ONDC protocol.

Will enough sellers join the ONDC protocol?

Now, there is an opportunity for innovation, every VC, every entrepreneur is trying to set up a seller-app. Take GrowthFalcon, which is a PoS supplier and has relationships with groceries — they say they will make them ONDC-compliant. Even Microsoft is trying to create a platform. Earlier, it didn’t make sense to create such platforms because there were not enough customers. Even now it makes sense for very small sellers to join a sellers’ app rather than creating their own. But now we can have thousands of sellers on the network, like shops in a market.

What is in it for the buyer apps?

Entities like banks, fintechs and telcos have digital consumers who can come together as a common pool of buyers and be exposed to thousands of sellers. So, for instance, Airtel can provide a service to its customers by giving them digital access to become e-customers. They may or may not earn anything but would want to give their customers the best experience or else customers may go elsewhere. Whichever buyer’s app a customer is on, he can shop from the same set of sellers.

Some banks are planning both buyer and seller apps…

Yes. So, banks could also expose their business consumers to the platform, make them visible and help them sell more. These transactions could become the foundation for flow-based lending since banks will have access to the client’s daily sales — product-wise — which would help them assess the working capital requirements. It could become a powerful tool. Right now, 10 banks are in various stages of preparedness for joining the protocol.

How do you see income opportunities for the buyer and seller apps?

Players will be free to decide the pricing like in a free market and specific arrangements can be entered into between apps. As of now, sellers have been paying the platform a relatively high fee. However, now there will be numerous seller apps because we are trying to unbundle the various pieces.  However, that does not mean the channel margins will be higher. On the contrary, the competition will drive down margins. If customers believe the buyer app that they are using is bringing them benefits, they may be convinced to pay a small charge.

What are the risks of the ONDC not being able to scale up?

We don’t see any reason why a consumer should not come to the network. Today, just 6-7% of all consumers are e-shoppers and for the seller fraternity, the penetration is less than 1%. The potential for e-commerce is huge so if the consumer base goes up to 25% and the seller penetration to 14-15%, those would be big numbers. Of course, it may take a couple of years for the hockey stick effect to kick in. We need both five-star hotels and dhabas, let both co-exist for all buyers. Innovation will drive the business. For instance, there could be startups which create apps for specialised cohorts of customers and deal with small numbers, maybe two million customers. Say it could be a group of Malayali consumers, with Malayali text and voice, looking for some specific products.

The bigger platforms have grown on the strength of good technology. How do you assess ONDC’s technology?

Investments will be made in technology by stakeholders; before this there was no reason to make such investments. The ONDC protocol has been tested and is up and running, it’s much like the http. The transaction layer is open-source and on top of that there is a thin layer of commerce policies. It enables inter-operability between buyers and sellers, so they can all talk to each other. Buyers’ apps can access sellers based on certain filters — price, location — or the rating that the sellers command. It is in the nature of a search application that consumers will use across a thousand shop-fronts.

Can ONDC live up to the standards set by the big platforms for customer complaints and returns?

The process would be similar to that on large platforms except that here the seller app and buyer app will be managed by two different entities. Both would be incentivised to keep their respective customers satisfied, else they would earn a bad reputation which would hurt business. If a complaint is raised on a buyer app, it would be uniquely identified and routed to the seller. It is possible the seller may bear the occasional loss and compensate customers for a faulty product.

Is data privacy a concern?

ONDC will not have proprietary or competitive information, the buyers’ apps will have the data on buyers and sellers’ apps will have the data for sellers, and the minimum information needed to fulfil deliveries. We will try and create aggregated data sets, that are anonymous, to help stakeholders and policymakers track trends.

How is ONDC structured?

We are a Section 8 company, which means we cannot list and we can’t pay dividends. We are working on a self-sustaining model. We have the big public and private sector banks and, among others, also NPCI, NSDL, CDSL, NSE, BSE, Nabard and Sidbi as shareholders. Once the payments are in, the capital will be Rs 195 crore and the public sector holding will be below 50%. There are some others waiting to invest.

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