Consumer brands must lead in building ONDC ecosystem

Deloitte India's whitepaper states that India's Open Network for Digital Commerce (ONDC) has the potential to transform the e-commerce sector, providing visibility of products and services for consumer and retail brands. ONDC, launched in April 2022, aims to challenge foreign e-commerce giants like Amazon and Flipkart. The network allows interoperability between platforms and integration of online stores. By 2030, India's e-commerce market is expected to reach $350 billion. While there are challenges, such as customer experience and data ownership, the ONDC is expected to democratize e-commerce and benefit small businesses.

Consulting firm Deloitte India’s whitepaper last week on Open Network for Digital Commerce (ONDC) said it has the potential to transform the country’s e-commerce sector and, among other industries, consumer and retail brands can gain from the network that facilitates visibility of products and services of all participating platforms. A Government of India initiative, ONDC is not an application or a platform but an open network which is inclusive and benefits both buyers and sellers.

HT Image

Rolled out in April 2022 with pilots in several cities, it has been positioned as an alternative to foreign e-commerce majors like Amazon and Walmart-owned Flipkart that have cornered 60% share of India’s e-commerce market. ONDC is a decentralized network that allows interoperability between e-commerce platforms and integration of online stores.

According to Government estimates, India’s e-commerce market is expected to reach $111 billion by 2024 and $350 billion by 2030. India has gained 125 million online shoppers in the past three years, with another 80 million to join by 2025.

With the increasing importance of online sales, brands, retailers, distributors and suppliers, can use ONDC to connect within their ecosystem and with the end consumers. In the past few months, categories such as grocery, food delivery, home and decor, electronics, fashion and lifestyle, beauty and personal care, and pharmaceuticals have leveraged the ONDC network that enables small merchants and Micro, Small, and Medium Enterprises (MSMEs) to address their demand and supplier connect.

Anand Ramanthan, partner, and consumer industry leader (consulting) at Deloitte India, said brands and marketers are exploring open network’s potential. “Right now, not too many stores are integrated with ONDC. But the possibilities are immense. As more buyers and sellers – both business-to-business (B2B) and business-to-consumer (B2C) -- come on board, the value of the network will grow exponentially,” he said.

For instance, if a small cottage industry ethnic wear maker joins the network, it can reach a global audience without middlemen or the hefty commissions charged by established e-commerce platforms. “ONDC is poised to democratize e-commerce by allowing small businesses to sell online. It will benefit the unorganized sector in a big way,” Ramanathan said.

However, some of the larger companies are onboarding ONDC too. In June, FMCG major Marico, the maker of Parachute and Nihar hair oils, connected its online Saffola Store with ONDC calling it a revolutionary digital commerce network that empowers businesses and consumers. At the time, Sanjay Mishra, Marico’s chief operating officer for India business, said, “While the e-commerce market in India has grown at an exponential pace over the past decade, online FMCG retail is yet to make significant inroads into rural and semi-urban markets. Tech-led interventions such as ONDC mark a sustained effort to bring together various stakeholders within the FMCG and retail value chain to solve this challenge.”

Ramanathan expects FMCG to take the lead in building up ONDC’s ecosystem. “FMCG firms are innovative when it comes to distribution and usually try and experiment with new models to see how they apply to them. They will be critical to the growth of ONDC as they will attract more participants setting the stage for the network to take off,” he said.

But there are plenty of challenges the open network currently faces. Since it is not an app, a customer can access the network through other buyer apps which are connected to it, like Magicpin and Paytm, for instance, to order food and groceries.

Secondly, people flock to established marketplaces because of good customer experience and great discounts. These will be issues that the network and its participants will need to resolve.

Besides, ONDC is not a regulator but a facilitator and it does not prescribe any policies on returns and refunds on goods and services sold. Clearly, customer service rules would require more clarity. Also, brand owners will need to know more about access and ownership of data that will be generated by the network when millions of transactions start happening online.

But these glitches can be ironed out over time, Ramanathan said. “By and large, the open network for digital commerce cuts out the middlemen and fosters more transparency between the supplier and the customer. The focus now is on how we can get more actors to participate in using the services. It’s all about inspiring people to ride the bandwagon,” he said.