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Freedom of choice: ONDC will level the field for small merchants, but there are challenges

Given how it throws out the top-down approach followed at large companies, sellers—even kirana stores seeking digital presence—can expect to be free of the fear of getting assigned marginal prominence.

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Ironically, to achieve real scale, ONDC has to convince big companies, including the e-commerce giants, to participate.

The Open Network for Digital Commerce (ONDC), launched yesterday on a limited scale, is a unique initiative that aims to allow small merchants and retailers to plug in and potentially gain the reach and economies of scale that only the two global giants, Amazon and Flipkart, enjoy at present. From five cities on the debut day, the non-profit initiative is expected to reach 100 cities in the next six months. ONDC has been positioned as an open platform for all aspects of e-commerce, harnessing the competencies of various established technology firms working to strengthen local economies. It is designed to enable consumers to reach any seller of a product or service via compatible platforms or applications, increasing the scope of consumer-choice, and more importantly, of sellers’ digital presence. Given how it throws out the top-down approach followed at large companies, sellers—even kirana stores seeking digital presence—can expect to be free of the fear of getting assigned marginal prominence.

ONDC could indeed prove to be a tectonic shift if it moves India’s e-commerce space away from its platform-centric character to a more platform-agnostic model. Little wonder, it has drawn comparisons with United Payments Interface (UPI), given the latter’s effect on the payments space. By helping smaller sellers and buyers benefit from dynamic pricing and rationalisation of delivery costs, ONDC does have the potential to bring the cost of e-commerce down for all parties. This will likely mean the smaller players won’t face daunting platform charges, which, some have claimed, is the case when it comes to engaging with the dominant e-commerce platforms.

India’s e-commerce potential poses an unparalleled opportunity for players. The market is predicted to increase from an estimated $75 billion by the end of this year to $350 billion by 2030. The penetration of online retail is also expected to grow phenomenally over the next decade. Against such a backdrop, the overwhelming dominance of only a couple of global firms (Amazon and Flipkart account for close to 60% of the e-commerce market in the country) does not augur well for the democratisation of the e-commerce ecosystem in the country. There have been several allegations against them as well. For example, an investigation by Reuters, based on internal papers of Amazon, had claimed that the e-commerce giant had bypassed Indian laws governing foreign direct investment. The charges are, of course, yet to be proved.

However, democratisation of a process shouldn’t mean a witch-hunt against these companies, which have already brought in billions of dollars of investment, and have created thousands of jobs in the process. One hopes it is just a coincidence that the Competition Commission of India raided the offices of the top sellers on Amazon and Flipkart just a day before the ONDC was launched. The probe was apparently based on complaints from local traders that the platforms were engaging in deep discounting, predatory pricing, loss-funding, etc, in collusion with corporate sellers—apart from owning inventory through a complex web of holdings and squeezing supplier margins—thus creating a deeply divisive system of preference for some sellers.

There is no doubt that small merchants have often been at the mercy of the algorithms and the commissions of large e-commerce platforms, and they will benefit from the ONDC. But the platform has several challenges as well. For example, data-privacy activists have always been concerned whenever government-backed bodies are involved in projects with a massive scale. Some have raised questions about the nature of data sharing under ONDC, especially with respect to the companies that will run the gateways between the buyer apps and the seller apps. Ironically, to achieve real scale, ONDC has to convince big companies, including the e-commerce giants, to participate.

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