What is ONDC? How a startup and small businesses can take as an opportunity.
This Blog will talk about what is ONDC? Why small businesses need this Platform and how giant tech Companies like Amazon and Flipkart are Ruling and Dominating the Market.
ONDC is an open-source network set up by the Government of India. And the most ambitious project after UPI. Just like the way that UPI digitalized the payment system, it will do the same for the e-commerce system. This means One meta store or One stop store for you and me. Yes, you heard it. Imagine Amazon, Flipkart, and Myntra all on one platform. In fact, Imagine Paytm, BigBasket, Zomato, and Uber along with Amazon, Flipkart, and Myntra all on one platform. One app for all your apps. Isn’t it AMAZING?
ONDC will be a proven Game changer for the e-commerce sector. Mentored by Nandan Nilekani, it’s already launched in a few select cities like Delhi, Bhopal, Bangalore, Shillong, and Coimbatore on 8th May 2022. ONDC is not for profit system which the government has high hopes for. Still, puzzled? Let’s understand and comprehend what this network is all about, and why India terribly needs it. And how it can revolutionize the e-commerce and online shopping sector.
Current Scenario of E-commerce and E-commerce Platform
The numbers show that despite a significant development in India’s e-commerce ecosystem, its share in the country’s overall retail system is still quite small, and the bottleneck lies in the value chain’s existing platform-centric structure where a buyer and seller can only transact through the specific platforms they both are listed on. Let’s break it down with an example of an illustration to make things simpler. When a customer needs something, she signs on to her preferred app, looks for it, and discovers few possibilities to purchase. To locate more possibilities, she must switch between several applications, but the primary issue is that there are a tonne of market sellers who lack representation in the apps the buyer uses, and who may have been able to provide her with better options in terms of cost, quality, and delivery. Sadly, she is powerless to find them. On the other hand, common dealers only advertise their goods on a few applications. Guess what, customers are ordering identical products from a number of other applications where he is not enrolled. This represents a significant missed opportunity for the merchant as well. In addition, the seller is subject to the terms and conditions of the apps from which he sells. Furthermore, it goes without saying that they cannot establish their own platforms as they are complex and expensive. Because of this, millions of buyers and sellers are unable to join the existing e-commerce model.
ONDC will solve this problem, How? Will explore this in the blog but before that we will see the challenges in the E-commerce market
What are the major problems in the market which prompted Indian Government to Intervene and take this decision? How will it promote small local sellers, retailers, and businesses against Giant companies like Amazon and Flipkart?
- E-commerce giants like Amazon and Flipkart have taken E-commerce network to different heights and control 60% of the total E-commerce market they have to spend a hell lot of money in understanding and researching the Market and consumer behavior to build world-class tech for E-commerce In India, so the question arises why the government is interested in ONDC.
- It’s because the government wants to dismantle the digital duopolies and monopolies that big tech firms like Amazon, Flipkart, Zomato, Swiggy, Ola, Uber, and other businesses have created.
- Along with Nandan Nilkani who is a member of the Advisory Committee and Mastermind behind this initiative., State Bank of India (SBI) (7.84% for ₹10 crores), Punjab National Bank (9.5% for ₹25 crores), Axis Bank, Kotak Mahindra Bank, and HDFC Bank (7.84%) each, are a few of the significant investors and supporters in ONDC.
In India, there are 2 important models, through which these companies operate and keep several small players, and retailers out of competition.
- Inventory Model:
In this model, Company will purchase mass quantities of products directly from sellers at the ultra-cheap rate to sell them directly to customers. As an illustration, Amazon FBA purchases merchandise from manufacturers and sellers, warehouses it, and ships orders. After that, they will sell at considerably greater prices on their platforms. Whereas,
- Marketplace Model:
In this model, e-commerce marketplaces offer a centralized platform to a number of merchants so they can connect with potential customers and sell their items. And the company takes a percentage cut when the goods are sold.
As they have the power to set prices, it is obvious that this e-commerce company makes the most money using an inventory strategy. Additionally, high-end products generate billion-dollar revenues. As a result, the business can make a lot more money through this than it might through a marketplace model. Amazon also has two large corporations, APPARIO and CLOUDTAIL, which are nothing more than enormous big merchants from whom Amazon purchases its things, stores them, and then sells them to customers. According to one of the investigative reports, until 2019, these two businesses received 35% of all platform sales on their own. Additionally, they leverage these sellers to negotiate exclusive contracts with major smartphone manufacturers, like Apple, Xiaomi, and others, to outperform both small and large enterprises.
But Govt came out with regulations that stated No foreign e-commerce industry can use an inventory model and should compulsorily use market place model in order to perform in the Indian market.
No matter what, these huge companies will find their own unique ways to market their product and earn tremendous profits. Also, A group of more than 2,000 online sellers has filed an antitrust case against Amazon in India, alleging the US company favors some retailers whose online discounts drive independent vendors out of business So, the time has come to take some crucial decisions to support Micro and small sellers. The very first reason for the ONDC initiative.
But how do they still manage to earn profits and lead the market?
- By limiting their search results and favoring sellers:
By limiting search results and placing them at the front, the corporation advertises the brands with which they have partnerships for maximum visibility. The tiny sellers are thus left behind since consumers tend to purchase items that are displayed first and with trust badges.
- Control over logistics:
Amazon is in a good position to offer supply chain management-as-a-service and end-to-end logistics. A system like this might analyze supplier data (such as delivery performance, audits, evaluations, credit scores, etc.) and build a reputation system for providers, allowing businesses to choose better suppliers and reorganize their supply chain. Additionally, it would make it possible for manufacturers and suppliers to effortlessly integrate into Amazon’s logistics and delivery infrastructure, doing away with the necessity for difficult procurement. Additionally, the systems that employ in-store data to make forecasts and offer those goods at a high price
- Owning Smaller warehouses
closer to city centers where these companies promote super-fast delivery options.
Here’s where ONDC comes into the picture.
- Since it’s an open-source network, anyone can sign up for an account for no cost, and it gives you results from any and all significant e-commerce platforms, you can benefit in a number of ways. At first, you find a nearby store that sells the same item you are looking for. You may then compare prices from several sellers and purchase whichever is offered at the lowest price. The ONDC operates as the Trivago of the e-commerce world. Additionally, you’ll get quick shipping. The next time you need to attend a party but don’t have a dress, all you have to do is look for several possibilities. If the seller is close by, you could be able to order a dress within two hours. It’s a win-win for both parties.
- It will give small players a chance for a level playing field, with No platform biases.
- The third option — choose your own delivery partner — is truly remarkable. As a scenario, suppose you wanted to purchase supper from Zomato but they could not provide delivery or did not serve that region. You can choose to have it delivered for a considerably lower delivery fee by another delivery partner like Dunzo. Isn’t it awesome?
Sounds too good to be true? Well, it might be. But there is a catch! how many companies will integrate with this platform? Well, there are several big tech companies, retail brands, and banks who have joined this network but it will again depend on the company to join this network or not.
Another question is whether the technology can compare with the ease of the current e-commerce platform. Current E-commerce giants ensure trusted goods, trusted delivery partners, timely return policies, and other such services. ONDC will have to outstand those expectations and hype it has created.
ONDC network is currently in the beta phase and has conducted pilots in select cities. Keeping hopes high and many companies including Paytm and Amazon Smart Commerce and logistics services are joining the network. Also, Amazon is providing infrastructure and technology to help ONDC achieve its goal faster.
Some of the startups that have already integrated with the platform
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